Airbnb v PRS21 Mar 2018
The rise of Airbnb versus regular renting…
More and more I hear property owners talking about whether they should try using their property for Airbnb or short term rentals as opposed to more typical long term letting. And recently when I attended a Propertymark conference it kept coming up as a major, MAJOR issue particularly in the Edinburgh rental market with many agents saying it was having a huge impact on the supply of rental property in the city.
What’s this Airbnb all about then?
Airbnb is effectively a platform which allows you to market your property (or room) as a nightly or longer, flexible accommodation option to anyone caring to look. So you can rent out your property for just 1 night, for a week or for a few weeks and obviously you can capitalise on the premium that renters will pay for a short term accommodation option. You can set a minimum term of x number of nights. Clearly there are some essential requirements that your property will have to meet:
- Fully furnished and equipped as a self-catering accommodation option so good standard required
- Bedding, towels etc will have to be supplied
- Broadband and / or working TV probably required
- Meet and greet of guests or alternative plan
- If your property is located in a sought after spot for tourists/visitors, great nightly rates can be achieved
- More flexibility with your property if you use it sporadically or are not sure on long term plans for it. You can control when it is used.
- Lower regulatory requirements than long term renting option
- Potential for lower tax burden
- All bills will be paid by you – council tax, utilities
- Property will have to be cleaned prior to each guest
- No references or checks done on anyone staying in your property (Risk of becoming party pad)
- Frequent replace/ upgrade of furnishings to maintain standards
- Time intensive for either owner or agent – frequent changeover = greater costs
- Potential issue with neighbours – can seriously impact social mix in certain blocks if a high proportion of owners choose to do short term rentals
So let’s take a typical 2 bed in Glasgow and 2 bed in Edinburgh
A 2 bed in Glasgow’s City/ West End will generate you around £110 per night – is it going to be rented all the time? When I check for property they don’t seem to be full but let’s be optimistic and assume you might have 200 nights of the year occupied.
£110 * 200 = £22,000 income with Airbnb
Versus £850 rent per calendar month with full rental year round = £10,200 income with regular rental
So income is about 50% more if you Airbnb… Sounds like a “no brainer”… BUT lets look a bit further…
What else do you need to allow for when you Airbnb…
Council tax £ 2,000 per year
Utilities £2,400 per year
Cleaning costs (£50 – £75 per changeover) £3,000 per year
Broadband and TV license £300 per year
Replace / Upgrade furnishings / linen etc £1,000
So already without even thinking too much about it we have almost another £9-10 k to the costs over 1 year which is making it a bit less attractive than on first view. That said, the income still looks to be more, but it’s a seriously time consuming business changing over 50 or more times a year and you need to have the time to devote to it , or pay someone to do it. And if you choose to pay someone to do it, its 20-25 % that the agent will be taking. And you have to be pretty confident that you will fill the flat 200 nights or more…
Inititally I thought that the price you could get for Edinburgh similar rental would be more, but surprisingly that is not the case. Over most of the year the rate for a 2 bed center / West End is around £90-£100 per night, with August generating a big premium – around £160 per night so we need to tweak the figures.
£160*20 nights in August plus 180 nights @ £100 per night = £21,200
So we are almost the same as Glasgow rates with regular rental income at a little more , maybe £900 per month so £900 * 12 = £10,800 per annum.
Given the above, it made me think, if I had enough time and energy to manage it myself, clean it , launder the bedding etc, meet guests I probably might consider giving it a go, but it would be risky and I would see how it went. If I wanted a hands off approach I still can’t see how Glasgow or Edinburgh works out as a short term rental option for the owner.
… Love your comments!