And increasingly, owners are deriving significant income from these properties — about 48,000 residences, according to council tax records, in the areas of Chelsea, Kensington and the City of Westminster — meeting the demand for tourist accommodations in the British capital by offering their homes as short-term rentals.
The financial benefits are clear. For example, a two-bedroom, two-bathroom apartment in Chelsea that achieves 80 percent occupancy can generate an annual rental income of £21,000 to £30,000, or $32,643 to $46,624, based on fees that are roughly 4 percent of the £750,000 value. More expensive properties could expect considerably more, though most homes actually are available for rental only about a quarter of the year.
Nick Aslin and his wife, Carol, bought a luxury two-bedroom, two-bathroom apartment just off Sloane Square in Chelsea in August 2011. They visit London two or three times a year, so when they are not using the apartment they rent it out through an Internet service, One Fine Stay.
“It was put on the Web site and we had our first booking two hours later. It was incredible,” said Mr. Aslin, who lives in Zambia.
Though technically a short rental is any stay of less than six months, most landlords — or, as many call themselves, “hosts” — generally rent their properties for one or two weeks at a time.
Such rentals command a premium of as much as 100 percent more than long-term rentals, with the prices usually kept in proportion to hotel charges. “It has to be more economic to stay in a private apartment or house than a hotel. And of course, it is much nicer,” said Joanna Doniger, chief executive of Accommodate London, another Internet service. Depending on location and size of the property, most agencies charge £100 to £1,000 per night.
But this year, even though London is estimated to have more than 100,000 hotel rooms, demand is increasing because of the Queen’s Jubilee in early June and the Summer Olympics in late July. About 450,000 overnight visitors are expected to visit London during the Games, according to a report by Oxford Economics (a separate report by London & Partners estimates 5.5 million day visitors). So agencies are, not unexpectedly, increasing the price of short-term rentals.
“Demand is very good, particularly for larger seven- and eight-bedroom houses, which are quite hard to find,” Ms. Doniger said. Depending on the property and the location, “we are marking up our houses 20 percent more than the normal premium rent.”
How much of the rental fees end up in owners’ pockets varies. Some agencies, like Accommodate London, take a flat 15 percent of each payment. Others, like One Fine Stay, have a more complicated arrangement, giving owners an annual net amount based on long-term rental yields, usually totaling 3.5 percent to 5 percent of the property’s value.
The Aslins’ apartment, which cost £1 million, so far has achieved 80 percent occupancy and earned them an above-average gross of slightly more than £60,000 per year, or 6.5 percent of the value.
The couple, who bought the apartment as a rental investment as well as a second home, knew from the start that they wanted to rent it out during their absences, so they painted it in safe, neutral colors. “My wife’s an artist and we enjoy creating space,” Mr. Aslin said.
In addition to the usual linens and kitchenware left for renters, a storeroom was turned into a study and a desktop computer and printer were installed. The apartment also has Wi-Fi.
The couple’s personal items are stored in a lockable cupboard during rentals.
While a detailed inventory is maintained, “people do not take things. The tenants are well-heeled people living in similar homes themselves,” said Greg Marsh, chief executive of One Fine Stay. The agency takes care of maintenance, as the owners arrange for the service, and the company has insurance coverage underwritten by Lloyds.
Depending on their circumstances, landlords are entitled to some tax relief, and some maintenance costs also can be written off against taxes.
As for the legality of turning a residence into a kind of part-time hotel room, “zoning and permission status vary by building and by council, so there isn’t a simple answer in all cases,” Mr. Marsh said. “In practice, we work through this question with owners on a case-by-case basis.”
Agencies also ensure that properties comply with other rental regulations, like having current gas safety certificates.
Occasionally, however, owners have their own restrictions on leasing. “Apartments in landmark buildings such as One Hyde Park and 199 Knightsbridge are held on leases which prevent their owners renting them out for periods of less than six months,” said Mark Tunstall, director of super prime lettings with Savills, which specializes in long-term rentals.
However, he added, the rule does help to maintain their exclusivity.
Source: The New York Times
Tags: HOUSES | ACCOMMODATION