With stamp-duty surcharges on buy-to-let UK properties, making an adequate return has become a little more challenging. On the other hand, there are now fantastic ways to boost your income from property – particularly leveraging AirBNB. Here’s how to double your monthly investment income using it:
Buy the right sort of property for AirBNB.
The ideal markets for a traditional buy-to-let and for an AirBNB property are quite different.
For a traditional buy-to-let you want something cheap, practical and versatile. A non-descript two-bedroom house in a frankly boring commuter town, located within walking distance of the train station and a supermarket, that you can get for a bargain, is ideal. However, as you might imagine, it’s not the kind of property that’s most likely to attract tourists.
Good AirBNB properties are located in tourist destinations, and the more stable the tourist numbers the better – London and Paris have visitors year-round, while a beach property might stay vacant in the winter, hurting your returns. Being close to attractions and public transportation is a plus, as is anything remarkable about the property – be it a nice view or pretty architecture. Also consider what the supply of competing properties and of hotels is like. With over 2 million listings worldwide, in some large cities, competition and vacancies keep rents down, even though the total number of people visiting is high.
The right size can also vary. For long-term renting, going above 2 or 3 bedroom houses can be risky, because they appeal to fewer people, so you are restricting your market. On the other hand, for short term rental, scale could be good – in a sense, you’d be running a bed-and-breakfast.
Be honest with yourself about what is return on capital and what is freelance work
A useful rule of thumb for AirBNB is that you can roughly double your income. So a property that you could rent for £1,300 thousand per month, you might be able to rent for £140 per night, and have it occupied 75% of the time. The first will yield £16,000 and the second £38,000, but remember that you will have to pay AirBnB fees, utility bills and provide cleaning, sheets, towels and perhaps breakfast. So net of all that, you’d have roughly double.
But apart from the financial cost of all those amenities, there is the work of maintaining and promoting your listings, answering inquiries, meeting the guests when they arrive and leave and solving the odd problem. And because guest ratings are such an important part of having your property high in the listings and keeping the guests coming, you can’t really shirk on these. On the contrary, many AirBNB hosts go above and beyond the minimum requirements. Some pick up their guests from the station, or guide them around the city, and I even had one who insisted on insisted on ironing my shirt for me before I went out, because it had got creased in the case!
Even if you don’t go that far, to keep a property constantly rented is, at the very least, a part time job. So you must ask yourself – is that part time job that pays £16,000 (the difference between the AirBNB income and that of a standard rental) per year attractive to you or not?
When the effort makes sense
AirBNB can be fantastic for pension income, because some pensioners really enjoy the activity of taking care of their guests. It can also be good if you have teenage or young-adult children who could use the experience of dealing with ‘clients’.
On the other hand, if you work full-time or are based overseas, your best option might be to have a manager. Many people have found a rewarding profession in managing short-stay rental properties for friends and taking a cut of, say, 20%.
Someone managing 10 properties like the one from the example above could earn roughly £65,000 per year this way, without any investment of their own, while the property owners would still make much more than through traditional rental. Not bad for either one! To find such a ‘managing partner’, talk to colleagues who also have buy-to-let properties, friends who are vocal about their own success on the platform, or others who have time on their hands and are looking to boost their incomes.
In conclusion, with some effort, and with the right setup, AirBNB can be a fantastic way to boost your monthly investment income.