Airbnb vs. Traditional Rentals: Maximizing Returns

Nikka Sulton

Airbnb vs. Traditional Rentals: Maximizing Returns

Entering the property market offers rewards and income potential, whether full-time or part-time. But taxes are a consideration, whether you’re considering Airbnb hosting or long-term rentals. Let’s compare Airbnb hosting with buy-to-let and discuss their tax implications.

Airbnb host VS a buy-to-let landlord?

The difference between an Airbnb host and a buy-to-let landlord lies in their rental approach. Airbnb hosts offer short-term stays, often for vacationers or business travelers, with flexibility for personal use. In contrast, landlords focus on long-term rentals, typically involving families or individuals with specific tenancy agreements. While Airbnb hosts have limited control over guests, landlords can target tenant types like professionals, students, or families, offering stability in tenant selection.

Do you need a buy-to-let mortgage for an Airbnb?

If your residential mortgage provider doesn’t support Airbnb, consider alternative options. A buy-to-let mortgage is suitable for long-term property rentals, where you can’t reside in the property as it’s now an investment.

Other choices include a holiday-let mortgage, ideal for short-term rentals as a business. You can also explore remortgaging with a different residential lender, but be cautious of early repayment charges.

Holiday-let mortgages offer benefits for Airbnb hosts, allowing you to stay in the property during off-seasons and deducting expenses, including mortgage interest, from your income for tax purposes. However, they’re less common and come with higher rates and substantial deposits.

Buy-to-let mortgages can work for long-term Airbnb rentals, especially with Airbnb’s monthly rental option. But note that lender criteria assume standard tenancies of 6-12 months, potentially complicating short-term lettings. Additionally, some cities impose rental restrictions, making traditional market advertising a better option for extended rentals.

Which UK lenders offer holiday-let mortgages?

Despite the limited availability of holiday-let mortgages compared to buy-to-let options, there’s a rising demand in this niche market.

Surprisingly, the holiday-let rental sector weathered the pandemic reasonably well. Currently, there are only 16 fewer holiday-let deals compared to March 2020, when there were 162 available. In the UK alone, there are now more than 21 lenders specializing in holiday-let mortgages, including several building societies, catering to the growing demand.

Banks offering holiday-let mortgages:

Hodge Bank
Castle Trust Bank
Metro Bank

Building societies offering holiday-let mortgages:

Leeds Building Society
Cumberland Building Society
Furness Building Society
Ipswich Building Society
Monmouthshire Building Society
Principality Building Society
Teachers Building Society
Vernon Building Society
Tipton and Coseley Building Society
Melton Building Society
Scottish Building Society
Mansfield Building Society
Bath Building Society
Furness Building Society

What happens if I put my property on Airbnb without the lender’s permission?

It’s essential to keep your mortgage lender informed about any potential income from your property, including Airbnb rentals. Since your property was financed with their funds, they have a vested interest in any profits.

Failure to notify your lender about Airbnb activity can lead to severe consequences. In the worst-case scenario, they may demand full mortgage repayment, potentially resulting in home repossession if you can’t comply. More commonly, lenders might increase your interest rate or impose substantial fees, both of which are unfavorable outcomes. Transparency regarding your Airbnb plans is the wisest course of action.