The Rise of Short-Term Lets

Short-Term Lets vs Long-Term Lets

What is the difference between short-term and long-term? While long-term rental landlords would look to the best buy-to-let areas where people want to live, short-term rental landlords would instead look to tourist hotspots, where people want to visit.

But it is not just the tenancy length or location that sets them apart. Despite the ongoing rise of short-term lets, only 1.5% of landlords are holiday let owners. Why is this? From upkeep and ongoing costs to the tenants and the property market itself, there are a few differences that can sway an investor either way. The short-term rental market is new, which investors can see as exciting or risky. So, what factors should buyers consider before making their decision?

Location

Using a short-term rental as a furnished holiday let can heavily rely on the tourist season, meaning the potential of longer and more frequent void periods. Tourism is a key part of short-term lets. However, they do not need to be limited to certain times of the year.

Location is key. Look to city centres or areas near the likes of sports stadiums or hospitals. These areas will see constant attraction for short-term accommodation without relying on times of the year, whether for students or visitors. Seeing where hotels or other forms of short-stay accommodation are is also recommended, as this is a sign of a tourist hotspot. Finding a profitable location will create a flow of passive income much like traditional long-term buy-to-lets.

Upkeep

After investing in a buy-to-let property, the owner can offer it as furnished or unfurnished. As for short-term lets, the landlord provides a place for a guest to stay rather than a place to live. Due to this, short-term rentals are expected to be fully furnished and equipped with essentials, from crockery and cutlery to bedding and toilet paper.

There are higher standards in short-term lets than in regular buy-to-lets. Due to vast competition, landlords would need to keep up with changes to keep their property desirable to potential tenants. With the constant coming and going of guests, too, the general wear and tear is expected more frequently than in a long-term rental. The previously stated 43% of rental income includes this work in the total costs. When compared to the 31% predicted in long-term rentals, the extra costs to maintain and stock a short-term let are not as high as expected – especially when both rentals result in similar profits.

Time and additional work are required for landlords to maintain the property in-between tenants, with regular cleaning and re-stocking, in an effort to turn their property investment into a home. However, it is this work that makes a short-term rental successful. The more invested in its upkeep and décor, the higher its desirability, the chance of returning guests and, consequently, its rental income.

The Property Market

Short-term lets played a major role in recovering the UK housing market after the pandemic. And, with fluctuating mortgage rates now as high as 5%, more investors will be opting for smaller cash buys to use as short-term lets. As the short-term trend grows, long-term rentals will be less available for those who want them. Due to this, rent prices will continue to increase for those tenants.

The already stretched housing supply will see a significant impact if the rise of short-term lets continues. Landlords with an existing portfolio of properties are more likely to follow the trend and replace their long-term model with a short-term one, especially as demand and mortgage rates grow.

With the market constantly evolving, investors should be best prepared when it comes to their first or even their fifth property.