Short-term rentals vs long-term rentals
When renting out a property, landlords and agents have to decide if they should let out a property on short-term rentals vs long-term rentals. Both options have their advantages and drawbacks for tenants and landlords.
Short-term rentals are tenancies that last for under six months. Depending on how long you let the property, they could last a few weeks or even a month. Short-term tenancies became much more popular during UK lockdowns as city centres were forced to close. It was advantageous for tenants who struggled to pay rent in large cities and wanted a change of scenery as they worked from home.
Most long-term rentals include an Assured Shorthold Tenancy (AST). ASTs allow landlords to lease their property for a fixed term (most range from 6-12 months or longer). These are more common for young professionals working and students who are studying at university full-time.
If you’re having trouble deciding how long you should rent out your property, read on and let our guide help you weigh up the pros and cons of short-term rentals vs long-term rentals.
The pros of short-term rentals vs long-term rentals
Short-term rentals provide flexibility
Providing the option of short-term rentals vs long-term rentals gives tenants more flexibility in how they rent. For example, renters such as young professionals may be on short work placements or internships, and students applying for short courses may be searching for temporary housing. Short-term tenancies may be more attractive to renters if they don’t plan to spend more than three months in one place, and flexible contracts have become more popular due to the pandemic.
Landlords can also benefit from short-term leases. You aren’t locked into year-long contracts, and you can let out your property for however long you wish. This flexibility means you can stop letting your property at any time if you need to.
Short-term tenancies have a larger potential for high rental yields
Depending on the season and demand, you could earn more from rental yields in short-term rentals vs long-term rentals. Those taking on work placements or internships will most likely undertake them during Easter or summer. It’s essential to take note of periods or holidays such as these to attract short-term renters.
If you have any extra features such as smart technology, gardens, or parking spaces, be sure your rent reflects these. Location and demand are also important factors when deciding how much rent to charge during your short-term lease.
The demand for short-term rentals are rising
Larger cities with busy work and social hubs like London usually see increased demand but low stock. Landlords may have more choices when it comes to choosing tenants for their properties. Again, COVID-19 made many tenants reconsider what they wanted in a rental property, even if they are renting short-term. Tenants now actively seek properties with outdoor space and spaces that enable working from home.
The cons of short-term rentals vs long-term rentals
Short-term tenancies provide less of a passive income
Though letting a short-term rental could provide you with an increased rental income, doing so doesn’t offer the same stability as a long-term rental does. If you struggle to attract renters, especially during quieter periods of the year, landlords and agents may face more void periods. On top of void periods, you will be responsible for paying utilities and any extra costs associated with the property. These factors may be deciding factors when deciding to let short-term rentals vs long-term rentals.
Short-term rentals require more management
Short-term tenancies mean landlords and agents often have to spend more time maintaining, repairing, and sourcing tenants for their short-term let. It may even become stressful trying to manage a short-term rental property within a portfolio of properties. You can hire professional services to help with cleaning, but it’s important to monitor the costs compared to your rental income. You need to be on top of admin, especially with enquiries surrounding your rental property.
Services like Resooma can list your properties and help source the best tenants for your property to take the pressure off your shoulders. Landlords and agents can list for free, which means we’ll only charge you when we successfully match tenants to your property.
There is a 90-day letting restriction on letting short-term rental properties
As outlined in the Deregulation Act, published in March 2015, landlords cannot let short-term rental properties in London beyond 90 days in the calendar year. If property owners want to let their property for more than 90 days, they need planning permission from their local authority. Failure to comply with this legislation could face a service notice, a desist, or even a £20,000 fine.
The pros of long-term rentals vs short-term rentals
Long-term rentals provide a steady rental yield
Though short-term rentals can produce a higher rental yield, long-term tenancies provide more security with a steady rental income. Landlords, therefore, can balance payments such as buy-to-let mortgages or emergency repairs and maintenance. Property owners tend to be more attracted to the stability of a regular income in a long-term rental vs a short-term rental.
Fixed-term contracts provide more stability
Again, fixed-term contracts in long-term rentals bring stability to both landlords and tenants. You can review contracts at the end of the fixed term period, potentially lessening void periods. It may even be less expensive in the long term. Some renters may want to bring their own furniture, meaning you can market it as an unfurnished property. Those in long-term tenancies vs short-term tenancies may also treat your rental property better since they’re more inclined to make it feel like a home.
Managing long-term rentals is easier than managing short-term rentals
Landlords tend to spend less time managing long-term rentals. Tenants are most likely to pay utility bills themselves and manage basic maintenance in the property. Long-term lets mean landlords and agents can worry about one less property unless there is an emergency.
Resooma Bills can save you and your tenants the hassle of managing and paying for rent and utilities over a long-term tenancy. We send tenants a monthly invoice of their bills, meaning you can rest easy knowing you have a guaranteed income. We’ll even handle the set-up pre-tenancy, so both landlords and tenants have a smooth move.
The cons of long-term rentals vs short-term rentals
Long-term tenancies have less flexibility
Inflexibility is a notable disadvantage when deciding to rent out short-term rentals vs long-term rentals. Though fixed-term contracts provide stability, you are bound to the long-term tenancy agreement between you and your tenants. This can prove troublesome if you run into problems before the agreed end date of the tenancy. Make sure that both you and your tenants communicate and understand what is expected of you to avoid any issues that may come up later down the line.
Long-term rentals have a lower rental yield
Though long-term tenancies provide more financial security, it does come at a cost. Rental yields may not be as high as what a short-term rental offers. There is also the risk that rent arrears and other financial problems may pop up during the tenancy.
Less time managing long-term lets does come with the drawbacks of facing lesser rental yields. However, offering bills included with Resooma Bills can attract more renters, and therefore can increase your annual revenue stream by £10,200 annually.
Long-term rentals require additional legal requirements
Though it is paramount to ensure tenants can safely live inside long-term rental properties, organising health and safety checks can be overwhelming. Landlords need to ensure that certified electricians, plumbers, and gas engineers check their property and provide valid certificates for electricity and gas. Resooma’s pre-tenancy checklist helps landlords and agents save stress and ensure their properties are safe for renters.
Deciding between short-term rentals vs long-term rentals will ultimately be down to the landlord or agent. Consider the advantages and disadvantages in this guide and how you manage and let your properties. If you want to know how Resooma can help rent out your property – short-term or long-term – drop us a message or give us a call any time.