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Are Short-Term Lets a Good Investment?

Posted by Jehan Anis on September 20, 2022

Are Short-Term Lets a Good Investment header

Short-term rentals are a growing segment of the UK real estate market. As a result of the pandemic and shifting work and lifestyle trends, more people are searching for short-term lets in various regions of the United Kingdom.


When investing in real estate, are short-term rentals a wise choice? How do these properties compare to long-term rentals? This article examines the advantages and disadvantages of short-term rentals. In addition, what you must know before investing in a short-term rental.



What is a Short-Term Let?


A property that is rented on a daily, weekly, or monthly basis is a short-term rental. A vacation rental home, renting of an extra bedroom, and a monthly lease rental are all examples of short-term lets. Short-term rentals are frequently found in densely populated tourist destinations with a high demand for such accommodations.


In contrast, a long-term rental is where the tenant typically intends to reside for a minimum of six months to a year and it is their primary residence. Typically, renters can only obtain short-term leases for fewer than six months.



Why Are Short-Term Rentals Increasing?


In the United Kingdom, 16% of landlords focus entirely on short-term tenancies, while 7% provide short- and long-term rentals. However, short-term rentals are increasing due to the following factors:


Reduced Pandemic Limits


As COVID-19-related restrictions have been lifted, travel demand increases globally. As a result, private residences in less congested areas with a home-away-from-home ambiance are especially appealing to visitors and travellers.


Altering Workplace Trends


As more individuals receive the option to work from home or remotely, tourists are staying in locations longer. Numerous individuals take their work to the countryside, towns, and abroad. This is to mix work and travel, which increases the need for short-term housing.


Market Shifts


The travel and real estate industries have undergone considerable changes due to popular websites like Airbnb. Regarding hosting visitors, property owners and landlords are taking a larger market share from hotels and resorts.



Who Employs Short-Term Rentals?


Those who choose a short-term lease may do so for various reasons. For example, some individuals select short-term rentals over long-term commitments to a region or property. Others may temporarily be in an area due to employment obligations or require a place to stay between moves.


Tourism also plays a significant role in the market for short-term lets. Those staying in a region for more than a week save money by choosing a short-term rental over a hotel.



What are the Benefits of Short-Term Rentals?


Short-term rentals have several advantages versus long-term leases:




Short-term rentals are flexible for homeowners to generate income from their homes or extra rooms throughout the year. The host has complete control over their schedule and can choose when to make their short-term rental available.


Increased Income


Profitability is greater for well-marketed properties in desirable locations than for long-term rentals. While you must ensure demand for rentals, vacation rentals typically generate more cash than conventional annual leases, and hosts usually earn up to 30% more revenue.


Easier Maintenance


Short-term leases facilitate the management and maintenance of your investment. Shorter stays result in more frequent cleanings. Because you are likely to be in and out of the property more regularly, it is easier to notice maintenance issues before they become significant. Numerous holiday homes assess a cleaning fee to compensate for these expenses.


More Control


Short-term rental hosts can adjust prices as they see fit. Owners might increase or decrease prices during peak seasons to make pricing more competitive. If guests like to stay for an entire month, proprietors can offer them attractive rates.


Tax Relief 


Owners who register their property as a company and make it available for at least 140 days per year are also exempt from paying council tax. This is because the council tax does not apply to business properties.



The Downsides of Short-Term Rentals?


With each real estate investment, there are both advantages and disadvantages. Before investing in a property for short-term rental, you should examine the following factors:


Void periods


Short-term leases provide greater flexibility but also unpredictability. Vacant periods may be more prevalent with short-term rentals, and the property may generate no money during some periods if there is no demand. However, on average, short-term properties are occupied 70% of the time and still generate greater income when compared to a long-term let.


Guest Issues


As a host, you may not get to know a tenant or run a thorough background check on the person moving in. This may increase problem tenants. In addition, you are responsible for ensuring that guests are satisfied and that any issues are resolved promptly. Alternatively, you can engage a specialist serviced accommodation management company to be completely hands-off.



What are Some Tips for Short-Term Rentals?


Investing in short-term rentals can be lucrative if you understand the ins and outs and do a few essential things correctly:


Invest in the ideal location


Not all locations are profitable for short-term rental properties. You must guarantee that your property is situated in a desirable area and a neighborhood where people desire to reside. Before making a decision, investors will need to undertake exhaustive research.


Be organised


If you manage the rental property yourself, you will be responsible for screening guests, cleaning the premises, guaranteeing adequate upkeep, and more. Multiple guest arrivals per week can be overwhelming. The solution is to hire a property management company to accommodate you.


Screen Guests


Before taking a reservation, if you own a short-term investment property in the United Kingdom, you should investigate your guests to ensure that both parties have a pleasant stay and that they adhere to any house rules.


Promotion of Your Property


It is essential to market your home during the off-season to continue receiving bookings during slow seasons. During the off-season, you may need to be more innovative and consistent with your marketing efforts to generate bookings. During the off-season, you may market to remote workers who wish to remain in place for an extended period of time, while during the peak season, you may target tourists.




Short-term rentals can be quite lucrative investments.


Especially because many short-term homes charge 30% more than long-term residential units. However, while there are numerous advantages, there are also disadvantages, such as void periods and shifting restrictions. Whether you’re considering a vacation rental or a short-term rental in the city or the country, our specialists can help you understand the market and what you need to know before investing in a short-term rental property. Contact us today for further information.

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Established in 2019, Star Sterling is a family-run business based in the UK. As a cutting-edge investment advisory firm, we aim to deliver top-of-the-line investment services to all our valued clients. Leveraging a dynamic combination of finance and real estate expertise, we specialize in B2SA, R2SA, and BTL property investments.
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