Much has been documented about the opportunities that AirBnB-style platforms give property owners to make a little extra cash. But what about a more serious proposition for landlords?
A survey of 1,500 landlords across the UK, conducted by the Residential Landlords Association (RLA), showed that 7% are now using AirBnB or similar sites to offer their properties on short-term lets.
And 36% said they have done this as a direct consequence of the increasing tax burden they face under the new buy-to-let regime.
One of the key trends we have observed, especially in London, is landlords renting out rooms or whole properties through sharing economy platforms when they are faced with a tenancy gap.
There are a couple of situations when these tenancy gaps can occur.
The first is simply when a tenant moves out. If the landlord hasn’t got a tenant lined-up to move in straight away, they are offering the property for short-term rental, often making more in this period then they would when it is rented on a longer-term contract.
The second situation occurs when a landlord wants to sell a property.
In most cases, buyers do not want to inherit sitting tenants, so previously rented out properties are often left standing vacant for what could be a few months while the sale goes through.
By offering them for short-term rental they are able to mitigate some or all of the rental loss during this period.
Elsewhere in the UK, we are witnessing landlords renting out properties on a short-term basis full-time.
The attractive returns to be earned from this approach being in answer to the new tax regime that landlords are facing where buy-to-let mortgages can no longer be offset as expenses.
In all three of these scenarios, there is a risk that a large chunk of landlords will be blissfully unaware that their commercial wellbeing could be threatened by the lack of appropriate insurance.
While sharing economy platforms offer limited cover to the property owner, in most instances this will not be adequate for all potential consequences.
Landlords need to inform their mortgage lender and existing insurance provider that they are participating in short-term rents.
From our conversations with the leading insurance providers, most landlord policies will not cover short-term rentals and mortgage lenders are only likely to be happy if appropriate insurance is in place.
However, there are a number of insurance products available on the market providing cover for short-term rentals.
For brokers, by understanding these issues you’ll be best placed to source these products for them.
Without a doubt, AirBnB rental platforms have made it easier for landlords to rent out rooms or properties but it could leave them with a massive headache if not done correctly.