Letting out a Manchester city centre flat

[Danielle971]

Hi there!

I'm new to the Airbnb community and I just have a few questions in regards to the setting up and logistics of hosting. 

So, my boyfriend and I are looking at buying a 2 bed flat in Manchester city centre to rent out through Airbnb. We're not sure on whether we will keep it as an Airbnb (see how it goes) or let it out normally with an assured shorthold tenancy agreement. As we aren't sure... would using a buy to let mortgage rather than a  holiday let mortgage still be appropriate/possible? I can imagine that many hosts started letting places out with a buy to let initially and then moved over to Airbnb.

We both work during the week so we wouldn't be around for keys/cleaning and general management so we are looking at using a management company. Is it correct that that kind of service will cost 20-25% of income before expenses?

Does tax work the same as it would for a normal BTL? So - 20% of profit after expenses (apart from the mortgage)? We are lower rate tax payers.

How much better are the returns than a normal BTL investment? As with a normal BTL we wouldn't have to pay for council tax/utility bills/cleaning/decorating to a higher standard etc...

What can we expect to make for a 2 bed flat (+ sofa bed) in Northern Quarter with room for 6 people? I've seen a few of the same at £175 per night +cleaning fee and service charge. How much can we expect the flat to be booked every month on average? possibly 10 nights making £1750pcm? I think if we were to rent out with an AST we would be making about £900 but obviously without all the bills/management fees I mentioned above.

Any help or push in the right direction of what to read/research would be massively appreciated.

Thank you 🙂

Danni. 

[Gordon0]

Hi @Danielle971 - stating the obvious, you've probably chosen the worst possible moment to enter the Airbnb (or similar) market. That aside, you'll want to a) check out the rules in Manchester (and any rumours of new STR ones) and b) study the lease small-print (that might mean it's outlawed in any building you're looking at) with a fine-tooth comb. 

I've got a one-bedder in Piccadilly which has been tenanted (now at £930pcm) since we purchased it five or so years ago. There has been perhaps six unoccupied days as tenants have moved out/in. Other than that, 100% occupied, and generally by sponsored overseas (well-behaved) students.

As for what you'd be making now, I'd say probably near to zero (a friend's Airbnb in the NQ has been empty since the horror show began, and all future reservations cancelled). 

I've got another property in London, but that too is on a standard lease. 

If I was entering the market three weeks ago (pre CV19) I'd think very carefully about it. This landlord lark isn't the gravy train it once was, and the taxes are a killer. 

[Danielle971]

Hi @Gordon0 ,

Thank you for getting back to me. Yes, totally agree - we are just researching at the moment so we won't be making any commitments until the pandemic is long gone and the property market is stable. 

Would the council website be the best place to find info on STR rules?

Thank you for the info on your Piccadilly flat. Is it a luxury flat? As i've seen cheaper 1 beds that are more average looking...We are looking at 2 bed's that could turn over 950-1000pcm in NQ. But I'm not sure if it would be better paying more for a 1 bed and charging more or paying less for a 2 bed and charging less...

As for your friend's flat in NQ - do you know how many days out of the month it would be rented for?

Airbnb obviously comes with more risk and extra bills to pay but I've heard the earning potential can be far higher...

The tax does put me off a bit but for now it's not such a worry because i'm in the 20% tax bracket. 

Thanks for the help!

[Gordon0]

Getting a (legit) mortgage for STR is going to be trickier than ever after this, despite how much money will be thrown around because the benchmarking is (and will be more) sketchy at best. You need to be searching everywhere you can about STR rules, not just on the Manchester Council website. Try local Facebook groups etc. 

My flat is in The Hub, @Danielle971. Luxurious? Not massively, but it's an extremely popular complex for well-heeled foreign students (who'll often pay a year in advance) plus the Barclays mob downstairs.

A two-bedder will give you a different crowd, especially sharers (unless it's an ultra-lux two-bedder for one person/couple) and quite possibly a lower rent.

Friend's NQ place was running at the high 70s occupancy (zero now).

Don't get hung up on your tax bracket - it'll screw you anyway. As I said, it isn't the gravy train it was (even five years ago). 

[Danielle971]

Cheers Gordon, I'll be sure to look into local STR rules before we go any further.

Would you mind me asking how much you paid and when for the hub apartment? Also, is the service/ground rent charge about 160pcm?

Shame about the gravy train!...

Thanks for the advice/info

[Danielle971]

@Gordon0 , which forums are most useful for general AST questions? Especially for inexperienced investors...

[Gordon0]

If memory serves, @Danielle971, around £120K (furniture included). And yes, the SC is in that region, but I believe it offers value for money given the quality of the place (lifts/internal areas etc) and the roof garden. Top-end tenants won't put up with crappy common areas. 

[Danielle971]

Wow, @Gordon0 , that’s a good price... I’ve had a look for that building and there are two sold stc for 170k and 200k which is way too high to make a decent return. I need to shop around and get lucky I guess but I’m in no rush to purchase anything just yet with the current COVID 19 situation. 
We’re also considering a terrace or semi detatched in one of the suberbs like Stretford  or Whalley Range for example, to rent to young professional family’s. Then we could avoid a service charge... 
Thanks. 

[Mike-And-Jane0]

@Danielle971 

You should look up the Government rules for Furnished Holiday Lets. They have some requirements such sa being let for 105 days a year and available for 210 (check my numbers) but they have advantages such as

1) Business rates apply - These are often zero however with small business relief

2) Income can be directed to my wife to reduce the income tax liability - not sure what rules would be for a boyfriend/girlfriend

3) I THINK you can take mortgage interest as an expense if its a FHL 

Please do check ALL the above!

As @Gordon0  said - Now is not a good time for Airbnb but also not a brilliant time in general!

[Danielle971]

@Mike-And-Jane0 , Thanks for the tips - I'll dig a bit further to make sure 🙂 

[Annette639]

Airbnb  acted unprofessionally towards me and I do not trust Airbnb anymore.   They screwed me over one time to many, i will be telling friends  and all  about how Airbnb is not to be trusted

[Gordon0]

Any advice for @Danielle971 about their Manchester city-centre flat, @Annette639?

[Sarah977]

@Annette639 Rest assured we are all now well aware that Airbnb acted unprofessionally towards you, that you don't trust them anymore and that you will be spreading this word, because you continue to post this on every thread, even ones that have zero to do with your post, which is quite disrespectful to the topic poster.

It's the behavior of spammers and internet trolls. Please stop.

[Helen350]

@Annette639We know! -  Go away! - And I echo @Gordon0 's remarks, scattered where you pop up! ; )

[Meir0]

Hi Daniel, i just came across your conversation and im interested in doing the exact thing you where thinking off for my first property, buying in the NQ and so on... Would really appreciate it if you could let me know if you went along with it in the end and if it worked out? thank you in advance