Our good friends Warners, Edinbugh based solicitors and estate agents have written a blog for us relating to some potential pitfalls of AirBnB letting in Edinburgh.
It must be especially tempting for many Edinburgh homeowners and landlords to consider short term letting – especially during the hugely popular Festival and Hogmanay seasons. Headline figures show the average advertised AirBnB rental in Edinburgh at £2187 per month, significantly more that the average £986 for long term rent. Yet the reality is that many people are acting on the initial returns, perhaps unaware of the costly pitfalls.
Neil McInnes, Director with one of Edinburgh’s leading letting agents, Umega Lettings, urges homeowners to take stock of the hidden costs, risks and the damage that could be posed through a potential breach in mortgage agreements. He told Warners: “Buy-to-let mortgages do not allow holiday letting as they require a Short Assured Tenancy, which is a minimum of six months, to be in place.
“A special holiday-let mortgage is required and these are not offered by high-street lenders due to the increased risk and uncertainty of holiday lets. Holiday-let mortgages require larger deposits and will likely charge higher interest rates and fees to manage the increased risk.”
“A valuation letter from an ARLA accredited agent is also need, in order to grant the mortgage in the first place and breaching a contract by allowing short-term letting can result in the mortgage lender forcing the owner to sell or ultimately repossessing the property.”
While the headline figures can look attractive, Umega Letting does not believe that holiday letting stacks up financially. Neil added: “At first glance, income figures that show the average advertised AirBnB rental figure certainly look appealing to a landlord. “However once you factor in the costs associated of holiday letting, such as booking fees, cleaning, council tax, gas, electricity, TV licensing and Wifi, owners would need to achieve 75 per cent occupancy on AirBnB to reach the net rental compared to long-term letting. “Should occupancy be closer to 50 per cent, suddenly long-term letting is more lucrative by £440 per month, without even considering the expensive insurance that is recommended for short term letting.
“With long-term letting, the legal obligations on the landlord are clearer and the tenant is responsible as the resident of the property, whereas visitors or guests in holiday accommodation expect a higher level of service from their host and take less responsibility for the property as a result. “In other words, you have people taking less care of the property as they are only in it for a limited time, compared to long-term tenants who want to enjoy comfortable surroundings and décor.”
It is not the only issue with short term letting. Complaints from disruptive holiday lets in Edinburgh have prompted some property developments such as the popular Quartermile to enforce the clause in the deeds of their properties banning holiday lets altogether.
Sites like AirBnB have made the option of renting a property out as a Festival let more enticing to many homeowners, but it is certainly not something that people should enter into lightly. As the figures from Umega show, when you factor in some of the additional costs and the likely occupancy rates you will achieve, many landlords would be better off letting their property out through traditional methods.