Short Or Long-Term Let?

When you invest in property, you want to spend your money wisely and get a worthwhile return. The property market is not for the faint-hearted, especially when it comes to a buy to let. If you plan on letting out your property, you could be torn between a short-term (holiday let) or the long-term residential route. There are a number of factors to consider in this decision, and this article may help you choose.

What’s the difference between short-term and long-term lets?

Short-term lets are typically based on tourism, where people let their property for a short period of time, such as a couple of days, weeks or even months. Platforms such as Airbnb charge property owners in return for them listing their property and marketing it to users internationally.

Long-term letting on the other hand are let for at least six months or more. Landlords typically advertise on Rightmove to find long-term tenants, sign a tenancy agreement and collect rent each month.

Short-term vs long-term letting: pros and cons

Holiday lets have the potential to be extremely lucrative since they command a far higher rate than a long-term rental. In fact, some properties can make as much in one week than the property could make in a month from a long-term lease, especially if your property is in a popular tourist destination. However, holiday lets rely heavily on the tourist seasons.

There’s high demand for short-term lets, not only for holidaymakers but also for people who want to enjoy a more relaxed experience on a business trip. Since your tenants are constantly changing, there’s the opportunity to meet new people all the time. It certainly delivers some flexibility, as tenants can extend their stay easily, there’s no requirement to serve notice, and you can use it for yourself, friends or family when you like.

Void periods

However, this flexibility also comes with risky void periods. As the pandemic has shown, unforeseen events could leave you without an income for long periods, particularly if your property relies on seasonal tourism. If you’re relying on your rental as our primary source of income, this may be a risky option.

Cancellations can be an issue too. If your next guests cancel last minute, it’s unlikely someone else will book in with such short notice, leaving you out of pocket.

Hosting and maintenance

With many guests passing through every week, your property will also undergo more wear and tear. This will increase your maintenance costs, and if you’re managing the property yourself, it can be a time-consuming task to keep the property clean and well-maintained. 

Ideally you need to be located near your short-term let or allow for additional costs of someone to manage the hosting of guests and the turn-around of the property between lets.

As a host, you’ll have to spend time messaging your guests, sharing the property location details, and handing over the keys. If they have queries, you need to be available to answer them quickly too. Whilst Airbnb and other platforms do provide some protection, any claims or losses are at the discretion of the platform which may not go in your favour. 

Airbnb vs renting: Advantages of a long-term let

A long-term rental generally required less involvement than a holiday let. There’s a bit more to do before they move in, but once they’re in they could stay for a few years at least.

Once you have found a tenant and sorted the admin (referencing, agreements, deposit security) you’ll only need to visit the property for routine inspections or maintenance. Most landlords carry out an inventory at the start of the property, then a mid-term check about six months in to keep an eye on things.

Your tenant may contact you regarding maintenance and or emergencies, but it’s up to you how you’d like to handle it. A lot of landlords like to take care of maintenance themselves, particularly if they live close by and know people in the trade, or are handy themselves. Others prefer to hand the keys to an agent who sorts maintenance issues on their behalf – but this is usually more costly than the former.

Find the right tenant

The main advantage of a long-term let over a holiday let is that you have the ability to screen your tenants and select the right people to rent your property. At viewings, you’ll be able to meet your tenants and get a feel as to whether they’re the right fit for your property.

Tenant referencing provides credit and employment checks, as well as a reference from their previous landlord, giving you the peace of mind that your tenant has a good renting history and can afford the rent.

Legal responsibilities

The most significant difference between short-term and long-term lets are the legal obligations. Long-term lets have more rules to follow, including safety inspections, Right to Rent checks other regulations specific to private renting.

You’ll need a buy-to-let mortgage or consent to let if you want to rent out your property. Even if you’re looking for a short-term let, you’ll need to check it doesn’t go against your mortgage terms.

Renting with the wrong mortgage or without consent to let is a breach of your mortgage contract.

For this reason, you need to confirm your plans to rent out the property are clearly outlined when you apply for your mortgage, or contact your lender to get consent to let to change your mortgage over.

A consistent income

A long-term let provides you with more financial resilience and a constant income. This can help with annual tax planning and makes it easier to budget as you’ll know how much money is coming in every month. 

Just like Airbnb, there can be void periods, but the risk is far less. If you find a good tenant that wants to stick around, a long-term rental is a less time-consuming income source.

Of course, you’ll have some repairs and safety inspections to pay for over time, and there is the risk of your tenant not paying rent, but rent protection provides a monetary safety net.

Tenants may not live in your property forever, but the turnaround will be far less frequent than a holiday let. also, if you market your property in the right way, and keep it maintained, you may be able to boost your rent and maximise your return on investment further.