A rich man's world, I have tried a lot, I'm in beauty mode, but they're beauty. Hello, welcome to the full English, United Kingdom's AirBnB podcast. The place to learn how to buy, host, and grow your AirBnB business, specifically in the United Kingdom. Helping you to learn, grow, and become an AirBnB success. Okay, welcome to today's show. This is a conversation with Fiona Ford. Fiona's a short-term rental portfolio owner with properties in and around Brighton area on the South Coast of England for anyone who doesn't know. Fiona and I discussed her specific niche, which is hemp parties. We talk about all the nuances of this niche, better-nightly rates to damage repair and managing neighbours. Fiona's been in the industry pre-AirBnB, so we also get some insight into how AirBnB has changed the industry and how it's evolved over the past 10 years or so. Great guest, great first episode, the full English. I hope you enjoy it as much as I did. Okay, hello Fiona, welcome to the show. Thanks for joining us today. I think let's just jump, let's just jump straight in. If you start off Fiona, just tell us a little bit about yourself and how you got into short-term rental marketplace. It was somewhat by accident. There is an agent in Brighton called Crown Gardens and they were advertising looking for short-legged properties, predominantly specialising in the hemp party market. My husband and I had this more refurbishment business and we had successfully accrued by that point three properties all in the same building. But we were struggling with cash flow particularly in the summer. So I contacted Crown Gardens, they came round and did an assessment. I thought the top floor flat would suit them better but as soon as they saw the bottom floor flat and the potential for the hemp party market, we jumped on board, secured a small business loan to finish off the property which went through renovation in the May. How long ago was that Fiona? I simply have lost you a bit, I don't know what happened there. How long ago was that 2009? 2009, that's a few years ago now. So what was your plan for that particular property? What was your plan for it before you decided to go into the short-term market? Was that going to be a traditional, traditional lap model? Regular ASTs? It was actually supposed to be our home. Okay. But this was what just post 2008. Cash flow was very tight, mortgages were, as you know at that point, interest rates were high. So I was looking for alternative funding just to keep alternative meat, a source of income to keep us afloat, particularly in the summer months. So how did that go then? Talk us through from sort of that initial kind of journey that perhaps the first couple of years. It went very well. Initially, I was predominantly getting my business through the agents based in Brighton. For the first winter, I did a six-month let as opposed to a holiday let's all year round. But come sort of year three, year four. I was pretty much renting that apartment all year round. And particularly in the summer, there is a niche market, particularly in Brighton, for hen parties. So it was predominantly weekend business, not midweek business. The problem was always securing the midweek business. So weekends, you had groups of eight to ten girls, mainly girls, sometimes, sometimes stacks, not always hen parties, but group bookings, special occasions. What are the challenges then? Because doing, having a particular niche such as hen parties, it always strikes me as quite nice if you've got a particular niche that you work within. But each of them obviously also comes with its own challenges as well. What are the challenges of, I mean, do you find that you get lots of damage? Do you get lots of complaints? Or is it plain sailing all the way through? Strangely enough, not necessarily damage, collateral damage, and champagne glasses are broken, and things glasses are smashed, but that's easily replaceable. Yeah, the main issues over the years have been noise abatement, is whilst you want the group booking or the hen party to have a nice time to enjoy themselves. My property is located in a very residential area of Brighton and Hove, and it's respecting the neighbours and trying to restrict the, in particular, with girls shouting and screaming until two or three in the morning, because there is a garden attached, a garden in my property. And that's what proved to be the issue and complaints from the neighbours, visits from the council. All of the complaints whilst reasonably founded for that particular booking, moving forward, I tweaked and adjusted the property, so there were limited reasons why the neighbours could or should complain, and I have now got it down to a little bit of a fine art. Regrettably, one of that is, they can't really use the garden. So if you were to define that fine art, I think, yeah, restricting the use of the garden, it's a shame, but you can see that that will make a big difference. There are only other key points that you'd recommend that people could take on board to help mitigate complaints from neighbours. Very strict house rules, specifying definitely no parties, and that is a residential area and to keep the noise to a minimum after half past 10, 11 at night, and notification of the house rules around the apartment, so it's very clear when they check in. A new addition for the past year, 18 months, which again has helped enormously, is for other more security reasons during COVID, I put a camera in the garden to monitor trespasses and so forth, because I wasn't there all the time, but this has had a bonus effect of, A, I can see if guests have checked in and B, I can monitor myself, noise levels without being intrusive, because I can't, I don't believe in cameras inside the apartment. It's a camera directed out onto the garden, but obviously the microphone, that's the right word, can pick up the noise elements it will, and it's been successful. Do you think if you've got, I mean it is a bit of a nature isn't it, something like emparties, do you think it makes much difference to effectively how much you can charge if you've let in the apartment for say three days, four nights over a weekend, can you charge significantly more if you have identified and you are playing to a niche as opposed to, I mean they talk about, people talk about having an avatar, I guess avatar and this is the type of person that you're targeting, what impact do you think that can have in terms of increasing how much you can charge for your daily rates? It can definitely, if you do have a niche, you can charge more, however you are relatively speaking, speaking limited by that market. For example, hen parties are quite a seasonal market, pretty much April through to about the middle of July, and obviously they have their weddings July August and then there's another small amount, you generally get September October, sometimes over the winter months but not usually. So do you always then, do you always do a mid-term, each year, sort of six month mid-term rents or do you just take it year by year month by month? No, I've developed a system now but to sort of go on from what I was saying, the advantage of my property versus what I would term purely hen properties, the purely hen properties are are generally more centrally located and they are large, large houses, large properties that can in some cases sleep up to 20 girls. Mine is a smaller property located further away from the town centre and as such I always try to keep my options open in the different markets that I could tap into. So whilst I have this nice niche, I also do have the ability and the flexibility to make it more of a what I call a family-orientated apartment as opposed to only hen parties and that's where I've always had a slight advantage over the pure hen party properties because I could tap into different markets depending on the season and depending on the market conditions. You hear quite a bit about hen party properties, you don't hear of stag party properties, there's reasons for that I'm sure. Fiona, over the last, so you've been involved in this marketplace since about 2008 you said almost 15 years. So I suppose through that period you will have seen the riots of, I suppose when you've started you're talking about local agencies that you could go to and work with for short-term rentals and you will have seen the riots of Airbnb and the like over that period. Tell us a little bit from your point of view in terms of how that's changed the industry, whether that's for the better or for the worse or for both and some of the things that have changed over that period. There has been a significant impact upon the industry by Airbnb. When I started off it was predominantly through a locally based agents and or more national regional agents, your bookings.com, your cottages.com etc. Let me get my right trying to thought here. So as a perfect example as I research just before I came on air with you, when I joined Crown Gardens in 2009 they had 33 properties. I over the next 10 years they built up the business significantly and I think at their peak they had plus minus circa 150 properties. They are now reduced back down to 19 properties, so that shows you the impact of Airbnb. There are a lot more Airbnb has made it a lot more accessible for a lot of different types of landlords, hosts, call it what you want. I think the traditional model of Airbnb was quite a sort of hippie model in that people came and used your spare room and you made a bit of money out of it and you got to meet interesting people from around the world. Whereas now I would very much say it's a great business. What's the expression where you can't account for the type of business that is what they call it? The gig economy, is that correct? The gig economy, yeah. Very much part of the gig economy. It's attractive a lot of people, a lot of investors, by to let landlords have got out of renting their properties on the AST basis and they're exploring the holiday let market because there is a financial benefit to that in terms of if they're on interest only mortgage. If you're operating a holiday let business you can obviously claim the cost of that mortgage. The buy to let the buy to let market is it's not very labour intensive. You can buy properties and you can make a certain yield from your investment and you don't have to put a great deal of work into it. With short term rentals, I think you can earn more money but you have to put more work into it. What would be your take on that in terms of how much more money you can make from short term rentals but also balance against how much more work you need to put into it? I would say in terms of yield I have a small for example I've got a small cottage in standing just outside of Brighton. I am doing double the yield on a holiday let as opposed to a buy to let but yes it's the amount of work that is involved. Then it's the pros and cons of taking short stays versus longer stays and minimum stays versus being a lot more flexible with your type of stays you take and the cancellation procedures. You can do a lot of work or you can try and streamline the amount of work that you do. My advice and experience in all of this is the more work you do yourselves and do not use other services such as cleaning, maintenance, key safe settled properties where appropriate and able to keep your cost to a minimum as much as possible. Obviously fossilising now because obviously we all know utility energy costs are going up and we all know and are eagerly awaiting the Chancellor's announcement today because more good rates are going through the roof. More good rates do continue to rise and we will see if that's going to continue or not. Fiona the properties just tell us really quick overview of I think you've got three short-term rentals. Is that correct? I've got three short-term rentals and one AST rental. Okay so just stick into the short-term rentals and two in the Brighton Hoveria. And one in where's the third one? It's in standing. It's a small picturesque market town just on the edge of the south-downs just north of Shoreham approximately 10 to 15 miles away from Brighton. So what one of the things that's interesting to me and we touched we touched on this when we spoke offline is that the immediate reaction certainly for someone like myself would be that whether it be much more demanding somewhere like Brighton for a short-term rental and I suspect that yes there is a lot more demand per say but equally there's probably a lot more supplier as well and I just wonder if if you do look at areas slightly more of the beaten track such as your third property there may be decent demand but quite low supplier which might make it perhaps quite an interesting type of marketplace to look into. So when you consider you are two the two locations that you've got staining and hope how would you compare the two in terms of sort of overall investment opportunity for short-term rentals? At the moment but this type of market is cyclical I do believe so the current cycle is that the market in Brighton and Hove is saturated. There's a lot of Airbnb short-term let properties in the market and there is vast amount of competition which is obviously demand and supply so if there's too much supply demand is less and rates drop accordingly. Staining you are correct it's a much more of a niche market and a lot less supply therefore demand is higher plus the type of property it is at the moment in that it is a one-bed property sleeps too and I do believe the disposable income at the moment is more in the that age group in terms of professional couples and or and older your silver travellers if you know what only you want to go off on short breaks or they can wait off here and there and they won't access to beautiful countryside. So if you were to look at yeah if you just look at purely the yield from those two areas in terms of the value of the property in relation to the income that it produces would you say that the staining as a higher investment yield than the Hove property is obviously property in Hove is it's quite expensive isn't it? It is and yes to be honest I should have I should have done the figures on the years before I came on air but the one thing I would however say is is as I am about to do myself is I keep my options open all of the time because whilst there is a a drop in inquiries bookings in Brighton and Hove there is a burgeoning and lack of supply in the rental market and rental rates have gone exceedingly high through the roof so there's always the option particularly in the place like Brighton and Hove and the transient nature of the population there and the student population there to secure a six month let just to see out the difficult time and then reassess again and of course then you've also got some way like Brighton and Hove you've also got fantastic capital appreciation as well which is which is another thing to kind of take into the mix as well isn't it? Yeah you've got the talent of appreciation in Brighton and Hove is significantly better than that in standing and then the problem with standing whilst it's a beautiful little cottage in the great location and it perfectly suits the purposes I have set it up for which at the moment is a holiday let it's not the easiest of markets to appreciate the wrong word selling I've tried to sell it a couple of times and trying to secure a buyer has not been not being as successful as I would have thought it would have been so it's definitely more of a long-term financial investment for me in terms of yield from it as opposed to it creates cash rather than rather than create a whole load of appreciation in the asset value which is which is interesting isn't it? So that's something to also think about when you're investing in a holiday let premises because is that the salability should you just you get to appointment your life and think right I've had enough of this and what else it's it's it's been quite a learning curve and I had a conversation again on Saturday about it with my letting slash sales agent in Brighton and Hove who actually is a relative of mine and he would feel more confident in the salability of properties in Brighton and Hove than the cottage out and standing at the moment. So taking all of that everything we've discussed so far into account and I suppose it as always specifically thinking about your your experience and your knowledge. Where do you think your opportunities lie in the short-term rental market over the next say one two one to five years? I think they lie in niche markets and in good locations but purchasing them at the right prices which at the moment is I don't know where where the property market is going whether it is back peddling a bit or it's still being kept at the inflated levels. Well I think we may see some potentially see some some good deals being available where lots of people are backing out of the market at the moment. I potentially some some opportunity there to buy a good level at good rates if you can find the deals. Yeah if you can get the mortgage offer or or be you're in the position to buy outright with cash. Okay so one of the things that we were talking about offline which be good to get some of your thoughts on is changes in the tax rules for short-term rentals or not so much changes but just the treatment of tax rules in relation to in or in comparison to standard ASTs and some of the benefits that that throws out as well. Obviously any investment how it's treated from a tax point of view has an enormous effect on how successful it is long-term and there are certain tax benefits to short-term rentals as opposed to traditional ASTs. If you got any thoughts in relation to that? Yes it's it's a juggle. Obviously if you do the AST on a traditional bi-to-let interest only mortgage as we all know now that interest only mortgage is no longer tax deductible. So as per your previous comments there may be some interesting offers coming to the market if there's a lot of bi-to-let landlords out there who are due to change their products and are coming across interest rates at around six percent. I can't see how a bi-to-let landlord can make any money anymore. On the short-term let's side it's not all plain sailing because if you do do it properly as I have done in my case there are some tax advantages in terms of of business rates registering it however you want to have got one/two properties you are limited with about that because anything more than the VOA set amount you no longer qualify for business rate relief. So you lose all your tax advantages with obviously the exception of being able to claim that interest only mortgage as a tax deductible expense which obviously with interest rates about to have already increased that is that will impact upon your gross net profits but at least you can claim that as an expense. Good accounts and it's always needed. To be honest with you I do all my own tax returns. I found it easier in the end it's a I simplified it all and remove that cost from my cash flow. And then in terms of just going back a little bit we've talked about to see when you first started in the industry it was kind of pretty much before Airbnb came along effectively or maybe it was in its absolute infancy. How much of your business now comes through Airbnb and how much is through other avenues? Well after doing this for quite well I found that the the optimal sort of percentage of business was if you wanted to make a decent profit was between 70 to 80% of your own business with the balance made up by agents 20 to 30% through other sources otherwise you end up playing extortionate commissions and so forth. Yeah, Airbnb has changed it in that when I first started out the main route of everyone's income was through your trip advisor, your holiday lettings you could register your advert pretty much free of charge. You paid a small fee to them and then you earned the income direct from from the guest and also the cash flow because the your terms would be usually four weeks in advance and you hold a damage deposit which is refunded to them after they they've vacated the property. So that was a significant amount of cash flow in advance but over the years that has dwindled down Airbnb model changed all the dot com's models to this one of payment after the guest has left and damaged deposits are all held by all the dot com businesses no one no owner holds the damage deposit anymore except if it's the direct booking to them via either their website and or a previous guest returning. So does that make it difficult for if you're doing hem passes then you would imagine that that probably are more likely to cause some kind of damage in one way or another it's a group of people young people getting together having a good time there's more likely to be damage caused isn't there is that is that quite negative for you for booking through Airbnb or taking bookings through Airbnb because you can't get a damaged deposit and hold that. Well, you've got this it's on Airbnb now it's called is it a host or there's there is a system in place with Airbnb and in this last summer I've had to claim upon it for the first time ever as I said to you in the past with the with the uh hen parties I generally speaking touch wood there's been damage in terms of sort of sheets that may have to been thrown away and or glasses that were smashed and so forth but generally speaking I do find that because my property is a little bit away from the centre of Brighton I I attracted a more mature crowd and generally and the hen is known to all of the others but the but they are not necessarily all friends so they're quite really wanting to get their deposit back so they're pretty I'd say I 1995 percent I've never had issues with end parties I have more issues with groups or friends who know each other and very comfortable around each other or extended family groups it's interesting dynamic that isn't it you've just pointed out yeah and the amount of calls and emails or text messages I will get after they've left the property and they will contact me and say we've left it is all in good order can we have our damage deposit back now is I'd say eight out of ten out of all of the hen party bookings I get that kind of message usually as it stands through through the agent and not necessarily comes through Airbnb I then say to them that I've checked out the property everything appears to be in good order and then I will let the agent know and to refund their deposit back to them as soon as possible but otherwise the agents terms and conditions apply which usually is within seven to ten days after they've vacated the prompt they get the deposit back so if you know what are your plans then for the future in terms of your short term rental business are you quite comfortable that you've got a sort of small to medium sized portfolio that you're quite comfortable managing and and you're happy with it at that size or do you have plans to order the portfolio in some way or increase the size of it where do you think you're taking it over the next few years? It's a very good question I'm at a turning point in my life I think in some ways I may be scaling back my operations because the one thing I that we haven't covered which is perhaps important to mention but for the last ten years ten-thirty years I have been doing it predominantly myself and that's why I have been successful at it but it does mean that for pretty much six months of the year i.e. April through to September I am restricted I can't go anywhere I have to be available for changeovers I have to be available for to to run the business and I am getting to a point in my life where I don't want to be tied down to that commitment. So in your mind would that be with that be finding a way to moving away from it and perhaps restructuring it that way and perhaps going some more longer term rentals and accepting a bit of a lower lower yield but you'd have more time to yourself or would you look at ways to I know I think you've said the opposite to this already but would you look at ways to try and kind of bring more help in and put more systems in place so the properties could be a little bit more autonomous. I am probably looking at the former rather than the latter I've tried over the years to find cleaners maintenance people and I have always been let down. I'm more interested now in the longer term yield because as I said rental yields at the moment are good are high and at least you've got the security of knowing that there's a tenant in place and there is that income coming in but obviously I need to balance the books so. But if you had properties which were only suitable for short term rentals then obviously you wouldn't have that flexibility you wouldn't have the opportunity to do that and it would be quite in some way it's a risk mitigation isn't it it's good risk mitigation if a property is suitable for both. Exactly. So if you do need to pivot and pivot to traditional AST you can do that. Exactly. That is what one recommendation I would give to anybody because there's even other things which affect the market which is coming up funny enough in the next two months in an unusual part of the year but that's always over the years impacted yields and that is big sporting events. Let me tell you when the world cup is on nobody books nobody goes out everybody's at home watching the television and watching the football so so so things think occasions like that and obviously the next year we've got a coronation coming up that will happen effect upon business obviously obviously if you if it's a property in London it will affect your business because you get booked out but if you got properties in other parts of the country I can see it as being quite a quiet weekend because everyone be at home watching the television. Yeah you've got to make enough on the busy ones having you to make it worthwhile to make up for the quieter ones. That's correct. Fiona so how can how can people get in touch with you how can people find your properties if you thinking of having a hendu on the south coast or as you say if you perhaps have slightly more advanced years then a hendu party might be and you're looking for something a bit quieter 20 minutes drive from the south coast how can people find out about you and your properties and get in touch with you? I have got a website it's called downsandcoast.co.uk and then also all of my properties are featured on on Airbnb so yes please please check me out. Okay well if you want to get in touch with Fiona please please do so Fiona it's been really enjoyable having you on the show today um absolutely pleasure to talk to you um I've learned certainly some bits from you today and I'm sure our listeners will have done also okay have you enjoyed the show do remember the episode out every Monday to do come back for more in-depth conversation with short-term rental experts in the united kingdom also if there are any specific topics you'd like us to cover in future shows or if you'd just like to reach out for any other reason please do email us at the full english
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