Warning about risks of short-term lets in Edinburgh
Edinburgh landlords are being warned about the potential to breach their mortgage agreements if they let out their property for short term periods.
With the Edinburgh Festival in full flow, two property experts have warned homeowners and landlords to look carefully at the extra costs and risks they might face when looking to get a high return during events like the Festival and Hogmanay.
Neil McInnes, a director from Umega Lettings and David Marshall a director at Warners Estate Agents said that short term subletting through websites like AirBnB are becoming increasingly popular because the headline rental figure is very attractive because the average advertised AirBnB rental in Edinburgh costs £2,187 per month compared to £986 for long term rent.
However, they warn potential landlords that hidden costs, risks and potential impact posed from a breach in a mortgage agreement may take some of the gloss from the headline rental figure and could result in lower returns than from long term rental income.
McInnes said: “At first glance, income figures that show the average advertised AirBnB rental figure certainly look appealing to a landlord.
“However once you factor in the costs associated of holiday letting, such as booking fees, cleaning, council tax, gas, electricity, TV licensing and Wifi, owners would need to achieve 75 per cent occupancy on AirBnB to reach the net rental compared to long-term letting.”
If occupancy levels be nearer 50%, long-term letting would generate £440 a month extra income, not including the impact of extra expenses such as insurance.
He warned that buy-to-let mortgages do not allow holiday letting because they require a short assured tenancy of a minimum of six months to be in place. A holiday-let mortgage is also needed and they are not offered by high street lenders because of the perceived risk of holiday lets. Finally, a valuation letter from an ARLA accredited agent is also needed to get the mortgage.
Breaching a contract through short term letting could mean the mortgage lender can force the owner to sell or repossess the property.
In the Quartermile district of Edinburgh, some developments have enforced the clause in property deeds banning holiday lets totally because of complaints about disruptive holiday lets.
“With long-term letting, the legal obligations on the landlord are clearer and the tenant is responsible as the resident of the property, whereas visitors or guests in holiday accommodation expect a higher level of service from their host and take less responsibility for the property as a result,” added McInnes.
This could mean extra costs for landlords and homeowners because short term tenants don’t stay as long so have less incentive to look after the property.
David Marshall, from Warners Solicitors & Estate Agents, said: “For regular homeowners who are thinking of moving out of their property for a short period to make it available for Festival let, it’s vital that they check the terms of their mortgage to ensure that this is permitted.
“They would also have to consider the risks of renting their property out for a short period of time, and how easily they would be able to recover costs of any damage caused by tenants.”