There’s absolutely no doubt that the success of Airbnb and Airbnb agents has completely changed the landscape of the Edinburgh lettings market. It’s a fantastic business model. Allowing users to capitalise on their property by renting their spare room, it’s an easy way to make some extra money.
The website that was originally designed to rent out spare rooms and sofas has now turned into a mechanism for landlords to rent entire properties. It’s estimated that almost 60% of the listings on Airbnb are for entire homes rather than individual rooms within a shared flat.
The Airbnb set-up has so many advantages for a landlord. You don’t have to worry about any legal requirements associated with renting a property. No HMO certificate, no obligation to register as a landlord with the local council, no gas safety certificates… basically very little in terms of prescribed duty of care. When you register your property with a letting agency, they are legally obliged to ensure your property is up to code. And there are costs inevitably associated with that. However, that does offer the landlord a level of security and insurance that if something were to go wrong – they are not as exposed as they would be with Airbnb or an Airbnb agent.
Factotum have a few landlords who have experimented with Airbnb. Our flexible lettings policy allows our landlords to arrange their own private lets and list their properties with us whenever they are available. One of our landlords has kindly shared their Airbnb experience with us to compare it with using a letting agency or an Airbnb management company.
So which is really the most profitable? Airbnb? An Airbnb agent? Or a letting agent?
Our landlord listed their two bed Leith property on Airbnb exclusively from January to March 2017. During this time, they had 18 lets for an average of 3 nights each, giving them a total occupancy of 64%. This is slightly above the Edinburgh average of 60%.
The advantage with Airbnb is that the tenant is responsible for paying the cleaning bill, so there are minimal fees for the landlord. Airbnb took a fee of £97 for a total income of £2,690 (an average of 3.4%, but this can inexplicably vary by let).
It’s a good income. The lack of fees is certainly appealing, but don’t forget the amount of work involved in turning round 18 different lets within 3 months:
- Creating and maintaining your Airbnb profile, updating availability
- Checking bookings and accepting tenants
- Cleaning the entire property between lets
- Washing and changing sheets
- Checking the inventory
- Checking for damage
- Meeting and greeting / key handover
- Saying goodbye / key collection
If you use an Airbnb agent, they charge a commission rate around 14% to handle the entire process. However, this is on top of Airbnb’s commission so this adds up to just over 17%.
Factotum’s commission is 15%, but instead of handling multiple changeovers we specialise in short term lets. A short term let is a rental agreement that lasts for at least one week up to five months.
Based on our landlord’s Airbnb income, we compared this to what they would earn with an Airbnb agent and also with Factotum over a 3 month period.
|
Airbnb |
Airbnb Agent |
Factotum |
|
| Commission |
3.4% |
17.4% |
15% |
| Set-Up Fees |
£0 |
£90 |
£50 |
| Cleaning and Linen Fees |
£0 (paid by tenant) |
£0 (paid by tenant) |
£53 (Cleaning) £45 (Linen) |
| Occupancy Rate |
64% |
64% |
100% |
| Average Income / Night |
£41 |
£41 |
£40 |
| TOTAL INCOME MINUS FEES |
£2690 |
£1990 (£700 less than Airbnb) |
£2900 (£210 more than Airbnb) |
Obviously, this data is based on a single case study. If you could increase the occupancy rate to 100%, Airbnb would undoubtedly be the most cost-effective option. The questions remain, is this achievable and is the amount of work required to manage the turnovers worth it?
The issue still remains that using a letting agent means having to comply to regulations. The average short term landlord pays around £75 a year to gain the minimum required certificates. However, Edinburgh Council has recently announced plans to enforce regulations for properties rented through Airbnb that are as strict as those for letting agents.
It all boils down to flexibility and the amount of time you are prepared to dedicate to managing the property. It’s about what works best for you.
Unlike other letting agencies, Factotum do not insist on sole agency agreements. This gives landlords the freedom to advertise their properties privately, through other agencies or via third parties such as Airbnb. All landlords can edit their property’s online profile and update Factotum’s real-time availability calendar to make sure the latest information is presented to potential tenants.
We specialise in long term, short term, festival and holiday lets. By offering a range of options, we allow you to maximise your property’s income by augmenting long term lets with short term and festival contracts.