When you’re investing in property, you want to spend your money wisely and get a worthwhile return. The property market is not for the faint-hearted, especially when it comes to a buy to let. If you are planning on renting out your home, you may be torn between a holiday let or the long-term residential route. There are a number of factors to consider in this decision, and this article may help you choose.
- The difference between short-term and long-term rentals
- Airbnb vs rentals: pros and cons
- Advantages of a long-term let
- Airbnb vs Renting: Which should you choose?
What’s the difference between short-term and long-term rentals?
Short-term rentals are typically based on tourism, where people rent the property for a short period of time, such as a couple of days, weeks or even three months. Platforms like Airbnb charge money to property owners in return for them listing their property and marketing it to users around the world.
Long-term rentals on the other hand are let for at least six months or more. Landlords typically advertise on Rightmove to find long-term tenants, sign a legal tenancy agreement and collect rent every month.
Airbnb vs renting: pros and cons
Holiday lets have the potential to be extremely lucrative since they command a far higher rate than a long-term rental. In fact, some properties can make as much in one week than the property could make in a month from a long-term lease, especially if your property is in a popular tourist destination. However, holiday lets rely heavily on the tourist seasons.
There’s high demand for short-term lets, not only for holidaymakers but also for digital nomads and people who want to enjoy a more relaxed experience on a business trip. Since your tenants are constantly changing, there’s the opportunity to meet new people all the time. It certainly delivers some flexibility, as tenants can extend their stay easily, there’s no requirement to serve notice, and you can use it for yourself, friends or family when you like.
Void periods
However, this flexibility also comes with risky void periods. As the pandemic has shown, unforeseen events could leave you without an income for long periods, particularly if your property relies on seasonal tourism. If you’re relying on your rental as our primary source of income, this may be a risky option.
Cancellations can be an issue too. If your next guests cancel last minute, it’s unlikely someone else will book in with such short notice, leaving you out of pocket.
Hosting and maintenance
With many guests passing through every week, your property will also undergo more wear and tear. This may increase your maintenance costs, and if you’re managing the property yourself, it can be a time-consuming task to keep the property clean and well-maintained.
As an Airbnb host, you’ll have to spend time messaging your guests, sharing the property location details, and handing over the keys. If they have queries, you need to be available to answer them quickly too. Whilst Airbnb and other platforms do does provide some protection, any claims or losses are at the discretion of Airbnb (or whoever you’re renting with) which may not go in your favour.
Airbnb vs renting: Advantages of a long-term let
A long-term rental generally required less involvement than a holiday let. There’s a bit more to do before they move in, but once they’re in they could stay for a few years at least.
Once you have found a tenant and sorted the admin (referencing, agreements, deposit security) you’ll only need to visit the property for routine inspections or maintenance. Most landlords carry out an inventory at the start of the property, then a mid-term check about six months in to keep an eye on things.
Your tenant may contact you regarding maintenance and or emergencies, but it’s up to you how you’d like to handle it. A lot of landlords like to take care of maintenance themselves, particularly if they live close by and know people in the trade, or are handy themselves. Others prefer to hand the keys to an agent who sorts maintenance issues on their behalf – but this is usually more costly than the former.
Find the right tenant
One of the biggest advantages of a long-term rental over a holiday let is that you have the ability to screen your tenants and select the right people to rent your home. At viewings, you’ll be able to meet your tenants and get a feel as to whether they’re the right fit for your property.
Tenant referencing provides credit and employment checks, as well as a reference from their previous landlord, giving you the peace of mind that your tenant has a good renting history and can afford the rent.
Legal responsibilities
The biggest difference between short-term and long-term lets are the legal responsibilities. Long-term lets have a lot more rules to follow, including safety inspections, Right to Rent checks other regulations specific to private renting.
You’ll need a buy-to-let mortgage or consent to let if you want to rent out your home. Even if you’re looking for a short-term let, you’ll need to check it doesn’t go against your mortgage terms.
Mortgage Broker and MD, Pete Mugleston from Online Mortgage Advisor explains: “Renting out a property you do not own outright without a buy-to-let mortgage will likely be a violation of your mortgage’s terms and conditions. If you’re caught, your mortgage lender could request that the full loan amount is paid in one go and you’ll end up with black marks on your credit file, jeopardising future applications for finance”.
Renting with the wrong mortgage or without consent to let is a breach of your mortgage contract.
For this reason, you need to ensure your plans to rent out the property are clearly outlined when you apply for your mortgage, or contact your lender to get consent to let to switch your mortgage over.
A consistent income
A long-term rental provides you with more financial stability and a consistent income. This can help with annual tax planning and makes it easier to budget as you’ll know how much money is coming in every month.
Just like Airbnb, there can be void periods, but the risk is far less. If you find a good tenant that wants to stick around, a long-term rental is a less time-consuming income generator.
Of course, you’ll have some repairs and safety checks to pay for over time, and there is the risk of your tenant not paying rent, but rent protection provides a financial safety net.
Tenants may not live in your property forever, but the turnaround will be far less frequent than a holiday let. Plus, if you market your property correctly, and keep it well-maintained, you may be able to boost your rent and maximise your ROI even further.
Airbnb vs Renting: Which should you choose?
The benefits of short and long-term lets depend on a range of factors. Location, costs, maintenance and flexibility are just a few of the things to consider. If you’re still pondering which is best for you, ask yourself these questions:
How much free time do you have?
Do you have the free time to prepare the property for new guests each week, or do you need something less frequent?
Where is your property located?
Is the property nearby for you to maintain, or will you need someone to clean, host and maintain it on your behalf? Does the area get a lot of tourists, or is it a residential location?
What kind of income do you want?
Do you need a regular income you can depend on every month, or could you manage a seasonal influx? Are you happy to deal with many different people and payments, or would you prefer one person or family for a longer period?
Can you get a buy-to-let mortgage?
Could you qualify for a buy-to-let mortgage? Or get consent to let and switch your residential mortgage? Some mortgages state there needs to be an AST. Does short-term letting go against your mortgage terms or your head lease if you’re in a flat?
Have you checked your insurance?
Are there any clauses that may go against your insurance when renting short term?
Who do you want living in your property?
Probably the most important question of all. Do you want to know who’s living in your home and be reassured by reference checks, or are you happy to have many different guests over time?
Airbnb vs renting: Which one’s for you?
Both Airbnb and long-term renting have their advantages and drawback, but which one is right for you?
Residential lets are generally less time-consuming, cheaper to maintain and provide a more consistent income. The demand for rental properties remains high, making it easier to secure tenants – but there’s no denying that holiday lets have a unique appeal.
What are your thoughts on Airbnb vs renting? Share in the comments below.
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