Is Airbnb becoming a threat to some Landlords?
Airbnb has become a hugely successful platform for both property owners and people looking for a quick accommodation solution.
Part of the “sharing economy”, where the power of the Internet connects solutions to problems, it has revolutionised both the rental and hotel industries.
But has this come at a price?
The Airbnb business model is so simple you’re probably wondering why you didn’t think of it yourself.
People who have an empty property or spare room advertise it on the Airbnb site and those who need a bed for a set period of time search availability and book.
It’s like booking a hotel but cheaper and it avoids the hassle of renting a property privately or through a letting agent.
Airbnb get a nice commission for managing some website content and for enforcing some terms and conditions and everyone’s a winner – everyone involved in the sharing network that is.
A question that is cropping up a lot is, ‘how does Airbnb affect existing Landlords in the rental market?’ Seemingly Airbnb is more of a threat to Landlords than people realise.
If you are a Landlord renting your property privately or via an agency, then it is certainly worth arming yourself with some facts to ensure you’re not losing out to the pull of Airbnb:
Effects on short term letting
If you are a homeowner looking to rent your property out for a short tenancy, you will be competing with Airbnb.
Although the rates for Airbnb stays tend to work out more per night, those looking for properties don’t have to provide references, pay a deposit or a month’s rent up front.
No notice period with Airbnb
When you book a property via Airbnb, the duration of the stay is agreed beforehand.
This can give an advantage over rented properties, where generally the leaving day is not agreed but rather determined by a final notice period. This can lead to some Landlords losing out on potential tenants who prefer to have less of a commitment.
More choice with Airbnb
Because of the flexibility over the number of days you can rent your property or room out for, Airbnb has become a popular revenue earner for many people.
There is now an abundance of choice for renters looking for a stay in a particular area or property type.
It can be a lucrative business!
It’s not uncommon for homeowners to put their property on Airbnb while they are away on holiday and it has also become the go-to solution for those looking for temporary lodgers.
Homeowners with vacant properties and a bit of time on their hands are turning their skills to property management, booking back-to-back stays for huge profits.
If your property is of a type that does not lend itself to holiday lettings and you are a Landlord offering longer term tenancy agreements then you will certainly have the edge over Airbnb.
The rental costs for tenants works out significantly cheaper in the long-run. It also offers more stability to someone wanting a secure rental agreement with longevity.
However, there are even some issues to be aware of here when renting your property out long-term:-
Risk of your tenant “sub-letting” on Airbnb
There seems to be a rise in tenants renting properties and then sub-letting them on Airbnb without even living in them.
Landlord Joy Philips who was featured on “Nightmare Tenants, Slum Landlords” on Channel 5, rented her home to a doctor while she volunteered in Africa. She was later forced to return home when neighbours complained about the numbers of people coming and going.
Her house had been put straight on Airbnb as a boutique hotel, rented out room by room for a huge profit.
This issue with sub-letting comes with its own set of issues.
Breach of contract
If you are a tenant, sub-letting means you are the one responsible for breaching the standard no sub-letting clause in the mortgage contract. However it is very difficult for a Landlord to prove that they had no involvement in that arrangement.
Airbnb disclaims all responsibility when it comes to disputes between the vendor and the customer, meaning you could face a costly dispute.
Risk of voided insurance
As a landlord, if your tenant breaches the sub-letting terms in your contract this could also invalidate your insurance.
If something happens to your property whilst occupied by tenants that have been sourced via a sub-let, you could find yourself without cover.
If you have tenants in your property from a sub-let, you will have a tough job enforcing any of the contract terms for things like damage to property or antisocial behaviour.
Equally you may struggle to evict a tenant who has a longer sub-let through Airbnb. The original tenant with whom you hold the contract could easily disappear and you could struggle to catch up with them if you have no address for them.
Disadvantages of Airbnb
Airbnb may pose a threat to some Landlords but it does have some areas of weakness:-
- Owners have to take care of management and administration for their constant turnover of tenants, which is both time consuming and laborious.
- Cleaning fees and other fees for things like repairs need to be factored in each time there is a changeover.
Remember, long-term lets work out expensive for the Airbnb customer and Airbnb isn’t liable for any issues outside of its basic terms and conditions, which makes dealing with disputes difficult.
What you can do as a Landlord to protect yourself
Whilst the popularity of Airbnb is out out of your control, you can take some measures to protect yourself as a Landlord.
Have a tight clause in your contract about sub-letting that you can legally enforce should this occur. An increase in Landlords doing this will help to clamp down this growing scam.
Arrange for regular property inspections and explain that these are also for the benefit of the tenant, to ensure they are happy and comfortable.
Check on Airbnb regularly just to make sure your property hasn’t been listed there.
Short term letting advice from THP
If you’re a landlord thinking about short term letting talk to us here at THP Chartered Accountants to find out more about how we can help you with your Buy-To-Let, with offices in Chelmsford, Cheam, Wanstead, Saffron Walden and London City.