Airbnb is one of the internet success stories of the 21st Century with thousands of homeowners generating income from a single room or an entire property.
And if you’ve got a rental property in the UK it could be the answer to recouping your investment much faster than if you follow the traditional tenant route.
According to research carried out by online estate agents Nested, a savvy expat investor could theoretically make back their money in as little as three years if they bought a home for £150,000 and let it out on Airbnb.
If a UK buy-to-let is on your horizon or if you already have a property, then it is worth considering this alternative route.
For example, the average cost of a three-bed home in Sheffield is £144,255 and the average monthly rental for such a property is around £854. To rent it out as a standard tenancy you would make your money back in 14 years but on Airbnb, based on an average monthly rental income of £3,973, you could make it back in just three years.
It would take slightly longer in Manchester and Liverpool at 39 months and in Cardiff you could expect to be making your money back after seven years compared to 20 years if you followed the traditional rental route.
Of course, all this is based on you having the property booked for at least 80% of the year and you would have to factor in city restrictions on how many months of the year you can have your property on Airbnb. For example, since the start of 2017, London properties are only allowed to be rented out on the site for a maximum of three months of the year, putting the return on investment more in line with the normal rental market.
Pitfalls to avoid
Whilst Airbnb could potentially be quite lucrative for an expat investor you need to make sure you have done your homework in advance
- Risk to your mortgage
Before you go ahead, check with your lender what their terms are because you don’t want to invalidate your mortgage. If you already have a buy-to-let mortgage you might be covered for short-term rentals yet while some lenders might be happy about you renting out a room, they may not be so keen on the whole property.
- Check with your local council
Many authorities are now placing restrictions on short-term home rentals so check with them first what the limits are. You might need to pay for a licence, be registered in the country or be limited on the number of months you can rent it out which can impact your income.
- Managing your investment property
Think carefully who will look after the property for you if you don’t live in the UK. Simple things such as cleaning, key handovers and changing bedding all need to be considered and you might have to employ an agency to cover that which could hit your profits.
- Home insurance
Check the terms of your insurance. If you’re letting out the property, either on Airbnb or longer term, you need to make sure you are covered. Some insurers, such as Admiral, are now offering a specific Airbnb add-on which covers hosts and landlords for injury and property damage.
- Slow rental periods
It would be lovely if your property was rented all year round but this is unlikely to be the case. You need to make sure you can cover any mortgage repayments even when the property is empty.