Setting your sights on a city Airbnb

As an online estate agent, Move Places is no stranger to trend watching and something we’ve been charting for the last 24 months is the rise of Airbnb. Back in February 2020, ARLA Propertymark – the professional body for letting agents – reported that the short-let market was turning the heads of yield-hunting investors.

It forecast that 230,000 landlords were ‘likely’ to switch to short-term lets in the future, choosing to focus on the holiday accommodation sector via platforms such as Airbnb. Citing flexibility, less compliance, tax breaks (furnished holiday lets are treated as a trade by HM Revenue & Customs, and are not affected by the change to mortgage interest tax relief) and attractive yields (more on that to follow) as a landlord’s motivation, ARLA Propertymark’s prediction was quickly followed by the pandemic and a shift towards staycations.

Boom but no Airbnb bust

As recently reported by our sister company, Landlord Buyer, excellent returns are still being achieved in the short-let rental market. Although coastal cottages and bucolic bolt holes are still finding favour with the staycation crowd, Airbnbs have a much stronger city reputation and, therefore, wider appeal.

Urban Airbnbs are just as likely to be booked by professionals requiring an overnight stay outside of the peak holiday period as they are for seven-night stays in the summer and weekend city breaks. In fact, Airbnb’s CEO, Brian Chesky, recently revealed that 24% of the platform’s business is not travel but actually workers who commonly have remote, freelancing or contracting backgrounds.

Cities on top: comparing yields

A pre-pandemic report by Luxury Cottages found that landlords using short-term rental platforms made an annual average of £23,000. Interestingly, it discovered that cheaper cities, such as Liverpool and Newcastle, returned yields on a par with coastal locations.

Fast forward two years and short-let city yields are strong enough to outperform the rest of the property investment market. While a five-year study of rental yields by Paragon Bank determined an overall market yield of between 5.43% to 5.6% for all buy-to-let types, analysis by hotel room platform Hoo found holiday let investors in Glasgow, Belfast and Newcastle enjoyed handsome returns of 7.2%, 6.2% and 5.6%, respectively.

Newcastle was also found to be the most profitable city in which to start an Airbnb business. It was identified by Crafted Beds as the location where the highest ‘per night’ charge could be levied, at an average of £122 per night. Other cities that made the top five included Leeds (£121.60), York (£120), Exeter (£118.60) and Cambridge (£105.60).

Airbnb pointers

If you’re on the hunt for the ideal Airbnb to purchase, check out Move Places’ houses and flats for sale. Don’t forget, we also sell property fast if you want to free equity from your current home or dispose of a current buy-to-let in order to start a new city-based, short-let venture. If you’re new to Airbnb investing, it’s good know:-

• Any buy-to-let mortgage in place must be suitable for holiday or short-term lets, as there may be restrictions
• The freeholder of any leasehold property must give written permission to the landlord in order for them to run an Airbnb
• There is no charge for listing a property on Airbnb but there are hosting fees
• If using Airbnb’s split-fee arrangement, expect hosting fees of at least 3%
• Airbnb’s host-only fees are in the region of 14-16%
• As a host, you can change your nightly/weekly rents when you need to
• You can hire a property management company to change bed linen and check in guests for a hands-free investment
• You should take out specific landlords’ buildings and contents insurance, which must cover short let activity
• You are free to switch a traditional buy-to-let to an Airbnb during void periods, and vice versa

If you need an express property sale to make an Airbnb happen, you can request a free online valuation here – or if you would like advice about buying and selling, please get in touch with the Move Places team.