With the increasing popularity of short letting platforms such as Airbnb, more and more investors are considering short terms lets over more traditional long term lets.
However, before deciding to list your property as a short let, you should carefully weigh up the pros and cons and decide if this option works for you.
Quick Tip: Scroll to the bottom of the article for a FREE download our Short Term Lets Calculator spreadsheet where you can change costs, deposit level, interest rates and more! It’s the same one our consultants use in-house and has an example already in place of our best yielding short term let development – Portside Place!
Benefits
Higher rental yields – Short term tenants are prepared to pay significantly higher pro-rata weekly rent than long-term tenants. In many cities, landlords can expect to earn between 30-86% more by letting rooms per night, compared to having a long-term tenant. Some areas are more sought after than others so it is worth taking time to research demand in the area.
Flexibility – As the property owner, you control when and for how long you rent out your space. If your situation changes, you can remove the listing or move into the property yourself. Looking to use your property for a family holiday over the summer? Simply block out those dates in your calendar. This level of flexibility is not possible with long-term lets.
Easier to deal with problematic tenants – If you let a property on an AST, evicting a problematic tenant can take many months and be very costly to sort out. However, on the rare occasion that you may get a difficult short-term tenant in a holiday let there are far fewer regulations in place protecting them than there are with long term tenants, making the process for eviction quicker.
Drawbacks
Time Constraints – With short-term lets, you are often more of a ‘host’ than a landlord, and your tenants are more like ‘guests’. You may need to be on hand in case they have questions or there are any problems during their stay in the property, and then the property will need a complete turn-around before the next guest arrives.
Increased Costs – Because of the extra level of management and service required, many landlords choose to use a professional short-term let company to operate the let on their behalf. These letting agents typically charge 15-30% of the rent, whereas a long-term letting agent will charge between 8-15%. You’ll also have to spend more on maintaining the décor, furnishings, fittings, linen, equipment and cleaning between occupants – things you most likely wouldn’t need to pay for in a long-term furnished rental.
Inconsistent Income – Although pro-rata daily rental income might be substantially higher than a longer-term tenancy, there will naturally be more void periods. Many short-term lets are dependent on tourism which is subject to peaks and troughs, depending on the season and various economic forces beyond your control such as the pandemic.
Tips for successful short-term letting
Chose a location that appeals to tourists or business travellers. The most sought-after areas are in close proximity to attractions, public transport and amenities.
Look at partnering with businesses who regularly need to temporarily house staff. It’s a win-win situation as you’re likely to have longer and more frequent bookings, and it should be cheaper for the business going with you over a hotel.
Interior design is everything when it comes to short letting. If you want to achieve a high occupancy rate and price per night, making your property stand out with its interiors and furnishing. Focus on a mix of functionality and aesthetics when choosing furniture, ensuring they look good whilst also being comfortable and durable.
Include thoughtful touches such as a welcome guide with instructions on how to use appliances, local recommendations and guidebooks. Include timetables for public transport, numbers for taxi companies, directions and telephone numbers for hospitals or walk-in clinics. Provide essential complementary amenities such as tea, coffee, sugar, washing up liquid, etc. Consider personal touches such as fresh flowers, treats from local artisans, extra blankets/pillows, board games or books.
Keep an eye on similar properties in the area to ensure you stay competitive.
Take out a suitable short-term let insurance policy which covers you for any tenant damage.
Ensure you and your property are fully compliant with any laws and regulations that govern your type of let. Be aware of any additional local regulations for short-term lets or if you are letting an apartment, ensure short term lets are permitted in the lease.
Most of this can be covered by using a specialist short term rental company – but be careful to pick the right one!
Favourable areas for short term lets
| City | Average Daily Rate (ADR) | Average Occupancy Rate | Average Yield | Average annual revenue |
| London | £130-250 | 70-85% | 5-8% | £25,000-£55,000 |
| Edinburgh | £100-180 | 75-90% | 7-9% | £20,000 – £40,000 |
| Manchester | £80-150 | 70-85% | 8-11% | £18,000- £35,000 |
| Birmingham | £70-140 | 65-80% | 7-9% | £15,000-£30,000 |
| Glasgow | £75-140 | 70-85% | 6-8% | £17,000- £32,000 |
| Bristol | £80-160 | 70-85% | 6-8% | £18,000- £35,000 |
| Liverpool | £70-130 | 70-85% | 9-12% | £16,000 –
£30,000 |
| Oxford | £100-180 | 75-90% | 7-9% | £20,000- £40,000 |
| Cambridge | £100-180 | 75-90% | 7-9% | £20,000-
£40,000 |
| Brighton | £100-160 | 70-85% | 7-9% | £20,000-
£40,000 |
| Bath | £110-180 | 70-85% | 7-9% | £20,000- £40,000 |
Source : Airbtics
Scroll down a little bit further to download our FREE Short Term Lets Calculator Spreadsheet so you can work out all your costs associated and returns.
Conclusion
If you feel that the short term let option could work for you or if you have more questions on the subject we would love to hear from you, please speak with one of our investment consultants today on +44 (0) 113 380 8930.
We currently have stock in various locations which allow short-term lets and can recommend agencies who will assist in the management of your portfolio.
