Why I use Instant Book for my Airbnb listing

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. Should you try instant book?

Why I was hesitant to use Instant Book

I always use the request to book stage of the airbnb booking process to ask the prospective guest why they are coming to London and to tell me a bit about themselves. This is usually enough to help me decide if this person will be ok to stay at my place. Ideally a guest will reply back something like "I have come to visit London to do some sightseeing and visit the many galleries and museums." For me this type of guest is the best, they wake up in the mooring, get dressed, go out, and don't come back until late. Guests like this I hardly see the entire duration of their stay. They don't hang around the house watching TV and snacking. [caption id="attachment_142" align="aligncenter" width="636"]You can allow only guests who have had positive reviews from other hosts to book instantly You can allow only guests who have had positive reviews from other hosts to book instantly[/caption]

Two reasons to use Instant Book

I was willing to give instant book a try for two reasons. The first being that you can choose to only allow guests who have a positive rating to be able to book using Instant Book. For new users of airbnb and those guests who have a less than positive rating they will still need to get pre-approval from the request to book stage as before (guests are also required to have a profile picture to use Instant Book). Guests who have a probative rating presumably know how the airbnb model works and know how to behave in someone else's house. The second reason I was happy to give Instant Book a try is when a guest tries to book you can write a welcome message. I used the welcome message to say hello of course but also mentioned in a clear way that "there is no use of the kitchen with this booking. Bedroom and bathroom only." Getting my house rules clear at this stage is crucial to me as so many guests don't read the listing description.

Why did I decide to give Instant Book a try?

I recently spoke to a friend who was planning his overseas trip and asked him if he was using airbnb for his accommodation. He said no he wasn't because you have to send a message to the host and you have no idea how long it will take them to reply. To him the whole request to book stage of the process was a potential big waste of time and he preferred to just book his accommodation without this extra hassle even if it cost him a more money. I realised then that perhaps I was missing out on perfectly good guests who just wanted to book their accommodation and not waste time sending messages back and forth. A few hours after I turned on Instant Book I had my first airbnb instant booking. The guest has a positive review from one previous trip. I quickly sent him a message saying we are looking forward to having him stay at our place and if he needs any help finding the house to let me know. He sent a nice reply saying he was also looking forward to his stay. I guess Instant Book is easy if you try...

Checking out the Airbnb competition

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 market

How 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 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 Airbnb

Being 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 Competition can be huge in a city like London and not enough demand[/caption]

Too many hosts and not enough guests

This 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"

Do I need to pay tax on my income from Airbnb?

[caption id="attachment_111" align="aligncenter" width="729"]What tax do i need to pay? What tax do i need to pay?[/caption]

Hotel Tax

In the UK there is currently no hotel occupancy tax and to my knowledge no intention to introduce one.

VAT 

VAT 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 You will need to pay tax on your airbnb income[/caption]

Income Tax

Income 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 Scheme

The 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 Deductions

1. 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
Of course you can hire your Auntie Doreen to be your cleaner/receptionist/accountant and pay her a tidy sum for a hours work and claim that on your expenses too.

Apportioning your income and expenses

If 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 tax

Theoretically 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.  

Should I be charging a cleaning fee?

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.