AirBNB is not working for Landlords...
In the past few years, AirBNB has become a trending option for landlords to maximize their ‘per night’ property value by renting to individuals seeking very short-term stay. However, as the AirBNB trend has begun to plateau, landlords are discovering that the short-term revenue may not make up for the long-term costs on their property.
AirBNB has the option of ‘self-service’ or hiring an AirBNB property management company to handle operations. Self-service requires a landlord to manage all bookings, customer check-ins, cleaning, and customer service. Due to the workload of ‘self-service’ associated with rapid turnover, landlords typically hire AirBNB property management companies to handle these services. Air Sorted charges a 14% fee on revenues, which offers a competitive rate compared to a typical short-let rate of 25% offered by estate agencies. However, the short-term profit focus of AirBNB can do considerable damage for a landlord’s long-term prospect on their most valuable asset: their property.
With a limited liability of short-term stay, tenants do not feel the same level of responsibility to maintain proper conditions of the property as a long-term renter would. The marginal lack of care by tenants accumulates over time to property damage that a cleaning session cannot solve. Such issues include furniture damage, appliance misuse, plumbing issues, stains, and theft. Extensive proof of tenant damage and original receipts for all assets within the property are necessary in order to receive reimbursement from AirBNB. The time elapse to get reimbursement can also be hurtful for landlords when repairs need to be made in a short time to satisfy the next incoming tenant’s stay. In most cases, costs are the liability of the landlord.
Depending on the quality of property and time of season, an AirBNB in Kensington and Chelsea can earn as low as £25 a night from tenants. An AirBNB report indicates London has the third most places to stay of any city, at a growing rate of 75% per year. In the past year, a surge in AirBNB supply has driven down value of properties to often list on the low side of the earnings scale. On average, the AirBNB module of short-term stay attracts cliental to cheaper residence since quality is not as valued during vacation or temporary stays. To find success for this module, AirBNB thrives in cheaper units that are located in the most popular areas of town. These landlords typically have lower costs to cover more frequent damages, whilst also keeping reservation costs low to attract tenants.
The unfortunate draw to fitting this module is that AirBNB has an annual limit of 90-night reservations per property in London. The limit combined with a highly competitive AirBNB market often results in many vacancies for landlords. Also, damages and sporadic schedules of AirBNB can make it difficult for renting to cover the other 275 days of the year. So while per night revenues are high, landlords can struggle to maintain steady income through this method.
The affluent properties of Kensington and Chelsea do not match the strengths of the AirBNB module to maximize their earnings. Rather, Kensington and Chelsea property is more suitable for the longer-term professionals and families seeking a neighborhood to call ‘home’. A longer stay often places more liability on the tenant to maintain the unit, which will lead to lower maintenance costs for the landlord long-term. Long-term renting also ensures steady earnings necessary to cover the high costs of property in the Kensington and Chelsea area.
As for neighborhood environments, Kensington and Chelsea is one of the strictest in London for noise restrictions, public disturbance and property maintenance expectations. This environment can be a turn-off for vacationing AirBNBers and also lead to complaints from neighbors and violations of Kensington and Chelsea orders. A landlord is responsible for a tenant’s behavior to an extent, so it is worthwhile to know the tenants well to make sure their habits oblige with neighborhood expectations. This can prove problematic when turning over tenants every few nights through the AirBNB service.
As a landlord, it is important to value the strengths of your property, not the strengths of current market trends. Kensington and Chelsea has great value to landlords when there is long-term leasing to responsible and professional tenants. This strategy results in steady income necessary for high-value property. We at Jeremy Jacob have found this to be true for some of our landlords that have tried the AirBNB module- before returning to the stable long-term renting strategy.
Sources
Booth, R., & Newling, D. (2016, December 01). Airbnb introduces 90-day annual limit for London hosts.
Rudgard, O. (2016, June 07). The Airbnb pitfalls that could end up costing you thousands.
Sigee, F. M. (2016, September 26). How Airbnb is transforming London's property market.
