We've decided to make our first foray into the world of Airbnb hosting. Although we've been landlords for 10 years since purchasing our first buy-to-let property in 2011, we've only rented to long term tenants before, so this is our first look at the short term and holiday rental market.
Our rental properties already account for 60% of our investment portfolio, which is very high, and not something that I want to increase. We therefore haven't bought another property specially for Airbnb, but converted one of our long term rentals to an Airbnb property.
It's only been two weeks since we put our property onto Airbnb, so we're still learning, and we don't know how it's going to turn out in terms of money and hassle factors. Despite the early stage, I thought I'd record some of our thinking behind the decision to launch our Airbnb property and to see how things are shaping up in terms of bookings:
Why an Airbnb?
There's a short version and a long version as to why we've taken one of our long term rental properties to convert to an Airbnb property. The long version, which I did start to write, includes unscrupulous financial advisors and investment procrastination, as well as the impacts of Brexit...I think I'll stick with the short version!
Despite originally being from the UK, we've spent most of our working life and, so far, all of our early retired life, living away from the UK. Over those years, during visits to the UK, we've kindly been hosted by family, but it would be nice to have our own place, particulary now the cats tend to join us on these trips.
The solution, operate an Airbnb property. We can stay there when we visit, and still have the opportunity to earn some income from the property when we're not using it. We think we'll use it for a month during spring and another month in Autumn, and maybe the odd week or two outside of these times. We can block those dates, and rent it out on Airbnb when we're not using it.
Our Property
A three bedroom, semi-detached house in St Neots, Cambridgeshire, United Kingdom. If you want to see what I'm talking about, a look at our Airbnb listing will be more effective than more of my words here.
The Market
This was a difficult concept - it's not a tourist area or a busy metopolitan city, so what would our market be? In fact, is there a market at all for an Airbnb property? There are some other Airbnb properties in the same town, which could be a good sign or an indication that the market is already saturated, but we don't know which.
We decided the way to find out was to try it. My ideas on potential markets are:
Someone working in the area for a month or two, who doesn't want to stay for that long in a hotel.
Those in the process of buying/selling a house, or entering a longer term property rental. If move out/move in dates don't quite match, they may need short term accommodation during that process.
People whose family circumstances change, perhaps a relationship breakup means one or more of the family have to move out of the family home and require immediate short term accommodation.
To a lesser extent, people coming to visit family from outside of the area.
Of course, we're not restricting ourselves to these situations, if someone wants to vacation in St Neots, we'd be very happy to host them.
Pricing
We've chosen to initially price competively. We looked at the long term rental price, added on the bills that we have to pay, a small premium for it being furnished and for the convenience of a short term let. I suspect we could charge more, but my instinct is that occupancy is the first battle, and we can review pricing upwards in due course if we find we're achieving high levels of inquiries and good occupancy.
Airbnb have a Smart Pricing tool, that automatically adjusts pricing (within parameters that we set) based on demand. We haven't turned this feature on yet, but it may be something we can look at in the future.
Cleaning & administration
That the Airbnb property is in the UK and we're in France can be viewed in two ways. For sure, it makes for some logistical challenges such as Sally's recent trip to the UK to complete some maintenance issues, generally get the house ready, and take photos for our listing. We're also not close by to manage change-overs or to respond easily if a tenant needs assistance or if something goes wrong. We have to find a good person to help us with these things, which we think we've done. To make this more manageable, we've set a minimum stay of five nights, and three clear nights between bookings.
On the plus side, being remote forces us to put these systems in place (albeit at a cost), and that means we can concentrate on enjoying our early retirement. That's an idea I like!
The initial administration to get set up on Airbnb as well as getting suitable insurance in place took longer than I expected, but I've probably not spent much more than a day on that so far. After that, there's some time taken to respond to inquiries, occasional updates to our listing, but I'm not expecting this will take up too much time.
Bookings
Without bookings, there isn't much point in doing it. Having said that, I was expecting a slow start, and was even prepared to discover that there is very limited demand in our location.
For the period 30 August to 31 December we have 93 days available to be booked (after deducting the 31 days that we have blocked for our own use). As of today, 70% of those days have been reserved, which I think is a great occupancy rate, particularly as the property has only been listed on Airbnb for two weeks.
In fact, taking account of the minimun stay periods (we've set it at 5 nights) and the time we've allowed for changeovers, there are only two weeks still available before the end of the year. That's massively beyond my expectations - we can either say it's a great start or that our pricing is a little too competitive. Perhaps it's a bit of both.
A downside on the bookings is that I suspect we won't usually have bookings secured a long time in advance. This is different from our longer term rental properties, where we know that the houses are let for the next 6 or 12 months and that the rental income can be relied upon. For the Airbnb property, the amount and frequency of our income is less certain and is unlikely to be known far in advance.
Overall, it's still early days, and many questions remain to which we don't know the answers. Will we continue to get bookings? What level of financial return will we achieve? Should we change our pricing? Might there be damage or excessive wear and tear that cost us money and discourage us? Will the practicalities of operating an Airbnb property remotely create problems that are difficult to overcome? It will be interesting to see how these questions get answered over a period of time.
But very early impressions are that we might have a model that fits our wish to have a second home for use when we visit family and friends in the UK, without the effort, energy and materials that went into building the property being wasted by it standing empty for the nine or ten months of the year when we're not using it. Add that we can earn some money from it at the same time, and I'm hopeful that we have found a good balance between our requirement for accommodation when we visit the UK, my desire not to see a property under-utilised/wasted, and a mechanism to achieve a financial return too.