Arthur takes a look at the top five pitfalls of short term rentals that every home owner should be aware of.
Short term or holiday rentals are becoming increasingly popular, with a reported number of 80,000 British home owners letting their homes via AirBnB in 2016, and this trend seems to be doubling by the year.
The top-line income which can be earned with holiday rentals is very attractive: with the average daily rate of a London hotel currently around £140 per night, it is entirely possible that a good quality property in a nice location can mean a great source of fast income. Another perk is given by the current tax relief measures in place for short term lettings.
However, as with most promises of a cash bonanza, there are some downsides:
Risk to mortgage allowances:
Home owners letting a property directly run the risk of invalidating the terms of their mortgage, meaning that in the worst case a lender could demand a full repayment. Some lenders say they are open to a room at a time being let, but handling over the whole property to a paying guest could lead you into trouble. Lenders may also allow borrowers to let the property for a fixed amount of weeks per year.
Tenants staying for a short period of time tend to be less careful than those renting for a longer term.
Landlords will take a deposit to cover minor damage, but in extreme cases this may not be enough. Additionally they will have to ensure the property is fully furnished for the next tenant, and although they can expect higher rents, the general upkeep of the property is required more often and ultimately this will mean an extra cost.
Invalidating home insurance:
Home insurers have different attitudes towards subletting and home sharing. If landlords are not careful, they may incur into the risk of invalidating their insurance entirely, meaning that they will no longer be entitled to make any claims, even if these are unrelated to Airbnb.
Additional agent expenses:
Should you choose to offer your property as a short term rental through a letting agency, you will most likely be charged extra simply because the effort in finding frequent tenants is greater and the day to day management is more intense.
Longer void periods:
With the added responsibility of finding tenants at short notice, an empty property may become problematic and less secure.