The ins and outs of making money on Airbnb

Getting paid for letting out your spare room or house on AirBnB isn’t as straightforward as it sounds.

AirBnB host welcoming guests © AirBnB

Houseguests, like fish, start to stink after three days

Renting out your property for short-term lets on Airbnb may seem an easy money-spinner. But it's not as straightforward as it sounds. There are tax, insurance and mortgage implications to consider, and that's before you even start dealing with guests.

That hasn't deterred many UK property owners from having a go: Airbnb had 223,200 active listings last year, of which 41% were for a private room in the host's primary residence and 55% were for an entire house. Properties are typically rented out for 36 nights a year, netting their owners an annual average of £3,100.

Tax breaks

Still, it's not simply a cheeky earner on the side: the money you make on Airbnb is taxable and you need to declare it to HMRC. That said, there are some tax breaks available. You used to be able to earn £7,500 a year tax free under the government's rent-a-room scheme, but a rule change this year dubbed "the Airbnb tax" means this relief is now only available to those who are also living in the property at the same time. However, if you're not eligible for that, you can still earn £1,000 a year tax-free under the property income allowance.

Check your mortgage

If you have a mortgage on the property you want to list on Airbnb, you may need to ask permission from your mortgage lender first.

"There's no obligation for a lender to consent, or it could charge a fee or load your interest rate," cautions David Hollingworth, director at L&C Mortgages. He says many people just list on Airbnb without speaking to their lender, but this is not a good idea as lying by omission to your lender is mortgage fraud. Banks and building societies are realising that their customers want the option to rent out their properties, and some lenders have written this into their small print.

Nationwide, for example, will accept a certain amount of use as a B&B, as long as no more than two bedrooms are allocated to paying guests, while Metro Bank allows you to let out your property for 90 days a year, notes Hollingworth.

Outsource your hosting

Once the mortgage and tax administration is taken care of, there's the work of managing bookings, communicating with guests, organising cleaning and changing linen. If you don't fancy doing this yourself, there are many companies that will do it for you. But they don't come cheap.

You can usually pay them a percentage of your revenues as a commission, or they can take everything the property earns and pay you a fixed monthly fee, regardless of how your listing performs. Commission charges from companies such as Airsorted, Hostmaker, GuestReady and Your AirHost vary from 5% to 20% for "lite" to "premium" services, with many offering full-service options at a cost of 12%. Charlotte Morris and Kirsty Allsopp are both Airbnb superhosts, meaning they are experienced and highly rated. Kirsty manages her own property, a two-bed annex attached to her family home in Long Clawson, Leicestershire, while Charlotte lives abroad part-time so she uses a management company for her Hackney flat.

While Charlotte found the management company to be quite hands-on at first, the level of support dwindled over time. "I've had a ticket in about missing towels for over two months I've given up asking. I've had brand new, unopened skincare and food stolen and was very frustrated with the lack of support on this. I've lost count of how many times I've had to call them to get them to sort stuff out," she says. "I often wonder if it's all worth it. When it works, it's a dream. But for the percentage taken and the extortionate cleaning fees applied, it's hard not to get really miffed."

Extra insurance

Kirsty has been doing Airbnb for two years and likes the ability to make money from her extra space, with more flexibility than a long-term let. Admitting she was "nave" at first, she didn't consider the need for extra insurance. "We had a guest who opened the wood burner and a log fell and burnt the carpet. It was clearly an accident. If you claim through Airbnb they seek to recoup that money from the guest and that is paid to you. It's not insurance, which we had assumed it was. Your own home insurance won't cover areas let out so you need separate insurance."

The customer is always right

What would these superhosts say to someone who thinks Airbnb is easy money and wants to get involved? "That it's something you need to carefully consider," says Morris.

"It's a strange feeling coming back to your home knowing that a stranger has been there. Things go missing, things break, and no one takes responsibility... On the other hand, it's a great way to supplement income and, while management companies aren't perfect, it does take some of the hassle out of it. I wouldn't have been able to sustain my work and life commitments without it." Allsopp advises would-be Airbnb hosts to remember that the customer is always right, and as a host you live and die by your reviews. "Airbnb success as a host works on feedback so you always have to go the extra mile to ensure whoever is staying is happy. It's hard work, but also very rewarding. It's great to meet different people, but it's not free money."

Recommended

No let up in house price rises as new records set
House prices

No let up in house price rises as new records set

House prices continued to boom in April, with £20,000 being added to the price of the average home in the last 12 months.
14 May 2021
The best Tudor properties for sale now
Houses for sale

The best Tudor properties for sale now

From a timber-framed hall house dating back to 1542 in Swaffham Bulbeck, Cambridge, to an Elizabethan farmhouse in Norfolk, eight of the best Tudor pr…
14 May 2021
Three commercial property funds that go beyond offices and shops
Property

Three commercial property funds that go beyond offices and shops

When it comes to commercial property, these three real-estate investment trusts in promising niches look most appealing, says David Stevenson.
11 May 2021
Could you end up paying inheritance tax on your family home?
Inheritance tax

Could you end up paying inheritance tax on your family home?

The value of the average UK home has risen by 53% since April 2009, but the inheritance tax threshold has remained static. And that means more people …
7 May 2021

Most Popular

How will Joe Biden’s capital gains tax rise affect crypto prices?
Bitcoin & crypto

How will Joe Biden’s capital gains tax rise affect crypto prices?

The US president wants to increase capital gains tax – and that’s going to hit a lot of American cryptocurrency speculators. Saloni Sardana looks at h…
14 May 2021
US stocks look expensive – here’s what to own instead
Investment strategy

US stocks look expensive – here’s what to own instead

Right now, US stocks are among the most expensive in the world. So if you want a decent return on your investments, you should look into diversifying …
17 May 2021
Inheritance tax planning: the rules around gifting
Inheritance tax

Inheritance tax planning: the rules around gifting

There are plenty of legal ways to minimise an inheritance tax bill. Perhaps the simplest is to give away assets to reduce the size of your estate. Dav…
11 May 2021