This week I turned on Instant book for three of my listings. I was always hesitant to use instant book because I liked the added sense of security of getting the chance to weed out undesirable guests at the request to book stage. When a guest wants to stay in your listing on airbnb they have to request to book by sending you a message introducing themselves. Only if the host is satisfied with the information the guest has provided do they release pre-approval for the guest to make payment and secure the booking. If you turn on Instant book guests can book without going through the request to book stage and obtain pre-approval.
Between changing bedsheets and checking-in guests I often peruse the listings of my fellow Airbnb hosts. Partly to get a feel for who's charging what in the market also partly to steal ideas for making my listing look more attractive.
A very price sensitive marketHow much of a price sensitive market is Airbnb? Very I feel. Especially at the sub £50 a night level. A simple search reveals a £5 increase per night from £35 to £40 the number of listings jumps from 149 to 317, more than 100% increase. For anyone looking to make some serious money being a airbnb host then this is not very encouraging. [caption id="attachment_119" align="aligncenter" width="734"] Pricing your listing well below average is the best chance you've got of full occupancy[/caption]
I'm not going to get rich anytime soon from AirbnbBeing an Airbnb is not an easy path to riches. The level of competition in my city of London is so high that nightly rents are at rock bottom. Supply is currently well in excess of demand. Demand is rising quickly as far as I can tell; I guesstimate as many as 50% of my guests are first time airbnb users. It may take some time for either demand to equal supply or enough disappointed airbnb hosts give up on the hope of easy hosting cash. I get the feeling I joined the airbnb hosting party a bit late (I started hosting late 2014). The market is saturated. In this persons blog post he make $22,000 in 132 days in 2103. That's $169 a night. A quick look for whole apartments in London with a price per night of £100 are 3 bedroom apartments for 6 guests. Thats less than £35 per room. A normal long term 3 bed rental for those living and working in London is at the lower end £500 a week and there is no vacancy period and the tenant pays all the energy and cleaning bills etc. You might ask why bother? Ideally you will have a 100% occupancy rate or near enough to have any chance of making a decent profit. Cutting your nightly rate to a rock bottom price can help you achieve full rental but can eat into your profit. I sometimes cut my prices to ease my cash-flow over a certain period. Less money is maybe better than no money. It's surely easier to ensure your as full as possible as far into the future as possible. Don't rely on last minute bookings to keep you afloat. For popular listings I suspect the average vacancy to be about 20%. Reading this article in the Telegraph makes Airbnb hosting seem like easy money and even a lucrative lifestyle choice. The lady being interview charges £60 a night for singles and £70 for doubles in Oxford. Definitely at the top end for a private room listing for Oxford. I couldn't find her listing in Oxford but a quick look at the empty calendars for current listings in that price range suggests that she has either dropped her prices or dropped airbnb. [caption id="attachment_120" align="aligncenter" width="705"] Competition can be huge in a city like London and not enough demand[/caption]
Too many hosts and not enough guestsThis airbnb group post says it all. If you can't read it the hosts says her views have dropped to almost nothing and so have her bookings (she charges £300 a night for a whole apartment). A fellow airbnb host says she has dropped her prices 25% because of the competition. Another Airbnb hosts comments on another thread "too many hosts and not enough guests, thats the long and the short of it"
Hotel TaxIn the UK there is currently no hotel occupancy tax and to my knowledge no intention to introduce one.
VATVAT is payable on Airbnb’s service fee (collected by Airbnb at the time of booking so nothing for you to do here) but no VAT is currently chargeable on rent in the UK. If such a time comes the government decides that money earned from Airbnb is no longer rent but a service fee then VAT may become payable. [caption id="attachment_110" align="aligncenter" width="335"] You will need to pay tax on your airbnb income[/caption]
Income TaxIncome tax is payable on any earnings in the UK. There are very few instances where income tax is not payable on any form of earnings in most countries. You are kidding yourself if you think that profits earned from renting out rooms or anything else is not liable for some form of tax. This is just the world we live in. You pay income tax at your marginal rate (this means on top of any other income you earn for example your job). So if your already earning £40,000 a year from your employment then you could be paying income tax at 40% or more on your Airbnb income.
The Rent a Room SchemeThe Rent a Room Scheme is a UK tax free allowance when you rent a room in your house to a third party. This is applicable to ‘Shared room’ listings but no to ‘Entire place’ listings on Airbnb (that is unless is it usually your main home). The Rent a Room Scheme lets you earn a tax free allowance of £4,250 per year. So if you earn less that £4,250 for your Airbnb lettings portfolio then you are in the clear and owe nothing. If you earn more that £4,250 from your Airbnb listings then your going to want to start claiming some deductions to bring your assessable income down. The government has recently announced the intention to increase the rent and rooms scheme allowance to £7500 from April 2016.
Tax Deductions1. A Wear and tear allowance 10% of rent (Soon to abolished in April 2016) 2. Other Tax Deductable costs incurred from running your Airbnb listing might be:
- accountants’ fees
- buildings and contents insurance
- interest on property loans (for example your mortgage)
- maintenance and repairs to the property (but not improvements)
- utility bills, like gas, water and electricity
- rent, ground rent, service charges
- Council Tax
- services you pay for, like cleaning or gardening
- other direct costs of letting the property, like phone calls, stationery and advertising
Apportioning your income and expensesIf you are a live-in host then your going to need a apportion some of your expenses (for example your mortgage interest) depending on what percentage of the house is yours exclusively and what percentage was used by your guests. The generally acceptable method is by square footage of the property.
Capital gains taxTheoretically you could also be liable for future capital gains tax if you are taking in more than one lodger at a time - Private Residence Relief and Letting Relief.
You can opt to charge your guests a cleaning fee on top of their booking fee. The fee is of course a one off fee added to the total. The question is should you be charging this fee? Why I don't charge a cleaning fee
I don't charge a cleaning fee. There is just isn't a good enough reason to charge one. In fact I would say that if you do charge a cleaning fee then guests might well assume that they don't need to clean up after themselves as they have paid for cleaning on top of their booking fee. If I were a guest I would personally find a large cleaning fee off putting and it might change my mind on selecting a particular booking.The cleaning fee is included in the price in search results In the search results guests will see the nightly rate inclusive of the cleaning fee so the obvious question is why have the cleaning fee and not just include this cost within the nightly rate? See how Airbnb calculates the nightly rate inclusive of the cleaning fee here. I would personally find a large cleaning fee off putting and it might change my mind on selecting a particular booking. The cleaning fee is in fact an incentive for a longer booking Because the cleaning fee is spread out over the term of the booking a longer booking will have a lower average nightly rate than a shorter one. This will make your listing less competitively priced for short lets and more competitively for long lets.