Is short term letting a victim of Covid 19
In the good old pre-lockdown days, I would get 3-4 phone calls a week that all started exactly the same word for word:
Caller: Hello I am ringing about X property
Me: It is still available what can do for you
Caller: Would you accept a company let?
Me: Yes we would consider it. Which company is it for Airbus Rolls Royce Hewlett Packard? We also would like the names of the employees staying at the property
Caller: It is not for specific employees We are a specialist company providing short term accommodation to corporate clients. We are not the companies themselves
Me: So you are looking for a rent to rent situation and will be advertising the property on AirBNB or booking.com?
Me: That’s not what you said at the beginning of this call
Caller – Hangs up
The rise of AirBNB has seen the rise of the “upmarket” rent to rent company. Companies rent a good quality apartment in one of the many recently completed blocks for a rent of around £1,000 per month and then re-rent it for about £150 per night via Air BNB and booking.com . It doesn’t take a math’s genius to see that even accounting for bills and marketing break even is around 30% occupancy. A quick google of rent to rent courses throws up plenty of courses where you will be taught the secrets of rent to rent…….for a price. The typical price of this type of course? £2,000 + VAT – Nice work if you can get it.
Before lockdown occupancy wasn’t a problem. There were plenty of “corporate” clients to go round for weekdays and every weekend the apartments would be full with leisure bookings especially flats on the waterfront or in Clifton. 60-70% occupancy was the norm. The problem was that with little to no checks anyone could rent an apartment for a couple of days and move on. Short term lets were increasingly used as pop up brothels and at weekends these apartments were quite often party central with stag or hen weekend packing the flat with many more people than the flat was designed for as a cheap place to stay.
We got caught once by a “reputable” company and since then have refused to deal with this type of tenancy, but still the calls kept coming until mid-March . The calls suddenly slowed and when Boris announced complete lockdown the calls stopped. The rent to rent market has collapsed. Nobody is booking that weekend away, there is not much call to visit other cities on business legitimate or otherwise. Occupancy has gone from 60% to near zero. Rent to rent only works if you have income coming in and with no income comes arears and with arears comes evictions. With April and May rent due and no sign of lockdown being lifted, the rent to rent business in in freefall. We are expecting plenty of keys being handed back very soon as rent to rent companies start to run out of money.
What does this mean for the future? Firstly there could be a glut of similar types of property coming onto the market After a quick unscientific look at AirBnB and Booking.com I think there are over 200 properties being rented out by rent to rent companies in the city centre, admittedly not all of these companies will throw in the towel and hand back their keys ,but a lot will and if you are a landlord who rents your property to one of the companies you need to be pro-active. Call your tenant discuss the arears, it would be in your interests to get the property back before the majority of similar properties come on the market in a few weeks’ time. If your tenant asks for a rent holiday, make sure there is an agreed timescale for repayment, also use this as an opportunity to find out more about your tenant’s rent to rent business. Who are his corporate clients? What is the typical age profile of their weekend guests? What is their break even point. Talk to the neighbours of your flat, have there been problems/disturbances. If you are not happy with the answers you get, this is the perfect opportunity to reboot your buy to let property and return to the boring traditional long term tenant on an AST. We can advise you on how to end your current tenancy and how to get the best price for your apartment if you decide to.
Since writing this, there have been several articles in the national press warning that AirBnB type lets are collapsing, and giving advice on how to go back to long term rents. We are already seeing property that left the long term sector for short term lettings reverting back to long term lets. So if you have a short term let, now might be the time to revert with the market so buoyant (See market report)