Short term v long term lets, what are the differences?

When it comes to letting out a property, it is typical to think of a long-term tenant who lives in your house for years and years, but this is not the only type of let that is available. Landlords are now looking more seriously at the short-term letting market as a viable alternative to those long term lets.

Both long and short term lets have their benefits and some are better suited to certain types of property or landlord than others. So, how do you know what type of let you should be looking to offer?

Here, Mark Burns, Director of Pure Investor discusses the pros and cons of both to help you decide what route is best for you.

What is a short term let?

A short term let is a form of temporary accommodation that most commonly applies to holiday lets. It can be a house or even a cottage or an apartment. A short-term tenancy is a property lease which lasts less than 6 months but could be anything from just a few weeks. With the rise of sites such as Airbnb, more people are looking for this type of accommodation as an alternative to a hotel, and so it can prove to be profitable.

These types of property might be used for a holiday, somewhere to stay whilst working away on business or for those who want a change of scenery whilst working remotely. A short term let provides a home away from home, with all the flexibility and creature comforts that a tenant could want.

The benefits

The reason that many landlords are being drawn towards short term lets is because of the potentially higher profits that they can offer. Anyone offering property on these terms can expect to enjoy between 30% and 60% higher profits depending on the location.

Another great perk of short term lets is the flexibility that they offer to the landlords as well as the tenants. This means that troublesome tenants are never there for very long and can be easily replaced by others. In areas where demand for this type of property is high, a landlord has the option to be picky about which tenants they let to, ensuring they only take on the more reliable and better-behaved ones.

The drawbacks

Of course, there are always a few downsides to anything, and one main one for short term lets is the additional costs that can be incurred. Not only will you be responsible for cleaning and repairing vacant properties on a more regular basis, but you may also find that you are responsible for utilities and other costs such as Wi-Fi and television licences. This also means that you will need to put in a lot more time and effort both to turning round a property in between tenants and advertising it to ensure that there is a steady flow of people wanting to let your property.

Short term tenants often pay higher prices, but this is largely because the income they bring is unstable. You may be left with periods of time where the property is vacant, particularly in seasonal areas. This means you will need to do plenty of calculations to make sure that you can manage the upkeep and costs of an empty property.

What is a long term let?

A long term let usually has fixed term and is a legally binding contract. This tends to be for a minimum of 12 months and can be renewed if both parties are happy. The property provides an individual or a family with a secure place to live and call home over a long period of time for a fixed rental sum. If this is not paid, the tenant may be evicted from the property.

The benefits

One of the key benefits of a long term let is security for both the landlord and the tenant. With a contract in place, you know that the property will be occupied for a significant period of time and that there is a regular income from it that should cover your costs. Whilst no rental yield can be completely guaranteed, the legal contract that comes with it does give you some protection and allows you to calculate the profit that you will be making from your investment.

Once the property has been prepared and the tenancy has been agreed, there is minimal work that you need to do as a landlord. The tenant should be encouraged to set up a regular payment scheme and should then only be in touch if maintenance is required on the property, allowing you to put your time and effort into other projects.

The drawbacks

The problem with a long term let is that once the tenant is in the property, you are stuck with them. Unless you have reasonable cause to evict them, you cannot change the agreement once it is in place. This lack of flexibility can be frustrating for many landlords who might be subject to unreasonable behaviour or falling victim to rising interest rates. It is therefore advisable to add break-clauses into the contract that allow you to review certain aspects of the lease periodically.

As a landlord, you have a number of legal responsibilities that you must adhere to. This ensure the safety of the property and that it is kept in an adequate condition. Failure to fulfil these obligations has the potential to land you in some very hot water.

Both short and long term lets have their benefits, so it is important to do your research before leaping into either. You should take into account your financial situation and the time you have to give to a property before investing in something. You also need to think about the location of your property, as city centre or coastal properties tend to be better suited to the short-term letting market. Either option can be very profitable if managed in the right way, so choose wisely and you should find that you are soon reaping the benefits.