3 bedroom semi detached house in south Liverpool, 1 Double, 1 Twin & 1 Single
Ken inherited the house from his parents, it was his family home when he was growing up so he had a sentimental attachment and didn't wish to sell. He was also very cautious of letting to a long term tenant in case his current living arrangement became unsustainable and he had to move back into the property. He looked at all avenues and the pros and cons for each and these are the calculations he made:
If he were to rent to a long term tenant he would have received approximately £700 per calendar month. Once he paid the small mortgage of £400 his profit would be £300 per calendar month.
He decided to go down the short term rental route and with mortgage payments and bills he'd be spending approximately £600. After carrying out extensive research he estimated he could charge £75 midweek and £100 on a Friday & Saturday night. His thought was, if he could fill all weekend nights and 3 nights midweek then this would equal £1700 income which was approximately £1100 profit once his bills were paid. To Ken it was a no brainer and he was up and running within 3 weeks.
He opened his calendar from 1st October and got his first booking from 3 October for the weekend so he now had a date to work towards. The bookings started trickling in and by December he had one free night throughout December and it was his best month to date where his income was in excess of £2500 which far exceeded his expectations. His worst month (April) he has earned £1500 which is still £900 once his bills were paid and £600 more than if he had a long term tenant.
He still tweaks his listing and adjusts prices accordingly for events such as Grand National, Christmas etc. to optimize revenue.
2 Bedroom Apartment in city centre
Sarah was planning on moving in with her boyfriend of 5 years but still wanted to have a nest egg of her own should things not work out. She carried out some research and spoke to some letting agents who advised her she could probably receive £750 per calendar month for an AST tenant.
Her friend was renting out a room in her place and Sarah saw the potential in Airbnb as she herself had used it when travelling within the last year. She did some research and figured it would bring more income even if she got a management company in as she didn't have the time to clean, meet people and do the laundry. Her estimations were as follows: Her mortgage and bills were £700, she could charge £200 per night for weekends and £100 per night midweek. Every weekend being full and 2 nights midweek would earn her £2400 take off the 15% to the management company for managing the property and dealing with the guests and cleaning (cleaning fee is paid straight from the guest to the management company) then she would earn approximately £2040 which was still nearly £1800 per calendar month more than she could earn from a tenant.
When looking at short term rental you also need to factor in the following points:
There is less wear and tear on a property because even if you achieve 90% occupancy the wear and tear is about 50% less than a traditional tenant because guests are hardly in at your property as they are out on business or out sightseeing etc.
As of 2020 landlord relief will no longer be in effect, however for furnished lets mortgages are still deductible.
No more risky tenants not paying their rent and refusing to leave. As you know it takes up to 6 months to take back a property through the courts, with short term rentals the money is guaranteed from the rental platform and all the legalities are taken care for you.
Should your circumstances change and you need to sell the property you will not have sitting tenants and can show prospective buyers a lovely home as it will be furnished etc.