What is a Short Term Let?
Sometimes called holiday rentals or ‘short stay’ rentals, short-term lets describe tenancies under six months but commonly refer to landlords that rent their property out on an occasional weekly or nightly basis.
Pioneered by platforms such as Airbnb, short-term lets can be very profitable in areas where there is demand driven by local business or nearby attractions. This has made larger city-centres particularly popular, where tenants will usually only need accommodation for several nights.
But what’s the appeal compared to the traditional hotel booking? Aside from flexibility and availability, short-term lets such as those in 105 Broad Street typically provides tenants with an entire property at their disposable, rather than being confined to one room.
This is why some Buy-to-Let landlords with city-centre property are shifting to a short-term let strategy and marketing themselves as ‘short stay apartments’ – they can benefit from the consistent tourism demand that cities naturally generate.
Discover a Short-Term Let at 105 Broad Street
Looking to pivot to a short-term letting strategy? Invest at 105 Broad Street.
- Forecasting 19.5% capital growth over the next five years
- Ideal city-centre location for short-stay apartment demand
- Average short-stay occupancy rate: 80%
- Potentially higher returns than traditional tenancy agreement
What are the advantages of a short-term let?
One of the key advantages of a short stay apartment is the flexibility it can provide. The property is still yours to use if it’s in a prime destination and you can work around your occasional tenants much easier than you could in a standard shorthold tenancy – an appealing draw for investors that have a property in a ‘holiday destination’.
Short-term lets can also be incredibly profitable in areas where demand is outstripping supply as you can pick and choose as many or as few tenants as you like. Depending on where your property is located there’s always a risk that rates are seasonal but, for the most part, our example of a city-centre location means demand all year round.
Similarly, because these property types are typically priced per night, you can generally charge higher rates and generate greater returns than a long-term tenancy.
Finally, the nature of a short-term let means the challenges that come with a ‘bad tenant’ are much less pronounced. Rent arrears are not typically a problem and because these properties are generally used for short trips or holidays, there’s not really an issue with tenants refusing to move.
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What are the disadvantages of a short-term let?
The primary disadvantage of a short-term rental is how time-intensive it can be compared to a long-term tenancy. Properties need cleaning and maintaining in between guests, a factor that can build up over a larger portfolio.
While paying for an agent or marketing it through a short-stay platform is an option, this is another cost that needs to be considered within your budgeting.
Although longer tenancies can generally be described as truly passive income, short-term rentals will require more hands-on management.
This also applies to the property itself. This type of letting can suffer more wear and tear because of the sheer volume of different tenants that live there. While insurance can cover this, there’s always a higher risk of accidental damage or general wear over time.
Similarly, these properties obviously need to be furnished so ensuring there’s modern and comfortable furniture needs to be factored into your budgeting.
Finally, while short-term rental income is often higher compared to longer tenancies, it is delivered more infrequently unless you have a steady stream of bookings. While it’s an extraordinary case, the COVID-19 pandemic has had a huge impact on the short-term lettings market, leaving landlords in a precarious position.
As always, this can be mitigated with proper planning and marketing your property to the best of your ability, ensuring a steady stream of tenants.
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Is a long tenancy or a short-term let better?
The answer to this question is based on your own personal circumstances. You’ll need to consider your own financial position, what you’re looking to achieve and the finer details of your asset.
If you have an apartment in a city-centre, for example, then either of these options could work for you. Short-term rentals will benefit from the location’s high demand and provide flexibility but will require more hands-on management.
A long-term tenancy could offer lower returns but could ensure a long-term tenant that delivers a steady stream of rental income with very little input from you.
Ultimately it’s down to how much time you have and how much can be dedicated to running your property. The good thing about this situation is that you’re not locked into your initial choice. It could be that during the (traditionally popular) summer months you adopt a short-term letting strategy, before switching to a long-term tenancy over the rest of the year.
As always, be sure to speak to a financial professional before investing and check that short-term letting is allowed within the relevant regulations.
For most Buy-to-Let landlords, a short-term let is significantly more demanding than a traditional, longer tenancy. However, for those that are able to generate consistent demand, the returns on investment can be much higher due to the rates these types of investments can command in the right area.
If a landlord does need help running their investment, there are a number of management companies out there that can help – from finding guests to maintenance. While this obviously impacts your bottom line, it can make the entire process much more manageable for landlords that don’t have the time.