As a landlord in the UK, one of the key decisions you’ll face is whether to pursue long-term lettings or venture into the world of holiday lets.
Both options come with their own set of advantages and challenges, and choosing the right one for your property is vital to your success as a landlord and an investor.
If you’re stuck at a crossroads on the matter, use this guide to discover which path is right for you.
Understanding long-term lets and holiday lets
Long-term lets
Long-term lets typically involve leasing a property to tenants for an extended period, usually six months or longer. This type of arrangement offers stability for both landlords and their tenants.
The longevity of the stay means tenants have a place to call home, while landlords have a steady stream of rental income.
Holiday lets
Holiday lets, on the other hand, are short-term rentals for tourists or workers on secondment. These range from a few days to a couple of weeks.
Although holiday lets allow landlords to charge higher nightly rates, especially during peak tourist seasons, they are arguably trickier to manage than long-term lets.
Advantages and disadvantages of holiday lets vs long-term lets
Long-term lets
Advantages
1. Stable income: With long-term lets, landlords can benefit from a consistent and reliable rental income stream. This can help you plan your finances more effectively.
2. Reduced turnover: Longer lease agreements mean fewer turnovers and less time spent searching for new tenants.
3. Tenant quality: The screening process for long-term tenants allows you or your letting agent to carefully choose tenants based on their references, credit history and reliability.
4. Lower maintenance costs: Since tenants treat the property as their own home, they’re more likely to take better care of it, reducing maintenance expenses.
Disadvantages
1. Limited flexibility: Long-term leases mean you have less flexibility to access your property for personal use or make changes.
2. Changes to legislation: with over a hundred pieces of legislation to govern your let, it’s important to hire a professional letting agent to manage this for you.
Holiday lets
Advantages
1. Higher upfront rental income: Holiday lets can generate higher income per night, especially during peak tourist seasons or in locations that are desirable year-round.
2. Flexibility: You can use the property for personal holidays during periods in which it is vacant.
Disadvantages
1. Seasonal demand: Income can be unpredictable due to seasonal fluctuations in demand. There might be periods of low occupancy.
2. Void periods: Shorter stays and seasonal troughs mean more frequent void periods, which can result in costs over time, rather than gains.
3. Higher turnover: More frequent turnover between guests means higher cleaning and management efforts.
4. Intensive management: Managing bookings, cleaning and guest communication can be time-consuming.
Why choose long-term lets?
Recent statistics highlight the benefits of choosing long-term lets for your property investment:
Tenants are staying in their lets for longer
According to Rightmove’s August House Price Index*, the majority (57%) of landlords said that on average, tenants choose to stay in their properties for longer than 24 months, with only 8% saying they stay for a year or less.
This growing trend is good news for landlords as longer-term arrangements bring a consistent income and the assurance that your property is being looked after.
Rising rents
Rightmove also found that average asking rents for new tenants in London reached a new record of £2,567. London rents are now 28% higher (+£559 pcm) than at this time in 2019.*
Rental prices across the UK have been consistently rising, making long-term lets an attractive prospect for landlords.
Help with running your long-term let
If you’re leaning towards the advantages of long-term lettings, managed letting services can further enhance your landlord experience.
Letting agents take care of tenant screening, rent collection, property maintenance coordination, and more, helping you to reap the benefits of long-term letting without the hassle.
Summary: Long-term vs holiday lets – which is better?
While holiday lets offer the potential for higher short-term income, the stability, tenant quality, and rising rental trends associated with long-term lets make them a strong contender for landlords seeking a secure and profitable investment.
With managed letting services, you can maximise the benefits of long-term letting, while minimising the management burden.
Contact your local Ellis & Co branch to find out more about investment opportunities
