Buy to Let: Is Airbnbing a better option?
Anincreasing number of landlords are turning away from long-termrentals in favour of usingAirbnb and other platforms to let out their properties for holiday and short-term lets, new research has found. The trend is being driven by higher income tax many landlords face under a new regime being phased in over the next four years.
According to research from the Residential Landlords Association, published in August, the number of properties being rented out on Airbnb in their entirety increased by 54pc between February 2016 and March 2017. From the RLA’s sample of member landlords, 7pcreported they had now started to offer their properties on a short term basisusing Airbnb or a similar platform which they would have previously let in the private rented sector to longer-term tenants. Why the shift? Buy-to-let has become less profitable since the Government introduced tougher tax rules. The RLA said one in three landlords said they were focusing more on short term lets because of the changes in mortgage interest relief. Up until April this year landlords were able to deduct mortgage interest, along with other costs, before working out their taxable profit.
However, this relief will be reduced annually until 2020/21 when the scheme is fully implemented. In three years none of the interest will be tax deductible and all financing costs associated with the buy-to-let propertywill be taxed at a basic rate tax.
Can you make more on Airbnb? Short-term lets are generally higher – but the downside is that the property require more management and the likelihood of vacant periods is greater. According to current data from Zoopla, theaverage one-bed flat in London is let for £1,618 a month, or £376 a week. Airbnb says those who let out their entire home for a week could earn £630 a week. However, this could include larger properties.
You wouldn’t be able to rent out your property full time on Airbnb – 90 days maximum are the rules – but you could use other platforms. Rent-a-room relief up to £7,500 a year is available to both live-in landlords taking in a lodger andAirbnb hosts. However, this could all change following a paragraph buried in the spring Budget document suggesting the “rent-a-room” taxbreak would be removed for short-term letting. This would result in losses of £400 to £3,300 a year for Airbnb hosts. The Government said it “will consult on proposals” to “align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings”.
If you would like more information on aquiring a property with the purpose to rent it out on a long or short term basis why not give us a call and one of our property professionals would be happy to assist.
Article taken in part fromwww.telegraph.co.uk
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