Renting your home as an Airbnb is becoming a popular way to make extra money, but you could end up in trouble if your lender is not made aware.
Whether you choose to clear off entirely and rent your whole house or stick around to see your visitors and let out a single room it can be a way to earn extra cash.
However, it must be approached with caution. Beyond the fact that you are inviting total strangers into your home, it has ramifications for your investment, particularly if you still have a mortgage on your house.
Before you get started on your Airbnb adventure there are several people you must tell; your lender, your home insurer and the taxman.
Airbnb and your mortgage lender
Different lenders have different rules when it comes to Airbnb. Because Airbnb is still relatively new, there are unlikely to be specific terms and conditions on your mortgage referencing the site. There will be conditions about letting the property generally. Nearly all residential mortgages include a condition that states the property cannot be let without obtaining the lender’s permission and lettings via Airbnb would come under this exclusion.
Some lenders will charge more if you are renting the house out, while others will refuse it altogether, particularly if you are looking at a short-term holiday let, as with Airbnb lettings. You may find it easier to obtain permission for renting out just one room. If you are simply looking to let a spare room on a casual basis then it’s likely to be viewed more along the lines of a lodger and lenders are likely to be accepting, as the owner is still in the property during the stay.
Airbnb and your home insurer
Your home insurer should also be consulted before you put a property on Airbnb. It may charge you a one-off fee or increase your premium. If it refuses to cover short-term lettings, and some will, there are specialist providers available which provide cover for holiday lets.
Airbnb and the taxman
Even if you are renting a room or your home out on an irregular basis, you must still declare your earnings to KRA. If Airbnb lets are your only source of income and you make less than Kes 10,000 per year, you may not have to pay any tax on the rent.
Can I fly under the radar?
Given the rules and red tape surrounding Airbnb lettings, it may be tempting to think that you should just go ahead without telling lenders, insurers and officials. Don’t.
Furthermore, you will be in breach of your mortgage contract if you do this, which automatically invalidates your home insurance if things go wrong. Not telling your insurer compounds this and the potential losses could be huge if your guests damage your property.
Airbnb can be a great way to increase income and invite new experiences into your home. Just be sure you have put everything in place before you get started.
Before making financial decisions always do research, or talk to a financial adviser. Our views do not constitute financial advice.
