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If you’re a regular, seasoned investor, or just simply dipping your toe in the water and exploring the buy to let property market to see what’s out there, there’s a good chance you’ve encountered an increasing move towards buying an Airbnb investment property.
So what’s the deal? Why all the hype? Should you get involved? And if so, where might you learn how to invest in Airbnb properties in the UK?
If any of the above roughly represents why you’re here, then you’ve come to the right place!
To find out about buying property for Airbnb UK, 10 minutes is all you’ll need to set you on the right path and after that, well, it’s up to you…
Traditionally, investing in buy to let property has been one of the most stable and assured methods of generating a lucrative, long-term passive income.
As the UK market is historically one of the strongest and most resilient in the world, it’s easy to see why global investors consistently choose thriving cosmopolitan cities like London, Liverpool and Manchester in which to direct their capital.
Norms and traditions, however, are two things that have increasingly taken a back seat in all walks of modern life. So, what of the contemporary world of buy to let property investment?
Well, although many of the traditional trends remain the same like the UK’s relative market strength and the consistent performance of important regions outside of London – particularly the North West -, there have been some notable market shifts that serious investors simply shouldn’t ignore.
Among the most significant of these is the rapid move towards investing in short-term rental property, thanks largely to the steady rise of Airbnb – the world’s leading online booking platform for holiday lets.
Airbnb and similar companies like booking.com and Spare Room have enabled regular homeowners to become high-earning landlords, revolutionising the industry on a scale never before encountered.
Every type of property of every shape, size, spec and location now has the potential to earn homeowners a sizeable extra income, while providing holidaymakers with a more cost-effective and independent experience than the traditional hotel stay can offer.
There are, however, a number of factors to bear in mind before entering the market and like any investment, there are certain strategies that will maximise the income you can generate from Airbnb lets.
So let’s delve a little deeper into how to invest in Airbnb properties!
One of the main reasons Airbnb has become so popular and accessible to the masses is the fact that homeowners can become Airbnb hosts simply by converting spare rooms or extra spaces in their property into short-stay accommodations.
But say you aren’t so keen on offering up part of your primary residence for short-term lets and still want to get involved in this lucrative industry, then there’s a good chance you’re wondering exactly how to invest in an Airbnb property.
Firstly, there are a few essential rules and regulations you need to know before investing in a short-term rental property with the aim of advertising it on a platform like Airbnb.
Put simply, it’s not the same as investing in a regular buy to let property with a long-term tenancy in place, as there are certain UK laws applicable to owners of holiday rentals and short-stay accommodations that must be adhered to.
Things to Consider When Buying Property for Airbnb UK:
For those wondering how to start investing in Airbnb properties, it’s understandable that the specific type of planning permission needed may not be the first thing that springs to mind.
Without it, however, your short-term letting business is a non-starter.
In most places, there is a threshold regarding the number of days you can rent out your property for short periods before needing specific planning permission.
In England for example, planning permission is required when you let your property for a combined period of 90 days for short stays.
If you are not required to pay council tax on the property in question, then you will also need planning permission if you have any intention of renting it out.
Either way, ensure that you have obtained the required permissions from the council or relevant local authorities in your area before advertising the property for short-term lets, as regulations can vary from place to place.
In terms of an efficient, secure and legal investment strategy, investing in properties that have approved C1 planning consent is regarded as the best course of action when buying an Airbnb investment property.
This is the same class that covers hotels and guest houses and will therefore enable you to legally advertise your property on Airbnb and run a legitimate short-term lettings business.
For further information on UK planning laws, check out the official government website here.
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Due to the unprecedented speed at which the short-term rental market has evolved on account of platforms like Airbnb, governments across the world have had to act fast in order to keep legislation up to date with a rapidly evolving industry.
In many ways, this means ensuring that owners of Airbnb properties abide by the same or similar rules and regulations that hotel owners and other short-stay landlords are subject to.
Additionally, amending existing laws to allow homeowners in specific locations to advertise their properties for short-term lets has become increasingly common.
This has resulted in a number of recent changes to UK law that anyone interested in buying an Airbnb investment property should be aware of.
One such example of a recent legislative change brought in by the UK Government is the Deregulation Act of 2015.
Before this particular act became law, homeowners in London were not allowed to rent out their properties for less than a period of three months without planning permission.
Now, however, properties can be legally rented out for up to 90 days without the need to go through the process of applying for and obtaining planning permission.
In an attempt to monitor short-term lettings in England, the government has committed to introducing a registration scheme through the Levelling Up and Regeneration Bill (tabled in December 2022).
Citing the need to develop a ‘responsible, high-quality and competitive short-term lets sector’, the thinking is that registering short-term lets would provide data enabling local authorities to have access to relevant information on properties being rented out in the locality.
This also stems from a concern about the potentially damaging effects of the increase in short-term lets on local housing markets where a ‘hollowing out’ of communities and a rise in anti-social behaviour have been highlighted as potential issues.
Similarly, the Scottish government has introduced a short-term licensing scheme which requires all owners of short-term rental properties to have a relevant license. More information on the different types of short-term licenses can be found on the official Scottish Government website.
Can you get a mortgage for an Airbnb property and if so, what sort of mortgage options are out there when it comes to making this kind of purchase?
This is among the most frequent queries for those hoping to enter the short-term rental market as an investor and wondering how to invest in an Airbnb property in a secure and affordable manner.
So, let’s take a minute to consider the types of mortgages most commonly available.
Although the mortgage option most suitable to you will depend on the type of property you invest in, the mortgage provider you use and your financial circumstances, the following are the types of mortgages you’re likely to encounter as you look into buying an Airbnb investment property.
When researching how to start investing in Airbnb properties, it’s likely that the holiday let mortgage option has crossed your path and understandably so.
In terms of investing in Airbnb properties, short-term rentals and other types of holiday homes to be advertised for short lets, taking out a holiday let mortgage is probably the most suitable option.
Much like buy to let mortgages, lenders will usually require a significant deposit of around 25% of the property’s value which can prove an expensive initial investment.
Additionally, to be granted this type of mortgage, mortgage lenders often require the property to be rented out as a business and can stipulate that borrowers earn a certain income.
Most importantly, in order to obtain a holiday let mortgage, the property must be available to rent for at least 210 days a year.
Finding a mortgage broker that will offer you a holiday let mortgage can be difficult, so seeking expert mortgage advice from a specialist lender is highly recommended.
When first exploring how to start investing in Airbnb properties, it’s likely that these are the mortgage types that sprang to mind.
Generally speaking, though, you won’t be able to use a regular buy to let or residential mortgage to purchase an Airbnb property.
This is typically because the property is going to be used as a business with a high turnover of short-term tenants and so the potential earnings are much higher than rental properties with long-term residents, something that providers will be aware of.
Similarly, residential mortgages are difficult to secure when a property is being purchased to rent out on a short-term basis.
In some cases, residential mortgages can be used if a homeowner intends to rent out specific rooms in a property, but providers can limit the number of days your property can be rented out which isn’t ideal when trying to start an Airbnb business.
Either way, securing the right mortgage that will allow you to make a solid, affordable investment while staying on top of interest rates and mortgage payments is essential, so it’s well worth seeking the advice of an experienced broker.
So now that you have a grasp of how to invest in Airbnb properties, let’s take a quick look at what you can expect to earn!
Accompanying the fact that sites like Airbnb have made the short-term rental market accessible to regular property owners is the added bonus that landlords stand to earn much more from short-term lets.
At present, the average monthly rent in the UK is £1,184 for properties with long-term tenants, generating an average annual rental income of £14,208. However, recent data from Airbtics highlights that the average daily rate for an Airbnb in the UK is £175 a night.
This means that in order to match the average monthly rent for a long-term let in the UK, you would only need to rent out your property for around 10 nights a month on Airbnb.
Absolutely!
Using the above rates as a guide, to make an annual rental income of £20,000 through Airbnb lets, your property would only need to be occupied for 115 nights a year, which still meets HMRC’s minimum requirement.
Having your property occupied at the above daily rate for 200 nights a year will generate an annual income of around £35,000 which significantly outweighs the average income from a rental property with a long-term tenant.
Notably, this discounts potential rate increases during peak season or when say a major sporting or music event is taking place in a popular UK city.
During such periods, well-located Airbnbs have been known to be rented for rates in excess of £400/night, again highlighting the lucrative nature of this type of investment.
Obviously, your Airbnb income will depend on the rate of occupancy of your property, so it’s important to maximise exposure through effective advertising and by keeping on top of bookings.
In any case, the above figures show just how profitable a regularly occupied Airbnb property can be.
While maintaining, marketing and managing your property can be a lot of work, the financial reward is certainly worth it!
It’s undeniable that Airbnb properties have the potential to generate huge rental returns, but unfortunately, potential alone will not boost your bank balance.
As I’m sure you’ve already gathered, with successful short-term letting businesses, location is everything!
Now, although Airbnb is famous for having rental properties in pretty much all environments in every corner of the globe, there are some key recommendations when it comes to investing in a property that will provide steady returns and high occupancy rates throughout the calendar year.
To achieve this, buying an Airbnb investment property in a popular UK city that offers a combination of affordable prices, strong rental yields, high visitor rates and regular music and sporting events is usually a winner!
Take Liverpool for example.
A city with a rich history, world-renowned character, popular nightlife scene, two premier league football clubs and the birthplace of the band that changed music forever – need I say the name?…
Liverpool is an ideal location to invest in a short-term rental property in terms of securing bookings all year round.
Additionally, the average property price in Liverpool is almost £110,000 below the UK average according to the most recent House Price Index, while rental yields for Airbnb properties range anywhere from 10-15%.
Of course, there are many great places to consider in terms of buying property for Airbnb UK, and it’s essential to dedicate time to researching a range of areas in order to find the best investment for your short-term letting enterprise.
Much like location, there is a wide range of property types that can work well on Airbnb.
From idyllic coastal beach houses to central city apartments, there is something to cater for all wants and desires on this expansive booking platform.
But in terms of buying property for Airbnb UK, investing in serviced accommodation in a top location is widely regarded as the best investment strategy.
Put simply, serviced accommodation offers the comfort, privacy and facilities characteristic of a long-term residential property, but in a hotel-like setting that’s ideal for short lets.
Generally taking the form of a fully furnished apartment, serviced properties provide tenants with a little more independence than an average hotel room, as they’ll have the space and facilities to cater for themselves if they wish.
A standard such property will consist of 1-2 bedrooms, at least one bathroom, a functioning kitchen, living area and will usually include onsite parking for residents.
If the property is part of a larger development, tenants may also have access to further leisure facilities such as gyms, swimming pools and spas, often accessible for a small extra fee.
This makes serviced apartments ideal for holiday lettings as residents can enjoy a relaxing hotel-like experience while enjoying the comfort and space of their very own home away from home.
From an investment perspective, purchasing a property that’s part of a wider development in a prime location is a highly lucrative and secure investment strategy as tenant demand is not something you’ll have to worry about.
Additionally, being able to offer tenants added perks like those listed above, adds further value to the overall investment as it will allow you to charge a higher nightly rate.
Yes! As far as investing in buy to let properties go, renting out a property on Airbnb is among the highest earners in terms of rental income.
Of course, managing and maintaining such a property can require an ongoing time and financial commitment and, as with any investment, there is always a certain degree of risk attached.
To ensure the success of any short-term rental business, keeping on top of outgoings such as home insurance fees, mortgage repayments and further interest payments is essential.
But when all factors are considered, the pros far outweigh the cons in this case!
Additionally, enlisting the services of a property management company that will take care of all day-to-day landlord duties is an excellent option to consider if you don’t have time to manage the property on your own but are still keen on buying an Airbnb investment property.
Prime location, serviced apartment planning consent, competitive prices and up to 15% projected rental yields, our recently launched Liverpool Serviced Apartments offer everything you could ask for in an Airbnb investment property.
Comprising 210 serviced apartments, including opulent Manhattans, 1 and 2-beds, prices start from just £154,950 in this generational waterside development that provides tenant access to a range of 5-star residential facilities.
Ideally located just moments from the historic Royal Albert Dock and within walking distance of Liverpool’s main tourist attractions, these apartments are perfectly placed to maximise tenant occupancy rates and generate high rental returns.
With predicted earnings of up to £68,000/year on 2-bed apartments, properties in this stunning development are already selling out fast, so don’t hang around if you want to be part of Liverpool’s best Airbnb investment opportunity!
We hope that this has given you an insight into how to invest in an Airbnb property and we would be delighted to answer any further queries you might have! Enquire today and begin your investment in UK serviced accommodation.
Patrick is a property content writer at RWinvest. Keeping a close eye on the UK property market, Patrick helps our readers stay informed and up to date on the latest market news and statistics.
By submitting your details you agree to allow RWinvest to store and process the information submitted and receive product information and other communication, as stated in the privacy policy.
