Locations for a new AirBnB flat within 2 hr drive from London?

[Faraz-Ahmed0]

Hi all, I'm new to hosting. I did try to search the past conversations but couldn't find what I'm looking for:

What areas you would shortlist for a new 2 bed airbnb flat with a minimum of 70% occupancy and £100 per night.

Also, the max value of the property should be within 225k with no max number of nights limitations due to STR.

Many thanks in advance. 

[Anonymous]

@Faraz-Ahmed0  This sounds more like a real estate question than a hosting question. If you want to see some statistics about average occupancy and rates plotted out on a map, try AirDNA. 

Would I personally buy a flat in the current market solely to rent it out on Airbnb? Absolutely not. But that's a whole other topic.

[Faraz-Ahmed0]

@Anonymous agree, I'll be looking at AirDNA when it comes to detail validation but for now I just wanted to check what are the key locations people think for AirBnB getting in to the new year. 

Are you not advising STR at all or because of pandemic and airbnb business as a whole? I'm considering STR over BTL for better profit margins, will list it on other platforms as well.

[Mike-And-Jane0]

@Faraz-Ahmed0 If I were you I would worry about the logistics of how you will service the flat. If it is remote then you will need to find a trusted cleaner, handy person etc to keep the property in good order.

Then the economics.

.7*365*100 = 25550 per year

Airbnb fees - 15%+VAT = 4600 per year

cleaning - lets say 80£ per 5 days = 4088 per year

then we have heating and lighting  = guess at 1000 per year

then repairs and replacements  = 1000 per year

total costs 10688

total gross profit 14862

14862/225000 = 6.6% gross margin

Oh and I forgot insurance - Say 600/year and a load of other things........

[Faraz-Ahmed0]

Hi @Mike-And-Jane0 yes that's the plan, that's why planning to look in to areas where i can hire service people easily for example brighton. 

I've also done some estimations (per month):

[Mike-And-Jane0]

@Faraz-Ahmed0 Interesting numbers. Your original £100 per night cost to the guest is presumably net of the 14.2%+VAT they pay. If not then this needs to be more to allow for the Airbnb service charges. Laundry on a 2 bed flat will be more than 80 per month assuming you change all the linen weekly. It will be even more if you have shorter lets than 1 week. TV licence is too low. Insurance feels awfully low for a holiday let. Does the mortgage interest assume a holiday let mortgage? Internet seems very high

If its a FHL under business rates then these should be zero. You don't need an EPC certificate for holiday lets.

Anyway the true figures will be what they will be. Good luck in your venture - Just have to hope interest rates don't rise too high with our current rampant inflation and house prices don't crash.

[Faraz-Ahmed0]

Hi @Mike-And-Jane0 , I assumed Split fee model hence put 3% Airbnb fee. Are you suggesting that it has to be Host only model hence 14.2% fee?

Iv'e two insurances Home insurance £100 and Holiday let insurance £150. of course these are just estimates at this stage to figure out viability. 

Inflation and house price are risks correct.

Thanks,

Faraz

[Mike-And-Jane0]

@Faraz-Ahmed0 regarding the fees all I am saying is if a guest has 100 to spend per night then they will need the listing price to be below £90 to achieve said 100 limit. It doesn't matter which fees model you use- At the end of the day the guest limit/competition will determine how much you get.

[Helen3]

@Faraz-Ahmed0  your choices will be limited by the fairly low budget you have for your apartment.

It's up to you to do your market research and find out which areas are likely to be popular with the sort of guest you want to target. As you know there are many cities and large towns within two hours of London.

Bath, Bristol, Birmingham, Cotswolds, Brighton, Kent etc are all areas you can target.

You haven't including council tax, home insurance for STRs (not standard insurance), costs for doing up the apartment, furniture, decorations, bedding etc in your budget.

You also haven't factored in the cost of a co-host to help manage your listing and your cleaners if you live remotely. Nor have you factored in CCTV.

Obviously you will need to check any lease to see if you are allowed to run a business from the property/operate STRs before buying.

[Faraz-Ahmed0]

Hi @Helen3 , 

This is just my monthly opex cost, flat renovation is covered in the capex.

I thought for holiday let there's no council tax, instead a business rate? but i don't know how much would be the business rate for a 2 bed flat.

Thanks

Faraz

[Mike-And-Jane0]

@Faraz-Ahmed0 look at business rates in the area you are looking at. For a 2 bed flat (4 bed spaces) I would be surprised if you didn't get full business rates relief.

[Sarah977]

@Faraz-Ahmed0  If you aren't going to be living close by and on hand to deal  with any issues that come up, as Helen says, you will need a local co-host. This will lower your profit considerably. 

Your estimate for running costs, i.e. toiletries seems quite low. 

And an Airbnb needs to be deep cleaned on a regular basis, not only once a year.

[Faraz-Ahmed0]

Hi @Sarah977 good points, thanks.

My plan is to manage the communication with the guests, management company by myself remotely. So the cost of Management Company is roughly 10% of the booking if they're doing maintenance, supplies and cleaning? for full management including managing booking its normally 15% isn't it?

[Sarah977]

@Faraz-Ahmed0  Those are low percentages. I'd say double them. 

It really depends on how much work is involved. You're not going to get a very committed, attentive, and good co-host who does everything you can't do remotely if they only end up earning $8/hr.

When you look at the reviews of some of these big property management companies who have scores or hundreds of listings and maybe do only charge 15% for full management, you see review after review full of complaints-  not clean, dirty pool, slow responses to issues, poor maintenance, etc.

As with anything, you get what you pay for.

[Gordon0]

With the greatest respect, @Faraz-Ahmed0, I think you might be under the illusion that Airbnb is the golden goose, but as recent times have illustrated, this isn't the case (even if it once was). Putting the pandemic to one side (if only we could), there are so many underlying variables. 

Consider the seaside towns of Brighton, Deal, Whitstable or Ramsgate (all mostly out of your price range now). All incredibly popular - more so due to the pandemic - and great for DFLs ("Down from London" folk). Very seasonal, but you can still make a crust in the winter months.

Because they attract the London crowd, you're looking at out-of-peak, peak-season three-day bookings (Thurs-Sun) being the favoured stay. This immediately messes up your occupancy scores and means you'll need another in-between clean.

As it stands - certainly atm - you can't hire cleaning staff for love nor money and, if you do chance upon one, they tell you how much they're going to be paid (my husband runs a restaurant and is paying ridiculous rates now). That means the cleaning fees don't cover the labour.

What about the young couple who - while being really friendly/nice in the communications - smoke in your non-smoking flat? Your cleaner isn't going to break their neck making amends, you're miles away, and your next set of guests are coming the next day = rubbish review/discount/cancelled stay.

And the gas boiler that breaks down and the engineer can't immediately get there to replace a part (or even flick the reset button)...  

The thing is, @Faraz-Ahmed0, there are too many things to trip you up, especially if you aren't living within spitting distance of the property, to make this an easy gig in 2021. Many guests want the hotel experience, and that may mean not lifting a finger while they're there. 

I've just purchased my third BTL property in Manchester (an area where you can get pretty decent yields, and low service charges if you look around) and it doesn't really matter if you're not close by for a traditional let.

What ever you decide to do, look much, much deeper than a spreadsheet and consider more 'what ifs'. Lots of good stuff about Airbnb, and plenty of the other stuff too.  

Best of luck, whatever you decide to do.