Festival opportunities come with expensive pitfalls

Kirsty Mcluckie on the problems of holiday lets

t this time of year Edinburgh residents will be either looking forward to – or dreading, depending on your mindset – the start of the festival.

August marks the stampede of performers and tourists to the city and, if you can get over the added noise, congestion and litter, it is a time to enjoy the privilege of living in a city which for a few weeks becomes the centre of the cultural world.

But there is also the added temptation for property owners to cash in on the leap in the city’s population and let your space for the duration.

Tales abound of canny city dwellers turning over their homes to visitors and either moving in with friends or family or using the vast profits to fund an extended holiday elsewhere.

Meanwhile owning a buy-to-let in a good location is considered something of a cash cow, come August.

You can understand the attraction of a holiday let to landlords – average Airbnb rentals in Edinburgh during last year’s festival for instance reached £2,187 a month compared to £986 for long-term rent.

But those looking to turn a quick profit through short-term letting during the festival are unknowingly putting themselves at risk of costly pitfalls, according to property experts.

If the property is your home, it is very unlikely that your household insurance would cover an arrangement such as letting it without changing your whole policy.

If you chose not to inform your insurer you could leave yourself open to very costly problems down the line, even if damage is nothing to do with your guests.

For those with finance on the property there is also the mortgage company to inform.

And unless you have a specialised type of mortgage which allows paying guests, your provider is likely to take a dim view of the habit, however short-lived.

You may even see yourself denied a domestic mortgage rate for the rest of the term of the loan, which could prove very costly.

Even if the property you are hoping to offer to festival guests is already a buy-to-let, renting out by the day or week is problematic.

Neil Mcinnes, director with Edinburgh-based Umega Lettings, says: “Buy-to-let mortgages do not allow holiday letting as they require a short assured tenancy, which is a minimum six months, to be in place.

“A special holiday-let mortgage is required and these are not offered by high-street lenders due to the increased risk and uncertainty of holiday lets.”

While the headline figures can look attractive, Innes warns that holiday letting often doesn’t stack up financially when compared to longer lets.

He says: “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 compared to long-term letting.”

In other words, most of those with buy-tolet properties in the capital would be better securing a long-term tenant than chasing the festival pound, while homeowners should consider staying put and enriching themselves with culture instead.