Short Term Lets Could Boost Your Rental Income
Short term lets can offer a remarkable return on investment. More and more entrepreneurs are feeling the benefits of buy to let investment in the UK and cities like London, Manchester, Birmingham, Glasgow, Newcastle, Cardiff and Liverpool. This is becoming one of the hottest trends in the property investment sector.
In the past, most landlords gravitated towards long-term lets due to the security on offer. This trend is delivering more lucrative opportunities for landlords wishing to take advantage of the Buy-to-Let market.
The difference between long and short-term lets
The definition of a long-term let is generally one that lasts for at least 12 months. Short-term lets commonly involve contracts of less than six months. Things like internet access, TV and utilities will normally be covered by the rent. The increased popularity can be linked to a range of factors. Today’s world is regarded is regarded as more transient than ever, with many young professionals eager to relocate frequently. There is a growing appetite for cheaper alternatives to hotels that still offer all-inclusive living.
Why opt for a short-term let?
Individuals may decide to rent out properties on a short-term basis for many different reasons. Some people require accommodation whilst their main home is being renovated or refurbished, whilst others look for short-term lets to deliver accommodation during temporary work contracts. Short-term lets can be advantageous for buyers who wish to get a taste of a specific area before they commit to a purchase, as well as people on extended holidays and those in need of temporary homes whilst they are in the process of buying and selling a property.
Landlords drawn to the short-term lettings market often include those that spend extended periods away from home and wish to monetise their property whilst they are elsewhere. The market is also attractive for landlords who live in popular tourist spots as well as those that are renting out a property for the first time and wish to see how they fare before they commit to a long-term let.
Reduced waiting times and administration
The amount of administration attached to a short-term let is much more modest compared to the paperwork involved in a long-term let. This delivers welcome flexibility and frees up valuable time. In a short-term let, the application process will normally be shorter, and all the rent will be paid upfront, in advance. This is another reason why the short-term let is so popular amongst those who need to secure accommodation quickly. Many people choose to opt for short-term lets as a stepping stone to finding a long-term home, either to rent or to buy. When tenants don’t know exactly how long they wish to stay for, they can sign up for the minimum period then ask for more time later. The popularity of Airbnb and other sites shows us just how big a force the short-term let has become in recent years.
Short term lets vs hotel stays
Bills are normally covered by rent. This provides tenants with greater clarity and makes it far easier to budget. Rents will be higher than those charged for properties where bills aren’t covered, but it may still be possible to make savings. In any case, the figure paid will normally be much cheaper than the cost of staying in a hotel for the same period of time. Tenants can also expect to enjoy more freedom and privacy than they would in a hotel, not to mention more space. It is generally much easier for tenants to make themselves feel at home when they opt for a short-term let rather than an extended stay in a hotel.
Is this the right choice for you?
If you have a vacant property or expect that you will in the near future, you may well wish to opt for a short-term let. Short-term lets are generally better suited to landlords with more than one buy-to-let property, especially if this is their only or main source of income and the property still has a mortgage left on it. Should you expand your portfolio in future, it may well make sense to enter the short-term let market.
Charging a premium
You may be able to charge more than 50% more for a short-term let than you would for a longer-term tenancy. The extra cost is justified by the flexibility, convenience and inclusive bills offered by a short-term let, and many tenants are more than happy to pay this. You do need to ensure you have a plan in place for when the tenancy comes to an end and may need to start looking for new tenants quickly. When your property becomes empty, it will stop generating cash for you. Make sure the cost of offering the tenancy is covered by the rent that you charge.
A hands-on approach
You may need to adopt a more involved, hands-on strategy for dealing with problems when they arise. Short-term tenants are less likely to be patient when repairs and maintenance work are needed, and you will normally be expected to take action within 24 hours. This means you will have less time to source tradespeople to deal with the work if you are not carrying out yourself and may need to pay more as a result. Your reputation will hinge on the reviews that your tenants leave you, so expect to go the extra mile to keep them happy if you do wish to cement your status as a trustworthy, reputable landlord.
Is your property right for this?
Make sure your property adheres to all health and safety regulations, has suitable insurance cover and has undergone a fire risk assessment. Check your mortgage agreement permits you to let out your property on a short-term basis. Your short-term let plans are more likely to pay off if your property is located within a mile of public transport links and venues such as shops, bars and restaurants.
If you still can not decide, read more about the pros and cons.