The Inside Edge
Holiday rentals aren’t just reserved to country cottages and beachside retreats. If you have a property in London or the surrounding area then you could be in for some rental property opportunities during the Olympic 2012 season. Thousands of tourists will be hitting our shores and with hotel rooms at a minimum or those that are left available at premium prices, these people will be looking for somewhere to stay.
If you have a flat or house available in Stratford or close to the Olympic Village then it could be a “nice little earner” for you next year.
But will your mortgage lender allow you to rent out your home or the rooms within? Will you need special insurance? What will demand be like?
Online holiday rental website Homeaway.co.uk predicts that many homeowners will use their website in order to cash in on the 2012 visitors. Potentially, renting during this period could generate an average of £4500 over the 16 day-long event. 1 million visitors are predicted to visit from overseas destinations alone and this doesn’t factor in those travelling from other parts of the UK.
Let’s take a look at the mortgage issues when renting out your home to tourists. A spokesman from the Council of Mortgage Lenders (CML), said: ‘If borrowers want to make any changes to their mortgage, because they want to rent out their property short term for example, they need to contact their lender to discuss the request as their contract is unlikely to cover this. ‘They would also need to contact their insurer as they would potentially not be covered in the event of a claim.’
One mortgage lender, Lloyds TSB said they would allow their customers to rent out rooms within their property or their whole property subject to a number of conditions.
A spokesman for Lloyds TSB, said: ‘If customers do wish to offer accommodation at the time of the Olympics, they can rent a maximum of two rooms to a maximum of two lodgers. In this circumstance, we do ask that the customer let us know. In order to rent out their entire property to a tenant rather than a lodger, we require that this is done as an “assured short hold tenancy”, which protects the tenant, the homeowner, and the lender; the minimum legal time from for this arrangement, however, is six months. Customers should speak to their lender and consult legal advice if they are unsure of what action to take.’
Every mortgage lender is different so it’s important to contact your lender way ahead of time so that the necessary paperwork and arrangements can be made. This will also ensure you have ample time to advertise your property for rent.
You will also need to arrange additional insurance. You’ll need to let your insurer know of your intentions as most standard buildings insurance won’t cover letting out your home and therefore won’t cover any loss or damage resulting from such an arrangement. Even those living in flats and covered by their landlord’s insurance policy will need to seek additional advice and assistance. It’s the worst case scenario, but if your house burns down and you don’t have the relevant insurance, your insurer will probably refuse to pay out. Direct Line is one insurer launching temporary cover for its home insurance policies to ensure customers are clear on what is and is not covered if they do decide to rent their home out to Olympic tourists.
There is also the subject of tax. If you want to rent a room whilst you stay in the property you can earn £4,250 tax-free. However, if you are also cooking dinners, handling laundry or providing any other service then this will be seen as running a business and you will be subject to paying tax. If the Inland Revenue suspects you are not declaring rental income whey may launch an inquiry and this can lead to substantial penalty charges.
If you think your property has good rental potential then this could be a great way of making some money in 2012. Make sure you let all relevant parties know and choose a good website for advertising your rental property.