Airbnb has become much talked about, but is it worth it? we look to answer that questions in this article.
So, you have a spare room in your 2 bedroom flat, you probably work out of town, and you’re looking at making some extra cash on the side while you’re at it.
Well, the best bet is definitely running an Airbnb business. However, you might have questions you need answers to, and if you seriously consider Airbnb as your main or alternative source of income, you need to know the following information.
Like every business, the main reason why people delve into it is for one thing – money. With this is mind, it’s important to be aware that the amount of money which can be made depends on numerous circumstances.
Some of the factors which can determine how much can be made from an Airbnb business are:
Location of Property
In the property business, location is everything. As such, the location of a property has a major impact on the amount of money hosts can make in an Airbnb business. For people who have properties in desirable locations such as the seaside, the amount of money which can be made will differ from other locations.
Season of Listing
With travellers making their way out of the country mainly during the summer season, hosts stand the chance to make loads of money during this season, as travellers are keen to find lovely locations in the world; the demand is usually at its peak during certain times of the year. That said, don’t dismiss the travellers who are visiting town for a party or a wedding!
Listing of Property
For Airbnb business owners, the listing detail is very important when it comes to attracting travellers, so don’t rush this job! Y our income depends on the detail. Particular attention has to be given to the unique details of the property, and all the amenities which are offered.
Pricing of Property
An Airbnb business is certainly not a hotel business – pause, and let that sink in a bit. Hosts should not price their homes as high as hotels or unreasonably low just to make a quick buck. What is important is striking a great balance to ensure that your property is not underpriced or overpriced.
Airbnb Tax Implications
Before you concentrate on getting paid, it is important to consider the tax implication of such a business.
Just like any income in the United Kingdom, the money you make from Airbnb is taxable, but some reliefs are also available depending on whether your main home is used as the Airbnb business or not. For Airbnb homes, the tax payable also depends on whether the hosts decide to rent one or more furnished rooms in their main home, or whether renting a buy-to-let property.
In the case of the latter, the income which is derived is taxable income but subject to a relief called ‘rent a room relief’, which hosts can claim entitling them to a tax free allowance of £7,500 per year. If this is less, then hosts don’t have to make any declaration, but if it is more, then a tax return has to be filed at the HMRC.
For Airbnb hosts, this implies that hosting in their main residence can enable them to qualify for the rent-a-room-scheme if they let within their main residence.
A host can also qualify for the Furnished Holiday Letting, provided that such host owns a buy-to-let property which is let out through Airbnb throughout the calendar year.
Furthermore, requirements such as letting the property for at least 105 days in the year, property must be furnished, the property must be in the UK or the EEA, and the property must be made available to be let as a furnished holiday accommodation for not less than 210 days in the tax year
There are many points relating to taxation for Airbnb owners to be aware of, so as easy as it sounds to have travellers rent spare rooms in your property, it is also important to be on the right side of the law.
Other things to consider
With businesses such as Airbnb, hosts would have encountered numerous obstacles just to ensure that they remain competitive. For many people who are conservative, it might be an issue to spend time in a strangers house, instead of staying in a hotel which is the conventional choice for most people.
Also, hosts might encounter issues like having to restructure their homes in a way to make it habitable for travellers who they want to stay for a certain period of time. Hosts may also face the obstacle of trying to deal with the needs and demands of new travellers each time, especially those who choose to stay for a long time.
Another obstacle which hosts face comes in the area of insurance, and the type of insurance to take out when dealing with damages caused by travellers. Hosts who have home insurance need to be aware of the difference between Host Guarantee and Home Insurance.
Pros and Cons of an Airbnb business
Despite the obstacles which hosts face, and just like in every business, running an Airbnb business poses numerous opportunities and challenges for either first timers ,or for people who have run this business for a while. Let’s take a look at some of those Pro’s and Con’s.
- Extra Cash
Airbnb as a business is a means of earning extra cash for hosts who already have a job – especially during holiday season where travellers are looking for cheap places to stay. The extra income can be used to live elsewhere and use the entire property for rentals, or use the funds to develop the property for greater future profits.
- Low effort business
Once your listing is up, the return on effort is considerably positive. The main elements that you have to consider are key handovers, cleaning, and maintenance. That said, for a low fee, it could be possible for somebody else to take care of the handover and cleaning for you.
- Property Damage
Guests could cause some damage to your property, however with the guest leaving a deposit you always have the damages covered. Anything considerable can be covered by your insurance.
- Unstable Income
Airbnb can be a profitable business for people who want to earn extra cash. However, when compared to renting a property monthly or having long-term tenants, the income from an Airbnb business might be unstable to due to inconsistent number of bookings each month, making it potentially a seasonal business.
I personally think that putting property up on Airbnb is a great idea, however I think one of the biggest points to consider is the location and type of property that you are renting.
A two-bedroom property in a city may be full every week of the year, whereas a four bedroom property in the country may not be. Don’t take this statement literally, so I would encourage anybody to check out other properties in the area and see if they are always available.
Look at the properties that are always booked, why? Check out the reviews and see what it is that people like about it.
My final point is don’t forget the power of customer reviews! Look after people, communicate swiftly, be hospitable, look at little touches that can make a big difference when it comes to reviews. Did you leave a bottle of champagne for the wedding guests, or leave local information guides for the holiday makers? People care about this stuff, so remember that what you put in, you get out!
Thank you for reading our review of Airbnb. Now download our essential checklist on how to run an Airbnb business.
Read our article of home based business ideas. We strongly recommend the top one on the list because anybody can make tax free income from this!
High & Wise