Buying with a view to short term let (air bnb)

[settlement]

Hi all,
I'm new to this game. An opportunity to buy has arisen and the place is an apartment which would only be useful for air bnb really. I actually rent near it and could buy it for cash. It appeals to me as I could air bnb it out and then when it's free I could stay there myself if desired.

The problem here is that it uses up all my potential money for a deposit for a house, which I would otherwise buy and live in. I can save up a deposit again, so I guess if I were to buy to let like this, I would want to be getting very good cash flow.

Renting monthly doesnt seem to pay as well as air bnb, especially for a small apartment in a city like this which is more of an air bnb destination.

My qs are:
- what are the current air bnb (short term let) regulations - can I let it as much as i want if it is not my main residence?
- if the flat is in a block where a service charge etc is due, can other residents object to me renting the place on air bnb?
- how do I go about crunching the numbers? My best idea at present is
1. Take the total buying price (lets say for arguments sake it is 200k) and compare the rental income with average stock market returns (7%)
2. Based on these maths, I would want to make 14k profit per year on the flat compared with stock market (both will be taxed of course and taxation will be similar ish)
3. In order to estimate how much i could charge per night etc, i suppose i am to be guided by nearby similar apartments on air bnb? And of course service charge etc would have to be factored in.

The property itself has value to me beyond a rental and if I were to buy elsewhere in the future, it would be a great city apartment.

Beyond these numbers, there is the opportunity cost of buying a bigger place and renting a room in it, which is something less tractable to maths but which ill have to dwell on a bit. Any thoughts welcome

EDIT for further info:
1. its in a RPZ - what are the chances it would be approved for short term letting or what does this depend on?
2. If it is the only property i own, but i let the entire flat short term, i presume i still cannot claim it under rent a room as I am renting elsewhere? what if i am on holidays? it is a 1 bed

 

[ClubMan]

One thing to bear in mind ... Don't underestimate the work involved in running an AirBnB/short let type operation. It's significant. I have friends who do it (and have been roped in the odd time to assist) and it's onerous. They have mainly shifted to longer lettings for a reason.

 

[Premos]

If you don't live there, it's not a rent a room situation. Rent a room doesn't apply to short term let I believe anyway.
I really don't see the logic of investing in a BTL before acquiring your main residence and while you are renting somewhere else, particularly in a Rpz zone.
Why not buy somewhere to live as you have a deposit and then rent a room?
I don't know how much you rent for. If it's anywhere above €500, you would be better off buy it for yourself instead of trying to make 14000 of taxed profit.
As said above, how do you plan to organise the work involved? Airbnb means advertising, answering regular queries and booking, organising check-ins, check-outs, cleaning and laundry between each let... On top of normal maintenance.

 

[NoRegretsCoyote]

There is a website called airdna which scrapes airbnb and gives you an idea of realistic prices for properties in your area. I looked at it years ago and while the nightly prices were good I was surprised that I would still have 30%-40% empty nights even in a high-demand area.

Otherwise being a landlord is largely passive income while running a short-term let is absolutely a job. They are about as different as running a clothes shop and selling scarves on a matchday.

Otherwise you seem a bit naive for such a big venture but it's good you are doing your homework!

My qs are:
- what are the current air bnb (short term let) regulations - can I let it as much as i want if it is not my main residence? You may need planning permission
- if the flat is in a block where a service charge etc is due, can other residents object to me renting the place on air bnb? Probably. It may not even be permitted.
- how do I go about crunching the numbers? My best idea at present is
1. Take the total buying price (lets say for arguments sake it is 200k) and compare the rental income with average stock market returns (7%) That's completely naive. Your share portfolio needs zero attention when you go on holiday, your property will not. Don't forget to factor in the cost of your own time. For me nothing short of a 15% gross yield makes much sense.
2. Based on these maths, I would want to make 14k profit per year on the flat compared with stock market (both will be taxed of course and taxation will be similar ish)
3. In order to estimate how much i could charge per night etc, i suppose i am to be guided by nearby similar apartments on air bnb? And of course service charge etc would have to be factored in.

Do let us know what you decide and how you get on.

 

[settlement]

One thing to bear in mind ... Don't underestimate the work involved in running an AirBnB/short let type operation. It's significant. I have friends who do it (and have been roped in the odd time to assist) and it's onerous. They have mainly shifted to longer lettings for a reason.

You are right, it is a job. My parents run an air bnb and I help them sometimes so I understand (at least partly) what it involves. Part of the appeal here was that I live 50 yards away and I work remotely with a lot of flexibility so it would probabaly be manageable.

If you don't live there, it's not a rent a room situation. Rent a room doesn't apply to short term let I believe anyway.
I really don't see the logic of investing in a BTL before acquiring your main residence and while you are renting somewhere else, particularly in a Rpz zone.
Why not buy somewhere to live as you have a deposit and then rent a room?
I don't know how much you rent for. If it's anywhere above €500, you would be better off buy it for yourself instead of trying to make 14000 of taxed profit.
As said above, how do you plan to organise the work involved? Airbnb means advertising, answering regular queries and booking, organising check-ins, check-outs, cleaning and laundry between each let... On top of normal maintenance.

Thanks for clarifying. I think you are right, I probably got a bit star struck by the idea. I think also, because the stock market has done well in last few months, i have made some money and it just seemed a good place to put it, without having to worry about the crazy interest rates on mortgages. My rent is about 750, which is very good for where I am. I ran some numbers and it seems like I could fairly easily make 3k a month letting the place if I put it on air bnb (provided i had planning permission). Subtracting expenses and my current rent I would be left with a bit under 2k, before tax, leaving me a bit over 1k after tax per month. Not really that great of a return in reality.

There is a website called airdna which scrapes airbnb and gives you an idea of realistic prices for properties in your area. I looked at it years ago and while the nightly prices were good I was surprised that I would still have 30%-40% empty nights even in a high-demand area.

Otherwise being a landlord is largely passive income while running a short-term let is absolutely a job. They are about as different as running a clothes shop and selling scarves on a matchday.

Otherwise you seem a bit naive for such a big venture but it's good you are doing your homework!



Do let us know what you decide and how you get on.

I think because the property market is so bad at the moment, and because i just want to own a place, the appeal of this was very strong. I need a place to put my stuff and to settle down. And the interest rates on more expensive properties are getting crazy now. So i think this is why this was so appealing.

In reality it's probably not the wisest move. Will sit on it but probably the original plan of waiting and buying a bigger house (to live in for 10+ years) and maybe rent a room is better, even with crazy mortgage rates.

EDIT: I will probably however keep an eye out for a small 2 bed apartment somewhere that could also be bought in cash, in order to rent a room, in order to ride out these high mortgage rates. But in reality this is probably beyond the limits of how much cash I can muster

 

[DannyBoyD]

Look at what you can raise on a mortgage, put that on top of your cash & see what you can buy with that.

Rent-a-room is a no brainer; you can earn €1,100 per month tax free. That will take a nice chunk off any mortgage.

 

[Leo]

- what are the current air bnb (short term let) regulations - can I let it as much as i want if it is not my main residence?

If it's not your main residence then you will need planning permission to use if for short term lets. More here.

- if the flat is in a block where a service charge etc is due, can other residents object to me renting the place on air bnb?

Check the leasehold for the development, short term letting may be prohibited.

 

[lff12]

EDIT for further info:
1. its in a RPZ - what are the chances it would be approved for short term letting or what does this depend on?
2. If it is the only property i own, but i let the entire flat short term, i presume i still cannot claim it under rent a room as I am renting elsewhere? what if i am on holidays? it is a 1 bed

1. Something approaching zero - they are highly unlikely to give you permissions for a short let on a current residential property as it would be taking an existing home and applying it to a change of use.
2. No, you cannot, you must be using it as your primary residence and actually living there.

You'd be far better off buying a 2 bed apartment or house and then renting a room in that in which case you get up to 14k tax free. Or else buying a property in a non RPZ that could be used for holiday lets.