Long Term vs Short Term Lets

Long-Term Tenancies:

Disadvantages

Limited flexibility – Even though long-term tenancies offer financial stability, there is also a downside of reduced flexibility, making it harder to change or end a lease early, which can prove difficult with uncooperative tenants. 

Additionally, a fixed contract means that landlords are unable to benefit from any rise in rental prices in the area of their property. However, landlords can avoid these challenges by including a break clause in the contract. This allows either the landlord or tenant to end a fixed-term tenancy early.

Lower Yields – Short-term lets, on average reach 30% higher rates, but that is not always guaranteed. However, it is very uncommon for long-term tenancies to be able to reach the same high yields. People tend to pay more for short lets such as weekend breaks and nights away meaning there is a larger profit margin available.

Increased Regulations – With long-term tenancies, a property transitions into a permanent home for tenants rather than a temporary short stay, bringing additional legal obligations for landlords. Landlords must follow these broader regulations designed to ensure the safety of both tenants and property owners. 

Legally, this includes passing inspections, having necessary safety certificates, and registering tenant deposits with a government-approved scheme. These requirements ensure that landlords meet essential standards for tenant safety and property compliance.

Short-Term Tenancies:

Disadvantages

Unstable income – Income provided by short-term lets can be unpredictable due to vacancies and the maintenance required for a property with frequent tenant turnover. Also, it is important to consider how the property pricing compares to similar rentals in the area, any seasonal changes in demand, and whether there will be longer vacant periods. Short-term rentals might not provide the financial stability desired for landlords working with tight margins, as inconsistent occupancy and ongoing maintenance costs can impact overall profits. 

Additional costs – Following on from an unstable income, with a high turnover of guests, landlords may face increased repair and maintenance expenses. Especially if tenants don’t care for the property as they would their own, as this can lead to numerous issues and repairs. Additionally, landlords are responsible for covering costs that in long-term lets are covered, including utility bills, TV licences, and Wi-Fi, meaning the profits can decrease.

Requires More Attention – Landlords of short-let properties will frequently manage a flow of tenants, and often respond to inquiries about the property or assist guests during their stay. If a landlord owns multiple properties or is seeking passive income alongside a full-time job, they may find it challenging to provide tenants with the necessary attention.

Furthermore, the property will need a thorough cleaning between stays. So if it’s rented for just a few days at a time, a full cleaning will be required after each booking, taking up more time to manage the property.