Key Highlights

For investors just starting on their property investment journey, the decision whether to have short-term or long-term lets needs to be decided at the very start. Exactly what you’re looking for and what kind of tenants you’re catering to depends on your investment goals, methods, and properties.

Short term let’s refer to any period under six months. Long-term, of course, over six months. There are several benefits (and indeed downsides) to both. It’s something to carefully consider before purchasing your next buy-to-let property, as location, yield, rental prices, income potential, and other factors are dependent on the letting period.

In this short article, we’ll look at both long-term and short-term lets respectively, assessing their pros and cons. Which one is best for you depends on your property portfolio and goals.

Long-Term And Short-Term Lettings: Side By Side

It can be up for debate as to whether one is more profitable than the other. At first glance, short term can be more profitable as the prices are generally higher. However, there can be void periods for all sorts of reasons, such as cancellations and off-seasons. Long-term rentals may net a significantly lower cost but it is more consistent and reliable than short-term.

For those looking for buy-to-let properties to rent out on a short-term basis, it is important to look for properties that would be suited for this. Short term lets are usually let out as vacation homes. Your short term rental property should be next to popular tourist locations are key to ensuring good returns and that people will want to book nights.

For city hotspots, it should be easily accessible, have strong transport links, and have good amenities such as restaurants and bars nearby. For more nature-based locations, the property should still be easy to find and accessible via car. It should be close to national parks or other areas of outstanding natural beauty.

Long-term lets are a bit different. Investors should search for investment properties that have strong transport links, are in popular towns and cities with high yields, and are in a place that will attract high-quality tenants. It should be ideally situated next to the things we need in everyday life, such as shops, restaurants, clinics, and more. Proximity to local schools and colleges is also important.

Short-term Lettings

Pros

• Cost: It has an increased return on investment compared to long-term lets. Short-term lets and vacation rental properties can bring in more cash on a day-to-day or even monthly basis, providing a quick and large cash flow for investors. The price for short-term lets is higher, as asking prices are higher, and short-term renters are often willing to pay. The average nightly rate for a hotel in London is £100 for a basic hotel that might not be centrally located.
• Flexibility: Landlords can decide when they want to take a break from letting, for whatever reason, and can remove their properties from rental websites such as Airbnb or Booking.com. It can also be helpful if you want to renovate the property.
• Selling: If the landlord wants to sell sooner rather than later, this is more easily achievable as there are no long-term tenants who have a lengthy contract to fulfill. The property will still be appreciated and these holiday home rentals are often furnished to a higher standard, making them more attractive on the market.

Cons

• Inconsistent Income: There can be void periods with short-term lets, where the property isn’t being booked.
• Cancellations: While fees can be applied for last-minute cancellations, it can leave landlords falling short if a potential renter cancels and no one else books within that time frame.
• Additional Costs: As there is a high turnover of guests, a few additional costs can arise, namely property management fees. This generally stems from damage to property that needs fixing and the hiring of cleaners to clean the property in between guests (although a few short-term rental websites like Airbnb include a cleaning fee to be paid by guests). While there is usually natural wear and tear, there can occasionally be significant damage. Landlords also need to cover bills that would normally be paid for by long-term tenants, such as utility bills, Wi-Fi, and more.
• Time And Effort: With a high turnover of guests, landlords need to put the time and effort in to ensure guests are happy and safe. 

90-Day Rule For Short-Term Lettings

Potential short-term landlords should be aware that in the UK there is now a “90-day rule” for short-term lets. Introduced only in 2016 in London, this law stipulates that Airbnb landlords can only let out their properties for a maximum of 90 days. After that, Airbnb will automatically remove your property from the website and reinstate it during the following calendar year.

As stipulated, this rule only applies to London properties. It was introduced to tackle and regulate the short-term rental market which was beginning to dominate available housing in London. However, it is something potential short-term landlords should be aware of – particularly if they’re looking to operate within Greater London. Those who try to sidestep can meet a hefty fine, with some fines reaching £20,000.

Long-term Lettings

Pros

• Reliable Income: While long-term lets might have a lower return on investment, what sets it apart from short-term lets is that it is more of a reliable and long-term rental income. There are also fewer void periods. Long-term leases are usually a minimum of 12 months. This ensures consistent funds that are paid monthly. The average tenancy length in the UK is two years – which means two years of getting paid.
• Reduced Effort: While you still need to make sure your tenants are happy, comfortable, and safe in your long-term buy-to-let property, this requires much less effort than short-term lets. Beyond ensuring payments continue and the property isn’t being damaged, there is little to do.
• Fewer Additional Costs: Often, landlords can choose whether to make the property bill inclusive or not. If bills are exclusive, these payments fall on behalf of the occupier.
• Management Company: Long-term rental properties can benefit from being able to use management companies which can handle the lettings side.

Cons

• Inflexibility: Long-term properties are significantly less flexible than short-term. With tenants there to stay for the foreseeable, landlords can’t sell the property when they want to move on.
• Bad Tenants: This can be a nightmare for landlords, as bad tenants can result in costly void periods from not paying rent or causing expensive damage. They can also be difficult to evict.
• Legal Aspects: Long-term lets come with a lot more red tape than short-term, and it takes a lot of prior knowledge and preparation to be ready for anything. As it will be an actual home for tenants and not just a holiday, there are certain legal requirements the property needs to meet to be habitable. Long-term also includes more intricate lease terms to be aware of, such as the tenancy agreement.
• Lower Rates: By and large, long-term lets tend to have lower rates and have a lower return on investment than short-term. However, this can pay off in the long run.
• Maintenance And Repairs: Just because they’re long term tenants who are here to stay, doesn’t mean that the property won’t get damaged over time.

Property Management

Property management and investment firms can help you define your investment goals and decide on what path to take. They can offer expert guidance on finding the best deals and managing your property – both short and long term. They can help you build your real estate investment portfolio, conduct property management, and help you to diversify your real estate investments.

For more on investment and management agencies and how to manage your properties, read our guide here to find out more.

Summary

At North Property Group, we specialise in finding the best property investment opportunities to suit you and your business goals. We have a deep and extensive knowledge of the UK’s real estate market and can provide professional advice to help you maximise your investment. Book a free consultation with us today so we can help you unlock your investment potential.