We explain some of the major differences between short term and long term letting
We throw the terms short, mid and long term letting around quite a lot, describing how we fill your multiple properties with a mix of short term tenants who pay rent. Mixing up short term and other letting periods is one way of maximising rents and also keeping rent rolling. Sticking to one particular letting option can create issues, especially where legislation and local law dictates specific limits. With this article it will be easier to make a decision on investment or even taking buy to let mortgages. What are the pros and cons and how to set your cash flow?
Which letting type is right for me?
Making the decision to choose one letting type of your rental property over another can depend on many things:
Where your property is located
The type of property you own
The rental market in your area – is it residential, business or tourist-based?
The income you want to achieve
The amount of work you’re prepared to do
Your investment goals
Be aware of the council tax
So, without further ado, let’s jump straight in and answer your questions.
What is a long let?
A long-term let is considered a residential rental for a home. In many European countries, renting property is the norm and owning a property is far less popular. For others, getting onto the property ladder and buying your own house or apartment is seen to be much more important
How long is a long term let?
Long term lettings carry a rental contract of over 6 months or a year. Typically, and again, this will vary from country to country and contract to contract, there will be a renewable rolling agreement where tenants are expected to remain in a property for several recent years.
Long term tenancy agreement and the legal obligations
Advantages of long term lets
Long term lets offer a steady income
Long periods rental can be worth of consideration. Although the rental income doesn’t provide the same high yields as short-term letting can, it provides a steady income, and from less work. In most cases, many landlords will collect their monthly or weekly payments with few outgoings and little effort. Long term agreement can provide a peace of mind. It all depends what are your investment goals.
Minimum effort
There’s very little work associated with long-term rentals. Tenants take care of their own utility bills and often, a large part of the upkeep of the property. The only time the landlord needs to step in is to carry out maintenance or repairs. At the same time, finding long term tenants can be a really cost effective alternative
Disadvantages of long term letting
Long term lets are less flexible
Thee let type: long term let type is a problem because it may be more difficult to remove a problem tenant .
A good contract includes clauses to help with predictable problems. Some of the most common issues for landlords are those associated with problem tenants, and can soon lead to loss of rent. Arbitration can take far longer than expected, as can organising eviction, resulting in large losses and additional costs that are rarely recovered. You will have to ensure that all legal obligations are included in the contract.
Good long term tenant is not easy to find but can provide guaranteed income for a long time.
Lower yields
A long-term rental taps into different markets than short-term options. Residential rent will be much lower than tourist accommodation. However, due to the increased effort required and greater expenses of a short-term let, residential rentals appear much safer and still provide a profitable income.
What is a short term let?
Short-term lets provide a temporary home or visitor’s accommodation. Depending on the length of stay, this is often utilised by tourists and visitors to other towns, cities and countries. Short term tenancy agreement is the form chosen mainly by tourists. It`s mainly temporary accomodation.
How long is a short term let?
Short-term lets are anything shorter than 6 months. However, since the rise in popularity of letting sites such as Airbnb, VRBO, Booking.com, Expedia and many, many more, a short term let is typically associated with stays of a couple of days to a couple of weeks (up to 6 months).
Advantages of short term lets
Higher yields
The big advantage to short-term letting is the higher rents landlords can charge. More tourists are utilising the wealth of digital platforms to stay in a rental property offering the true character of the location they’re visiting. The rents they can achieve in such situations are far higher than typical long-term lets — in most cases, around 30% higher.
Who wouldn’t prefer a private fully furnished apartment for their holiday as opposed to often-soulless hotel rooms? Now that the ease of booking is simpler than ever, it’s becoming nearer the norm than traditional tourism stay options.
Constantly changing tenants
You might suffer the occasional poor tenant, but with a short term lets scheme, you won’t be stuck with them for long. Many tenants will change almost every week the flat or at the worst each month, but also seasonal changes. That’s one major hassle when renting out your property that comes off the table immediately. So you don`t have to worry about any difficult tenant.
Short term rentals are very popular in large or touristy cities.
Disadvantages of short term lets
Unpredictable market
Due to the high number of tenants required to supply a full year’s worth of rent, there are fewer guarantees that you will reach your rental target. Void periods and higher costs will result in your higher rent quickly depleting.
Higher costs
If you’re carrying out your own short let management, then you’ll need to pay for all the utilities, cleaning, laundry, TV license, Internet and more. You’ll also have to pay for the advertising and marketing of your property. The costs add up quickly. A savvy investor needs to weigh all of these against the security and simplicity of a long term option if they’re going to take advantage of the higher yields and rent rates.
Short-term letting demands much more work
There is so much more work involved in short term letting. Marketing, advertising, cleaning, upkeep, decorating, maintenance, the meet and greet of guests, problem-solving, laundry — all of this can quickly add up to being a full-time job. Have you got the time and energy to carry out all of these roles?
What is medium term letting?
Mid-term or medium-term lets are those that sit between the short and long term options.
It was once a fairly grey area, but more recently the term has been utilised to sit between the shorter holiday lets of a couple of weeks to a month, and long term residential rentals that last years.
How long are these lets?
These term lets usually last for few weeks or even a couple of months.
Typical usage for mid-term lets:
Short placement workers who require a home for the duration of a contract or project
Students on short courses or work experience
Consultants working on industry projects
Expats trial-running a possible residential location
Those requiring accommodation while their home undergoes work, maintenance or expansion
Medium-term lets offer similar flexible solutions as short term lets, yet because of the longer periods of booking, can also offer reduced rates for the long term tenants.
Bridging the Airbnb short term gap
There is growing legislation among many of the major European cities to limit the amount of night’s stay each year for short term lets. The operation supplied via short-term letting platforms, mainly Airbnb, has severely impacted tourist accommodation in many cities, as it’s easier than ever to make money from tourism lets.
The new rules protect existing tourism accommodation venues and keep a more cultural mix of resident and visitor. The majority of cities working to combat the problem have instigated a 90-day limit on short stay lets each year. If a landlord wants to go above the limit, they must apply for a special license or a change in usage and planning.
Mixing short and medium term rentals is one way that landlords can work around the issue, keeping properties full year-round, while still maximising their rental income.
UpperKey – taking the problem out of your hands
Every one of our clients that chooses UpperKey to manage their property can stop worrying about which of the letting types and rental periods is the right one for them.
Not only do we guarantee your rent every single month, but we also match our guests to your property. We choose the most appropriate and high-quality tenants while maximising rents. We are taking care of most important aspects.
All that and without any work involved for you—it’s the perfect solution for everyone.
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