Landlords Archives - Pikl

The truth about landlord insurance and Airbnb.

Estimated Read: 8 minutes.

Perhaps you are a landlord that uses your property as an Airbnb during tenancies. Or maybe you allow your tenant to sublet on Airbnb. If either of these apply to you, you might not be covered by your landlord insurer.

What landlord insurers think about Airbnb.

We spoke to the UK’s top landlord insurers and came back with some interesting results. In a survey of insurers that we conducted, we found some concerning trends:

Half of landlord insurers we spoke to said they wouldn’t cover Airbnb claims even if they occurred in between tenancies. That could mean no payout on your claim despite having no tenant in your property. An overwhelming 75% of landlord insurers we spoke to said they would cancel a customers policy if an Airbnb claim occurred during a tenancy.

What could that mean for me?

If an Airbnb guest damaged your property, you might have the pay for the repairs yourself if your insurer will not cover you. Worse, if your insurer decided to ‘void’ your policy (cancel it from the start date as though it never existed in the first place), you may struggle to get insurance after this.

What might I not be covered for?

Typical things not covered by insurers when it comes to Airbnb or similar platforms are:

Accidental or malicious damage by your guest. If you regularly do Airbnb, the chances of this happening could increase.

Theft by a guest. Theft is usually only covered if there has been forced entry.

A guest getting injured and holding you responsible. If your landlord insurer does not cover you for Airbnb then you might not have liability cover to help you if this happened.

A guest damaging someone else’s property. Like the guest injury scenario, you might not have liability cover for this if a 3rd party sued you for damage caused by your guest.

If your guests injure someone else then you might not be covered for this either.

Why don’t landlord insurers cover Airbnb?

Long term tenancies typically require a minimum period of 6 months and so the risk could be seen as more predictable. By also letting out your property on Airbnb, there could be an increase in people using the property, which could increase the likelihood of a claim occurring. Unlike long term tenancies, stringent background checks of guests are not a requirement on platforms like Airbnb.

What actions should I take next?

Inform your insurer.

Ask what they will and will not cover you for.

Think about when you are likely to use your property as an Airbnb. Whether this is done in between tenancies or during a tenancy could affect whether your insurers is likely to cover you or not.

Finding a landlord insurer that also provides adequate cover can be difficult. A specialist provider such as Pikl could provide cover for both your standard landlord insurance and Airbnb (or similar platforms) should you require this.

What does Pikl cover?

Pikl provide specialist insurance for short-term letting, including cover for properties that are let out on websites such as Airbnb. If you already have insurance elsewhere, we offer a ‘Top-Up’ insurance policy. Your insurer can still continue to cover you whilst our cover can insure your home for any claims caused by your guests. You will need to let your insurer know that you are intending to do this but alternatively, we can also cover your landlord insurance as well as cover for your guests. Our insurance for when you have short-term guests can cover you for:

  • Public liability including cover for guest accidents involving bodily injury.
  • Legal cover to defend or pursue legal claims against guests.
  • Accidental, malicious damage and theft cover if caused by a guest.
  • Alternative accommodation for you or your guest if your property is being fixed as the result of a guest related claim.
  • Fire and escape of water damage caused by a guest.
  • Loss of keys and replacement locks cover if renting out your entire property.

The above is an example of some of the cover we offer. If you are not comfortable with the level of cover your insurer provides, getting a specialist insurance policy is a relatively straightforward way of covering this gap in insurance.

Running an Airbnb vs becoming a Landlord: Which one is best for you?

Estimated Read: 15 minutes

Maybe you are a landlord considering moving into Airbnb. Or maybe you are wondering whether you should be a landlord instead. There are benefits and disadvantages to doing either. Choosing which option is best for you may depend on what you are trying to achieve and what type of work you are willing to do.

You may make a higher return on investment with Airbnb.

Given the short-term nature of Airbnb, hosts can often charge guests a higher proportional rate than they would if they were a regular landlord with tenants. Take London as an example. Airbnb’s UK Insights report confirmed that the typical Host in London earns £2,600 a year with 35 days being the typical amount of nights hosted per year for a typical listing. That’s £74.28 a night for the typical host. According to a report by the Office for National Statistics in December 2019, the median monthly rental income for long term tenancies in London was £1,450. Comparing the potential annual income you could get from both figures (before tax and other costs are deducted), you get the following:

Potential annual income from Airbnb (if rented out 365 days a year): £27,112.20

Potential annual income from long term tenants: £17,400.

It worth noting that there are lots of caveats to consider here. Whether you can get a high occupancy rate through Airbnb will depend on your location and having it occupied every day of the year might be unlikely. If you were are doing everything yourself, it could be an enormous amount of work if you spent every other day meeting guests and cleaning the property before the next ones arrive. Local restrictions like the London 90 day rule (limiting how many days you can host to 90 days a year) will also affect how much income you can earn. However, when simply looking at the potential ratio for return on investment, there may be significant benefits to running an Airbnb.

You may have more spare time with long-term tenants.

Once you are all set up and have tenants in the property, the day to day management of being a landlord could be easier than running an Airbnb. Provided that you are following all of the required regulations, have a good tenant and your property is safe and well maintained, your involvement would mainly be needed when a problem arises. Many landlords hire an agent to manage the day to day running of their properties, giving them even more free time. Contrast this with running an Airbnb where you may be responsible for meeting guests, cleaning the property and dealing with day to day issues on a regular basis. If you are considering running a full-time Airbnb or have multiple Airbnb properties however, you may also want to consider hiring an agent to manage this for you to free up your time.

There may be less regulatory hurdles if you run an Airbnb.

To get set up as a landlord, you will need to conduct risk assessments, health and safety checks and make sure your property is safe and well maintained. You will also have to adhere to regulations regarding tenant rights and handling deposits (check out our article on becoming a landlord for more details on what is involved). The Airbnb industry by contrast is still an emerging industry and is yet to catch up. You will still have to follow basic regulations such as for fire and safety and it makes sense to keep your property in a good shape if you want to attract more guests (see our article, on how to be an Airbnb host for more information on how to get started). You will also have to follow less regulations than if you were a regular landlord. As calls for more regulations around Airbnb grow however, it also makes sense to focus on providing your hosts with a safe, comfortable experience. Doing this may also improve your bottom line.

Landlords may have a more stable income.

Both landlords and Airbnb hosts may experience periods where their properties are unoccupied. However, once a landlord gets a tenant in their property, the typical minimum tenancy period is 6-12 months. Give the short-term nature of Airbnb hosting, Airbnb hosts may have more periods where no one stays at their property. How often this happens may depend on factors such as the location of your home, how good you are at promoting your property and general market trends. If your property is in a popular holiday destination then you may be affected by seasonality as well. Properties situated in big cities like London may be less affected by this. Crises such as economic shocks may also convince guests to travel less. In times of uncertainty, it could be tempting to stick to more traditional property sectors than short-term lets.

Running an Airbnb may give you a more flexible lifestyle.

The beauty of listing your home on sites like Airbnb, HomeAway and is that you can list or delist your properties from their websites when needed. Don’t feel like having guests over? No problem. But if you are a landlord with a tenant on a fixed term, assured shorthold tenancy then you will have a lot less flexibility. Typically, you will have got them to sign a contract allowing them to reside in the property for a minimum period of 6-12 months and getting them to leave during this period is not straightforward. As the landlord you must give a legal reason that a tenant must leave the property during the tenancy (such as rent arrears) and would have to get a court order to evict them. If you put a premium on flexibility then running an Airbnb property will make more sense for you.

Being a landlord may expose yourself to less risk.

Landlords and their agents often require tenant background checks to minimise the risk of things like rent arrears. Given the long term nature of tenancies, doing this makes sense and the tenant may have more of an incentive to look after the property if they are living there. If you are running an Airbnb however, you won’t have time to conduct these types of background checks. If you accept automatic bookings, you may struggle to do any kind of checks at all. Hosts can require guests to complete Airbnb’s guest verification service. However, this type of check is basic and will not be as thorough. If you are running an Airbnb, you run the risk of having guests who are not who they say they are. Not only that, without extensive background checks you will not know what type of person you have allowed into your property. In addition, if you have a high turnover of guests there could be a greater chance that you may have to claim.

Airbnb is a growing market.

Since its UK operation was founded in 2012, Airbnb has generated an estimated £3.5 billion to the UK economy, according to Airbnb’s latest Insights Report in 2018. Several regions within the UK have seen over a 70% increase in the growth of inbound Airbnb guest arrivals. Companies like HomeAway and have also entered the market, giving hosts a wider range of platforms to market their properties on. Whilst there will always be a demand for the long-term rental sector, the growth for short-term rentals may be appealing to landlords that have seen their returns on investment diminish in the face of subsequent regulations by different governments. With the Covid-19 crisis impacting world trade at the time of writing it looks like this growth has been halted abruptly. However, once this crisis is over it inevitable that people will start travelling again.

Landlords may have less trouble with mortgages and insurance.

The landlord market is well established and there are several buy to let mortgage and insurance products available to landlords. By contrast, most home insurance policies don’t cover Airbnb. If you have a landlord insurance policy, whether your insurer is prepared to cover you for Airbnb may depend on whether you do this in between tenancies or are intending to do this during a tenancy. Unfortunately, most landlord insurers do not provide adequate cover for platforms like Airbnb either. Specialist insurance companies like Pikl can cover you is you are not covered for this. If you have multiple properties, you may want to consider checking out our portfolio insurance.

Many mortgage providers including buy to let mortgages do not allow short-term guests in their mortgage terms. However, there are now some specialist mortgage providers starting to cover this. Speak to your provider if you are unclear regarding the terms of your mortgage.

Which option is better? It depends on what you are looking for.

Which option suits you will depend on your goals and the lifestyle you want to live. If you are planning on doing one or the other, you may want to write down a list of what is important to you. There are lots of variables to consider. Broadly speaking though, the decision could be broken down as follows:

If you are already a landlord, you could try Airbnb in between tenancies to maximise your level of income (provided your mortgage provider and insurer is comfortable with this). For those with a mixed portfolio of properties, running some properties as full-time Airbnb homes and others as traditional rental properties may be a good way to balance any risk with the potential gains in income.

The quick guide to landlord insurance

Estimated read: 5 minutes

If you are a landlord, you might be wondering why you might need specific insurance. It is not compulsory, but there are several good reasons to considering getting landlord cover to help you stay protected. We discuss what landlord insurance can cover and some other important points to consider.

Some mortgage providers require it.

If a buy to let mortgage provider has lent you thousands of pounds, there is a good chance they will want you to insure it. Many require you to get insurance as part of their mortgage terms.

Protect your investment.

Your property is worth a lot of money.  Buildings insurance can protect you against things like flood or fire and damage that may cost you to put right if you did not have cover. If your property is furnished, contents insurance can cover you if things like furniture or appliances are damaged. If you do not insure yourself, you may have to pay thousands of pounds of damage if something goes wrong.

Insure yourself against loss of rent.

What would you do if your tenant stopped paying rent? Some landlord insurance packages offer rent protection insurance in the event the unexpected occurs and your tenant is unable to pay. If you financed your property with a buy to let mortgage, you could lose it if you are unable to keep up with the payments.  

Cover against legal costs and injury claims.

No matter how diligent you are, accidents can still happen. If a tenant had an accident on your property and they held you liable, they may decide to sue you for negligence. Liability cover can protect for this if it does happen. If you are held liable for a criminal offence, you may be able to get legal cover to defend you in court and cover you for legal costs. Legal cover may also cover some of the costs of evicting tenants.

Cover for home emergencies.

If your insurance package includes home emergency cover, you can get protected for emergencies in your property. Typical events covered could be things like your boiler going down, an electricity failure or blocked drains. This type of cover could be especially useful in cases where paying for an emergency call out from a tradesman would otherwise cost you £100s.

Accidental damage.

If your property is regularly occupied with tenants, there is a high chance at some point of your tenant damaging your property, such as a spillages and breakages. Bear in mind that the damage would have to be accidental in order to be covered.

What standard landlord insurance might not cover.

Cover will vary from insurer to insurer. There are some things however that are generally not covered or that you may need to notify your insurer about:

  • If your property will be unoccupied for an extended period of time, not all insurers cover this.
  • If your tenant type changes. Some insurers only cover specific types of tenants (such as professional tenants or students). If you are thinking of getting a different type of tenant in after your cover has started, be sure to let your insurer know.
  • Subletting your property. This is where the property is leased out to someone other than the tenant. Most insurance policies (and mortgages) do not allow this. If you or your tenant is intending to sublet, be sure to check that you are covered.
  • If you intend to also use your property as an Airbnb, many landlord insurers will not cover this and you may need to find cover through a specialist insurance broker. Check out our landlord article about Airbnb.
  • If your house is in multiple occupation (HMO). This is a property owned by a private landlord and shared by multiple people. It generally applies to properties with shared communal areas where the number of tenants would be considered as a multiple household living under one roof. This could apply to a number of different properties including bedsits, shared houses and hostels. If you are considering turning your property into an HMO, you will need specialist insurance for this.
  • Tenant belongings. This wouldn’t normally be covered by landlord insurance. Your tenants will be responsible for insuring their own possessions.

Think about what you need cover for.

The important thing to think about is what you actually need cover for. Is loss of rent protection important to you? Are you worried about tenants accidentally damaging your property? Not all landlord insurance policies have the same cover. Make a list of everything that is important to you and this should help you when you go shopping for insurance.

How to become a landlord

Estimated Read: 10 minutes.

Many people find that renting out a property can be a steady source of income but being a landlord is not all about sitting back and waiting for the money to flow in. There are a whole host of regulations and responsibilities to consider and to help you negotiate this minefield, we have created a handy guide if you are just starting out.

Law and responsibilities.

There are several laws governing what landlords can and cannot do in the UK. You will be responsible for keeping your property safe, maintained and obtaining the proper paperwork. You will also need to be aware of your tenant’s rights as well.

Once you are up and running, typical day to day responsibilities may include:

  • Fixing anything wrong with the property. This could be anything from the boiler going down to the drains getting blocked. If you are not able to do this yourself you will need to hire a tradesperson to do this.
  • Conducting health and safety checks and risk assessments. If you do not you could be breaking the law and be held liable if any accidents happen.
  • Drafting tenancy agreements and getting tenants to sign the relevant paperwork.
  • Making sure rent is collected on time.
  • Inspecting the property to make sure it is still in good order.
  • Finding new tenants and conducting background checks.
  • Keeping up to date with your accounts and expenses. 
  • Answering tenant queries. 

For the full list of rights and responsibilities, check out the government’s website for England & Wales and here for Scotland. They also outline current rules regarding tax. How you declare you tax can affect what you claim for and how much tax you have to pay. You may want to hire an accountant to advise you regarding this if you are not sure.

The costs.

Now that you know the regulations and responsibilities that come with being a landlord, you should write down a list of all the potential costs involved. Typical costs can include:

  • Buying your property if you do not already own it. This will have the typical costs of buying a house associated with it including potential estate agent and legal fees. If you are seeking finance then you will need to take out a buy to let mortgage.
  • Fixing and maintaining the property.
  • Acquiring the relevant paperwork.
  • Potential legal fees such as for drafting contracts or taking tenants to court.
  • Hiring a letting agency to manage your property if you can afford this. 
  • Marketing costs associated with attracting new tenants.
  • Paying taxes and potentially hiring an accountant to help you with this.
  • Buying new furniture and making sure it is safe if you choose to furnish your property. 
  • Potential costs if tenants do not pay the rent on time such as bank charges.
  • Paying for insurance.

Once you have an idea of the likely costs and expenses you may incur, you can use this list later on when factoring in how much to charge for rent and filling in tax returns.

What kind of property do you want your tenants to live in?

How you market and present your property will affect what kind of tenants you will attract. Think about your ideal tenant. Are going to attract students or professionals? What is their income level likely to be? Depending on who you are trying to attract, you will need to make sure your property is relevant for these people. Research the area surrounding your property. Look for nearby amenities and what the average rent and properties in the local area are. Your research should inform who is realistic to attract.

Once you have done this research, the next step should be deciding what to do with the property itself once it is safe and ready to go on the market. Furnishing the property may help you to attract tenants that do not want to do this themselves but there will also be a higher cost required in sourcing furniture and maintaining it. Alternatively, there may be less costs with an unfurnished the property but you may attract a different type of tenant.

If you are looking to attract students or tenants that want convenience, you may want to consider including utilities such as energy, water and broadband as part of your package.

The type of tenant you attract may also be a factor in what type of mortgage you can get, which may not allow certain types of tenant.

Laying down the rules.

When setting your tenancy agreement, you may want to implement certain rules to help protect your property, which you can specify in your tenancy agreement. This agreement forms the basis of a contract can be used to evict the tenant if things do not go to plan, provided you have followed all of the necessary rules and regulations. Tenants that have pets or smoke could cause damage and require you to clean or repair the property so you may want to think about rules regarding this. You may also want to include regular inspections so that you can check that the property is being kept in a reasonable state of repair.

Many tenancy agreements also ban subletting, which is where the tenant lets out the property to someone else (normally called a subtenant). There has been a lot of bad press regarding subletting, especially with the rise of Airbnb and in cases where tenants have done this without their landlord’s consent. Most landlord insurers and mortgages do not allow subletting. However, it is worth noting that subletting is not always bad. For example, if you own your property outright or you have a specialist mortgage that allows your tenants to sublet, allowing your tenants to do this may help them pay the rent more easily provided you already have a good relationship with them. If you do decide to allow this or are worried about your tenants subletting or doing Airbnb without your consent, Pikl can provide specialist insurance cover to protect you in case the worst happens.

Regardless of the rules you choose to stipulate, keep in mind that your tenants will be living there. Make sure that your rules are reasonable, proportionate and stick within the law.

Setting your rent and maximising your income.

By now you should have a list of all of your potential costs and done market research on your local area to get an idea of the average rent and prices. Make sure that your rent is proportionate to your area and the type of tenant you are trying to attract. Lower prices are not always better. If you are attracting higher value tenants, they may expect a higher rent and ignore properties with lower rental costs due to perceived lower value. If you are hiring an agent to manage your property then they can help you with this but factor the costs of agency fees into your rental price. To make sure being a landlord is profitable, you need to make sure your rental income exceeds the costs you will incur.

If do not have a property to rent out yet or you are wondering at this stage whether it is even worth renting out your property then this is a good time to work out the likely rental yield once you have decided on the rental price you would be likely to set. This can help you calculate the likely return on investment you could get compared to investing your cash elsewhere. To calculate the rental yield, divide the annual rental income by the assumed value of the property (if you don’t know the value of your property or the rental income for a particular area, property websites such as Zoopla and Rightmove are going for giving you a rough idea). Once you have done this, times this amount by 100 and you should have the figure. An example of how this is calculated is below:

Annual rental income of £21,600 (£1,800 per month) / property value of £300,000 x 100 = 7.2%

In the above example we have a rental yield of 7.2%. Once you have calculated yours, this figure can help you consider whether you may get a bigger return on investment elsewhere (such as buying a different rental property or even compared to different assets such as pensions and bonds). When doing this, you may also want to factor in the current rate of inflation to see how this will impact your returns. If you are applying for a buy to let mortgage, the mortgage company may consider the rental yield when approving your application. For advice on this subject, you may want to speak to a financial adviser.

When looking at rental yields, you may want to consider the short term letting market if you are looking for higher return on investment. Our article that compares renting out your property on Airbnb to having long term tenants discusses this in more detail. Doing a combination of the two may be the best way to balance risk with with a maximum return on investment, provided your insurance and mortgage provider allow this. Examples of how to do this could be hosting on Airbnb in between tenancies or having a mixed portfolio of landlord and Airbnb properties.

The benefits of hiring an agent.

There are several benefits to hiring an agent to manage your property. These can include:

  • Local knowledge of the area.
  • Marketing.
  • Sales expertise when attracting new tenants.
  • Day to day management of the property and collecting rent.
  • Mediating disputes with the tenant.
  • Guaranteed rent (not all agents offer this and the rental income after agent fees may be lower).

Should you decide to go it alone, you will have to do everything yourself. The advantage of doing this is that you will have more control over your own affairs. If you do go with an agent then you will have to factor in agent fees when balancing your income against your losses.

Getting insurance.

Getting landlord insurance is not compulsory. However, it is strongly advised. Your property is worth thousands of pounds and insurance can protect you against risk of damage. It can also protect you against things like liability for tenant injuries and loss of rent if something unexpected happens. Having insurance may also be a requirement of obtaining your buy to let mortgage. Our landlord insurance article discusses everything you need to know to get started. If you also rent on Airbnb as well as having long term tenants at your property, our specialist insurance cover has the flexibility to allow you to do this.