A Guide to Short-Term Lets
We’ve got news for you, property owners: long-term lets are out and short-term lets are in. Ten years ago you’d never heard of Airbnb, but now the site has taken over the world and everyone wants a piece of it. Hiring out your property for year-long rentals used to be all the rage, but people have moved on. If you own a house or two and you’re still choosing long-term tenants, can we recommend a different approach? Short-term lets are booming bigger and louder than ever. Holidaymakers get something nicer and cheaper than a hotel, and landlords get a lot more money; it’s a win-win for all.
In this article you’ll learn all about short-term lets, including their pros and cons, who uses them, what’s expected of you as a landlord and the benefits of short-term let management services. That’s right, you can sidestep all the faff that comes with leasing out your property. If this page doesn’t get you fired up about short-term lets, we don’t know what will.
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What is a short-term let?
Good question! It’s perfectly simple: a short-term let is a property rental that lasts up to six months, although it can be as short as just one night. It’s also known as a holiday let, because that’s mostly what people use them for. They’re like hotels but cheaper and with a more homely feel. Unlike many long-term rentals, short-term let properties come fully furnished (because going on holiday with your furniture is a real pain).
Who uses short-term lets?
We can’t predict every type of person that will want to hire your lovely property, but we can give you a jolly good idea. There are three main groups: corporate visitors, holidaymakers and people who are relocating.
Companies are increasingly choosing to put their employees up in short-term lets rather than hotels. It saves them money and it also makes the employee feel like they’ve never really left home, which is nice.
‘Holidaymakers’ can pretty much mean anybody, ranging from a young couple on their first city break to a family of five. Most hotels just can’t compete with the price, privacy, space and comfort of short-term lets.
Many people who are thinking of moving house like to get a feel for a neighbourhood before they buy a property there. Staying for a few weeks in someone else’s house is the perfect way to do this. They can sample the parks, walk the pavements, visit the local pubs and then make a decision.
Why are short-term lets growing?
So why are short-term lets so popular all of a sudden? What happened to good, old-fashioned long-term lets? They’re still here, but they’re generally not as profitable and way less cool. A study from the Residential Landlords Association found that the number of Airbnb listings in ten UK locations increased by a whopping 200% between 2015 and 2017. Here are a few key reasons behind short-term lets’ skyrocketing success:
- Money, money, money. The holidaymakers spend less of it and the landlords make more of it. Short-term lets are cheaper than hotels for guests, and they’re more profitable for property owners than long-term lets. We discuss the hefty financial gains in the next section.
- It’s easy. Advertising your property for short-term rentals used to be a tiresome and costly process, but sites like Airbnb, HomeAway and FlipKey (plus many more) have made the whole thing a doddle.
- Falling house prices. Sad for homeowners, great for buyers. Between 2017 and 2018, Nationwide reported a 2.2% drop in the UK’s annual house price growth. Generally speaking, letting out your house will do much more for your income than selling it.
- No more mortgage interest relief. Landlords used to be able to deduct mortgage interest from their tax returns, but those golden days are over. The UK government have started reducing mortgage interest relief and by 2021 it’ll be gone. According to the RLA, in 2017 one in three landlords moved to short-term lets because of these changes.
Advantages of short-term lets
Short-term lets come with a bunch of benefits, but there are two particularly huge ones:
Higher rental income
Your property is basically one big cash cow, so you need to make sure you’re milking it properly. A switch from long-term to short-term lets can work wonders for your annual rental income. We’re talking really significant increases. How significant? Well, there are a lot of different figures flying around. Some industry professionals suggest that a 30% increase is the average, but others estimate up to 60% and beyond. Yes, really. It all depends on a handful of factors, such as the time of year, the location of your property and the strength of its online ratings. A house with stacks of five-star ratings can command a much higher price than a three-star property down the road.
So why is short-term letting more profitable? It’s all about supply and demand. When you let out a property on a long-term basis, you fix a rental price and it stays the same for the duration of the tenancy. With short-term lets, you can increase your prices in the summer months when demand goes up. Likewise, if your property’s in the same location as a big event, you can hike up your rates even more. For example, London landlords can make a killing during Wimbledon and the FA Cup Final. On top of this, the more homely and comfortable you make your property, the more you can build this into the price. Nice cushions and fresh flowers go a long way.
Imagine you’ve hired out your property for a whole year, and then six months down the line you realise you need to live there. Sounds dreadful, right? If you use your property for short-term lets, that means no tenant is ever going to be there for very long. You can move in and out pretty much whenever it suits you. The flexibility of short-term lets also comes in very useful whenever you’re going on holiday. If your property is going to be empty for a few weeks or even a few months, there’s no point letting it go to waste. Get some short-term tenants in there and earn a bit of extra cash.
Disadvantages of short-term lets
Short-term lets naturally come with their cons, although luckily there are ways around them.
No guaranteed income
The prices are higher, but there might not always be someone there to pay them. Switching to short-term lets means you’re sacrificing the income security that long-term lets provide. Your summers are likely to be full to the brim with keen tenants, but off-peak seasons paint a different picture. Fortunately, short-term let management services are the solution to these sad empty periods. As part of their service, they make sure your online advertisements are fully optimised for attracting a constant stream of new tenants. Who knows, your house might go viral!
As the landlord of a short-term let property you have responsibilities, such as greeting new guests, cleaning the rooms, repairing things that break and paying the utility bills. Most long-term tenancy agreements demand that the current occupants deal with this stuff, but in the world of short-term lets it’s a different situation. With a high footfall of new tenants, wear and tear is much more common, and you need to get stuff fixed as quickly as possible. This sounds fairly draining, but that’s why short-term let management services exist. Just like magic, they can turn a stressful situation into one that’s entirely stress-free, and they’ll boost your income gains while they’re at it.
Why use short-term let management services?
Once you become a short-term let landlord, one thing will become more important than anything else in your life: your guest’s experience. If your guest is not having a good time, everything will go wrong. They’ll leave a bad review, other people will read it and your endless stream of tenants will slow to a sad drip. Once the tenant numbers fall, your prices will follow and consequently so will your income. It’ll be one big unhappy game of dominoes, and that’s not a game you want to play.
So what can short-term let management services do for you? Quite a lot, it turns out.
Create your listings. As we mentioned earlier, they’ll design and post the advertisements for your property. This service typically includes professional photography and postings on multiple different property rental sites. They’ll put your fingers in a lot of pies.
Set your prices. The best short-term let management services have some pretty clever ways of doing things. They will review your property’s prices every day using customised pricing algorithms. How cool is that? No need to worry if your place is priced highly or competitively enough; an algorithm will sort it for you. Nice one, maths!
Manage your bookings. For some people, communicating with guests is one of the pleasures of being a landlord. For others, it’s a bit of a drag. Fortunately, short-term let management services will take care of all your online bookings and respond to any queries. They’ll also do guest verification checks in person, so you’ll definitely know who’s staying in your property.
Look after your guests. They’ll greet your guests so you don’t have to, letting them into the property, showing them around and giving them local recommendations. What’s more, they’ll typically include a ‘welcome pack’ that includes some goodies and treats, such as chocolates and mini shampoo bottles (you know, the ones you steal from hotels). Little things like this can make a big difference.
Deal with maintenance issues. Someone will be available 24/7 to deal with any maintenance issues that arise, from warm fridges to dodgy taps. Basic property manager services will alert you of any problems and then you’ll have to sort them out yourself, but premium services will fix things for you. This means you can be on holiday in a totally different country and your property will keep ticking along without you.
Do the housekeeping. A dirty house is an insult to your guests. All it takes is for one person to have a bad experience and you’re in trouble. Property managers will keep your place stocked with quality fresh linen and clean towels. There’s a difference between “homely” and just plain grubby.
Design your house. No amount of professional photography will help if your property doesn’t look good in the first place. The key factors are style, daylight and cleanliness; cover these three and you’re in business. Most short-term let management services offer an add-on design service for around £200 per room, where stylish people will show you how to improve your property.
Most short-let management services charge around 12% (plus VAT) of your rental income, although this can range up to about 17% depending on whether you choose their classic or premium services. The price is also based on the size of your property, such as its square footage, number of floors and whether it has a garden. They skim a little off the top so you can get a whole lot more from the bottom.
What’s required of you?
And finally the serious stuff. If you’re planning on entering the short-term lets market, there are a few things that your property must have and a few rules that you need to follow.
1. Insurance. Landlord insurance and contents insurance are both essential. With tenant after tenant staying in your house, certain things are sure to get damaged. It’s probably best to remove your most treasured items from the property – you don’t want clumsy guests falling into Aunt Mabel’s antique vase.
2. Health and safety. Make sure your property meets all the local health and safety regulations (you will need to investigate the local regulations). Gas, electricity and fire safety inspections are all necessary before any guests can come to stay. Think smoke alarms and fire extinguishers. If you fail these regulations then you’ll struggle to make any insurance claims.
3. Utility bills. Unlike long-term tenancy arrangements, it’s up to you to pay the bills. These typically include water, electricity, gas, the phone line and the Wi-Fi. Fortunately, you can factor these costs into the price of the property – problem solved!
4. 90-day limit. This one’s specific to London, but it’s extremely important if you live there. The Deregulation Act 2015 removed the need for planning permission for short-term lets (hooray) but it also imposed some limits (not hooray). A London property must not be let on a short-term basis for more than 90 nights each year, in total.
It’s services like this that can utterly transform your property and its prospects. Take an average house, apply some fresh towels and lovely hospitality, and it could quite possibly double its monthly income. With more and more people increasingly turning to short-term lets, you need to do everything you can to stay competitive. Remember: five-star reviews are your bread and butter. If you own a property in London and you’d like to know what short-term let management services can do for you, fill in this form with your details.