27 Aug

Beware: Financing and insurance for investment landlords using Airbnb

Posted 27/08/2019 by: Reeds Rains

Picture of a door and window to a cottage

If your investment property is empty for a short period of time, you may have thought about recouping some of the lost rental income by advertising it on Airbnb. It might be an attractive idea, but the first question to ask yourself is: are you actually allowed to do it?

Your Buy to Let mortgage almost certainly prohibits Airbnb

Be aware that under the terms of a standard Buy to Let mortgage, the property must be let on a 6-month minimum contract - lenders are unlikely to permit you to rent it out on a short-term basis.

And if you’re tempted to go ahead and list your property on Airbnb without first speaking to your lender, don’t. These days, they are very wise to the ways in which some landlords break the rules (even by accident) and have teams making online checks for breaches of mortgage conditions. If they find out, you may be asked to repay your mortgage in full and you would have to disclose the breach on any future mortgage applications, making it much harder to get new financing.

A small number of lenders will allow landlords to rent out rooms for short periods of time and some have already begun to consider Airbnb in the same bracket as holiday lets, however:

  • Some of these mortgages are only available in certain areas of the UK
  • You will usually be required to already own at least one Buy to Let – and some lenders require a minimum of three
  • The rental income will be assessed as if the property were a traditional rental on a standard Assured Shorthold Tenancy, i.e. much lower than the potential income from short-term lets
  • The LTV will almost certainly be a maximum of 75%

Check your insurance

Insurers have different attitudes towards sub-letting. Because of the greatly increased risk in letting to a third party for a very short period of time, some won’t insure you at all and those that will are going to charge a significantly higher premium.

Airbnb does offer its own insurance and it’s worth speaking to an independent broker to make sure you get the most appropriate cover.

Note: Be aware that if you let to a tenant on an Assured Shorthold Tenancy and they sub-let a room via Airbnb, that could invalidate your landlord insurance, not to mention breach the terms of your mortgage!


 

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.