The sharing economy, driven by the success of Airbnb, has convinced thousands of us that we can make money renting our property in the short term. Now, with the UK Government’s Rent a Room scheme becoming a short-term let landlord has never been so tax efficient.
Of course becoming a landlord is a big undertaking and one that shouldn’t be taken lightly. Is this the right choice for you and what are the legal implications of letting your spare room or your second home for up to 6 months at a time?
In this guide, we take a look at how to become a short-term let landlord, what’s involved and the pros and cons.
The Rise of the Short Term rental
Short term rentals last anywhere from one week to six months and include all bills, furniture and amenities. So the first thing you need to think about as a short-term landlord is protecting your property with contents insurance.
A recent report revealed that second home ownership has jumped by 30% since 2000, with the majority being used to create an extra income stream. There’s no doubt that the short-term rental market has been driven by companies like Airbnb and HomeAway, however, if you want to go it alone and become an independent short term let landlord then there are some legal hoops you’ll need to jump through first.
What are my Legal Obligations as a Short Term Let Landlord?
Whether you rent, own or have a mortgage, when you let out part of your home you become a resident landlord and that comes with a number of responsibilities and legal obligations. These include:
- If you’re a council tenant you must contact the council before subletting a part of your property.
- If you’re a private tenant you need to check the terms of your tenancy to see whether you can legally sublet.
- If you’re an owner-occupier and you pay a mortgage, you need to check the terms and conditions of your mortgage agreement and/or talk to your mortgage provider before you let out all or part of your home.
- You remain legally responsible for paying all bills.
- Your home must be safe to live in and you’ll be responsible for gas and electricity checks and repairs.
- All furniture and mattresses must meet fire safety regulations and you should carry out a full fire safety risk assessment.
Getting your Property ready for Rental
When you start out as a short-term rental landlord it’s tempting to do everything yourself from repairs and cleaning to accounting and marketing. But if you want your business to grow, consider outsourcing to a professional property letting management company – it’ll save you time and money in the long run.
Remember that you can earn up to £7,500 under the government’s Rent a Room scheme before filing a tax return with HMRC. You can also offset house-related expenses against this, making it a very tax efficient income stream that could supplement your main income.
Whether you’re letting for short periods or arranging lets of up to six months at a time, the rules are the same. Your property needs to be neat and tidy, well furnished and well presented. If you’re going down the Airbnb route then invest in the best bedding and towels you can afford and think about little luxuries like fast broadband and smart devices, as this is what guests have come to expect with these services.
Fit smoke detectors and fire extinguishers if they’re not already in place and make sure you have gas and electrical safety certificates. And don’t forget to make any repairs; so fix that dripping tap and replace that wonky door handle.
Always charge a security deposit and don’t drop the amount just because your guests are only staying for a few days. It doesn’t take long to cause a lot of damage – whether it’s through accident or design.
Maximising your Letting Potential
If you live in Wimbledon, then why not rent a room or even your entire house while the tennis is on. If you live in Edinburgh then why not do the same during the Fringe Festival? If your property is near a major sporting or cultural event then you are in a very good position to maximise the rental value of your property for very short lets.
If you prefer to look at short-term lets of up to 6 months then try to plan ahead with availability so there are no gaps between tenants. You might want to sign up with a property management company who can make sure your rentals are always let and can manage them for you, meaning you don’t have to worry about maintenance or cleaning.
You can also consider focusing on a niche market like providing luxury accommodation for film and TV shoots, corporate relocations to the area or families looking for comfortable accommodation, while their own property undergoes renovation. In this case, you might consider offering cleaning, laundry and shopping services for an extra fee.
Always meet the tenant personally and show them around the property when it’s time to hand over the keys. Respect your neighbours and the local community and don’t be afraid to make it clear as to the types of tenants you’re looking for and the ones you aren’t (you might want to avoid large groups of young people on stag or hen weekends for example).
Remember that professional photos and a well-managed property with a responsive landlord will always stand out from the competition.
The Pros and Cons of being a Short Term Landlord
There’s no doubt that short-term lets can be lucrative, but is being a landlord the right decision for you?
Whilst, shorter lets offer far more flexibility and mean you’re not locked into a long-term tenancy. You can also charge as much as a 30% premium on rent as well. On the downside, these short-term lets involve a lot more work on your part, as well as a higher risk of damage (such is the nature of short-term lets).
You’ll also need to consider the extra maintenance and wear and tear that comes as a result of short-term lets because it can really eat into your profit margins. What’s more, the premium rates you get for short-term tenancies can soon be cancelled out by the uncertainty of not having another tenant lined up. These gaps where you have no guest or tenant in place can quickly add up, offsetting any gains you’ve made by charging a premium for a short term let.
Managing your short-term lets using an online platform like Airbnb, is empowering and does give you a good degree of control, but there are risks involved including negative feedback if you get it wrong. If you choose to work with an experienced short-term letting agency you’ll be buying into their expertise – at a cost, which is usually higher when short-term lets are involved. The return on investment is often very significant though and more than worth it.
Thinking about short-term letting your property?
AirBristol has many years of experience with short-term lettings across a number of different platforms, including Airbnb and Booking.com as well as direct through our own website.
For free impartial advice get in touch to see how we can help you maximise your rental income or read more about our Airbnb and short-term lettings management services.