Which is better – short or long-term letting of my property?
Many people are being swayed by the potential for larger rents and the ease of advertising through websites such as Airbnb to try short-letting rather than more traditional long-term letting. What should you be aware of if you are thinking that this looks like an easy way to make a better return from your investment?
The pros and cons of short-term letting
I recently read an article by Graham Norwood which stated that “research by data company Propcision has revealed that across London typical Airbnb rental rates for apartments are double that of long-term rental rates.” It made me think about what you need to consider before you dive into short-term letting rather than relying on its more traditional counterpart of long-term letting. Here we consider the pros and cons of short-term letting:
- Increased rental income – The research from Propcision suggests double the income you can expect from long-term rentals. In some instances you can achieve up to 4 times the rent you might expect to achieve for longer agreements. If you are trying to work out your figures, you are likely to need an occupancy rate of around 70% to net the same money as for a long-term rental.
- Still being able to use your property – People will tend to use your property on a weekly or monthly basis giving you the opportunity to make use of it for weekends away or short holidays. Bear in mind that it is an investment though and your use shouldn’t get in the way of your primary objective if that is to make an extra income.
- Tenants extending their stay – If you have someone renting your property for a work project they can extend their stay if their project runs over. I have known this lead to some exceptional returns with people staying for long-term periods at short-term rents.
- Lower occupancy rates – As people will stay in your property for shorter periods of time, often a week or even a weekend, there are far more void periods. It is rare that the dates people wish to stay marry seamlessly. Long-term rentals give more assured income as it is easier to predict occupancy rates.
- Greater wear and tear – Although you might expect less wear and tear there can be a tendency for occupiers to treat the property more like a hotel rather than their own home. This can lead to more need for repairs and more regular redecoration and upgrading.
- Increased expenditure – As well as the added expense caused by greater wear and tear, for short-term rentals you will remain responsible for utilities and council tax and will be expected to provide an internet connection. If you use an agent to find tenants and/or manage the property for you their fees are also likely to be increased to reflect the higher turnover and workload.
When deciding on the route to take with your investment property it is worth considering all of the points above. If I had to give one piece of advice it would be to only take the short-let route if you don’t mind taking a risk. Although you can see greater returns it is definitely more of a risk than a long-term rental.
If you need help looking for an investment property you can contact me on email@example.com or maybe just read our article: What makes the best investment property?