Thinking about becoming a host & have some v basic questions

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Hi!

I’m thinking about buying a small flat where I live in Manchester, UK (probably Salford Quays or Media City if anyone knows them!), but then airbnb-ing it whilst continuing to live where I am in my rented house share. The aim would be to pay the mortgage with airbnb. I’m not at all sure how realistic this is though! My long term plan is to buy a flat, airbnb it via a specialist airbnb agency (who take 15% of rental profit) for 6-12 months, then go travelling or work abroad for 12 months. I would either continue to airbnb it, or try to move onto a ‘consent to let mortgage’ so I can let it on a more stable, long term basis. But I have some basic questions…

Mortgages - In people’s experiences, are your mortgage lenders ok with you airbnbing out your property? I would be giving them the impression that I lived there in order to get a residential mortgage, but then I suppose there would be the issue of which home I register myself as living at on the electoral register. Hmm!

Insurance - Do you need specific landlord insurance to let your property out on airbnb, or do airbnb take care of insurance on top of your normal residential house insurance?

I think my mortgage & bills will come to around £630, and looking at similar flats in the area, the airbnb price per night is £80 - £100. So to cover that, at a per night cost of say £85, I would need to rent it out around 7 - 8 nights a month, taking into account the agency’s 15% and airbnb’s 3%. Does that about right?!

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Hi @George

Personally I wouldn’t rely on BNB to pay your mortgage. Anyway, in order to get one in the first place you will need to demonstrate you have the deposit and have the income to sustain repayments. I understand if you want to let your place out through BNB and you declare that to your mortgage company, you will pay a higher interest rate.

You need to get a specialist insurance for short term lets Admiral do one in the UK.

Where you are registered to vote has nothing to do with your mortgage company.

Costs - how would we know if your costs/calculations are right :slight_smile: we don’t have access to the information that you have.

You haven’t said anything about doing up your place/furnishing , insurance, council tax etc - I presume you have allowed for this in your costs.

Have you checked that similar properties lets for on average 10 nights a month or more? What contingency do you have in place to cover your mortgage/bills in you don’t get the number of bookings you want.

If you are only looking to let it out for 10 nights or so a month, why use an agency - that’s quite manageable by yourself - with a cleaner.

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If you’re giving them the impression you live there…no they won’t be ok with you Airbnbing the property. Those two conflict as you already know :slight_smile:

You can’t get a mortage as if it’s your primary residence and then rent it out. You will need to do a buy to let mortgage assuming you want it above board.

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From what the OP says he is looking to mislead the mortgage company and indicate he is living there to obtain a personal mortgage.

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Hi Helsi, thanks so much for replying to my ramblings! I will respond to each of your comments in-line below :slight_smile:

Personally I wouldn’t rely on BNB to pay your mortgage. Anyway, in order to get one in the first place you will need to demonstrate you have the deposit and have the income to sustain repayments. I understand if you want to let your place out through BNB and you declare that to your mortgage company, you will pay a higher interest rate.

Yes, it is a risky idea. It wouldn’t have to cover the entire mortgage every month - I will have a contingency fund to help, and I can afford both my rent and mortgage in 1 month if need be. I just won’t be able to go out at all! :slight_smile: However, I do wonder if a lender would share my optimism? They might say due to my income, they don’t think I could afford to cover rent and a mortgage at the same time I suppose?

The part about declaring to your mortgage lender seems a grey area to me though. Say you just had the one property, and airbnb it at the weekends - you wouldn’t need to declare that to the lender would you? Or would you? I thought the point of short term lettings like airbnb was that it’s such short term lets that it’s ok - it doesn’t fall foul of any restrictions on your mortgage?

You need to get a specialist insurance for short term lets Admiral do one in the UK.

Thank you, I will look at that!

Where you are registered to vote has nothing to do with your mortgage company.

OK. I just meant that it might cause alarm bells if I own a flat and told the lender I live there, but then I’m on the electoral register at a different address. But if they wouldn’t have access to that information then maybe that doesn’t matter.

Costs - how would we know if your costs/calculations are right :slight_smile: we don’t have access to the information that you have.

Apologies - I think I was just thinking out loud here. I guess I should’ve asked is there any other costs that airbnb take, or is it just 3% of each let? :slight_smile:

You haven’t said anything about doing up your place/furnishing , insurance, council tax etc - I presume you have allowed for this in your costs.

Yes, the flats I’m looking at come fully furnished. And I’ve included all the bills - and added a little more to be safe.

Have you checked that similar properties lets for on average 10 nights a month or more? What contingency do you have in place to cover your mortgage/bills in you don’t get the number of bookings you want.

This is the main worry. Some of the flats nearby don’t seem to be booked much, but some have some big chunks of bookings.

If you are only looking to let it out for 10 nights or so a month, why use an agency - that’s quite manageable by yourself - with a cleaner.

Well, mainly because I’ll still be working full time so I won’t be there to clean and let people in or help with any problems. There are a couple of local agencies who offer to manage your property on airbnb - http://smooth.rentals/ and http://www.airb4me.com/ - both of whom offer to handle everything for 15% of each let’s profit.

Thanks for taking the time to reply to me, I appreciate it!

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Isn’t this a bit of a grey area though? Because if you have a residential mortgage, but just airbnb your house for a little bit each month, surely that wouldn’t anger your mortgage lender? So surely what’s stopping me from buying a flat as an investment on a residential mortgage, and then doing a few short term lets a month on airbnb?

I would make sure I have the right insurance in place to cover it.

I’ve just found out about Consent to Let mortgages from an advisor. You can buy a property on a residential mortgage, then convert to a Consent to Let one, which is when your lender gives approval (usually for 12 months max) for you to let you property out. Usually for a slightly higher interest rate, but apparently it’s lower than Buy-to-Let usually. And you get around the whole 25% deposit and other strict rules of Buy-to-Lets.

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The risk is yours to take, but you are meant to provide full-and-frank details to your lender. The fact is that you do not have an intention to live in the house. This changes the bank’s risk profile, and therefore, there are tighter restrictions.

I’m guessing you didn’t live through the 2008 collapse of the banking industry?

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Well I might live there some of the time. I’m only planning to airbnb it some of the month - the rest I could be living there. What difference does it make?

I’m 34, so yes I did live through the collapse of the banking industry. I’m also old enough to know the cause of it wasn’t some people doing short term lets on a residential mortgage! :slight_smile:

To be honest, I think there’s probably little chance of a mortgage lender willing to lend me a residential mortgage if I’m also renting. It would probably look obvious that I would be letting it out.

I think the new plan will be to just buy a flat, live there, then switch to a consent-to-let while I travel, then come back and live there again/sell it.

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On a simple level, the banking crisis was caused by sub-prime lending on mortgages and other financial products. Since then, banks have put in updated risk profiles, and BTLs are covered by that. This is essentially what you’re doing - buying a property to let it out.

Be honest with your mortgage broker and they will get a product that works for you - without having to bend the rules. :slight_smile:

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Which one is it? Are you going to be a live in host renting a room or are you renting the whole property as you go travelling? You need a different mortgage product depending on which of those you’re going to do.

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Thanks zandra. It would be a 1 bed flat so I would never be living there whilst letting it.

My girlfriend is also purchasing a flat, so my other possibility is buying one now on a residential mortgage, and letting it on airbnb, and staying at hers whenever I’ve got a booking.

Then when i go travelling, switch to a consent to let mortgage and get some long term renters in there.