As a landlord, you might find yourself questioning whether to offer your property as a holiday let or long-term let.
In this article, we explore how both options have their unique benefits and challenges. Understanding these can help you make an informed decision that aligns with your investment goals.
Let's delve into the world of property letting and explore what each option entails.
What are holiday lets?
Holiday lets are properties specifically furnished and marketed for holiday goers. These types of lets offer them a temporary home away from home, and provide them with a flexible alternative to hotels. Holiday lets are usually let out for a few nights to a month and need to be let out for at least 105 days in the year.** The rise in demand for such accommodations has been notable, especially with travellers seeking more homely and personal experiences during their stays.
What is a long-term let?
A long-term let is a property rented out for at least 6 months. These properties serve as primary residences for tenants who are renting, instead of purchasing a home. Long-term lets offer stability and a consistent income stream for landlords, with contracts usually fixed for the duration of the tenancy.
What are the benefits of holiday lets?
Holiday lets come with the potential for higher income, especially during peak tourist seasons. Landlords can adopt flexible pricing strategies, adjusting rates to match demand. This can lead to significant profits, particularly in sought-after locations.
What are the disadvantages of holiday lets?
While these types of lets can be lucrative, they come with their own set of drawbacks. The seasonal nature of tourism can lead to fluctuating demand, longer void periods especially out of holiday season and therefore potentially unpredictable income. Managing a property with high guest turnover entails more frequent cleaning and upkeep, translating to higher operational efforts and costs. Moreover, the intensive management required for bookings, guest relations, and property maintenance can be quite time-consuming for the landlord.
What are the benefits of long-term lets?
Long-term lets provide a consistent income, with fixed rental rates offering financial stability for landlords. As utility bills and council tax tend to be covered by tenants, it also means there are a few things less to worry about, and tenants often treat the property with more care since it's their home for an extended period.
On the whole, long-term lets provide a more consistent income and, as a landlord, letting on a longer term you have the opportunity to build a strong, positive and reliable relationship with your tenant and agent.
What are the disadvantages of long-term lets?
Long-term lets, while offering stability, can present some limitations such as reduced flexibility for the landlord to utilise the property for personal use. Additionally, even though these types of lets provide a more consistent income over a greater period of time, you might find that, in the short term, the yields may be lower than with lets shorter than 6 months.
How do new Government regulations affect holiday and long-term lets?
Government regulations are continually evolving, impacting both holiday and long-term lets.
In the most recent Spring Budget announcement, Jeremy Hunt abolished the local holiday lets tax regime by scrapping the tax break for second homeowners who let out their properties to holiday makers rather than to long-term tenants to rent. Additionally, the stamp duty relief for those purchasing multiple dwellings in one transaction has also been abolished, meaning that anyone thinking of buying multiple properties to let, will be paying the regular stamp duty tax in England (unless other stamp duty tax relief applies).*
So, what’s better – holiday or long-term tenancies?
With holiday rentals you have to market them heavily in order to fill the property, plus you have to deal with regular changeovers, more wear and tear, plus paying all bills on the property. There’s no doubt that long-term investments also require a little time and effort - you’ll need to research and buy the property and then manage the investment from then on. However, switching to long-term tenancies dramatically reduces the amount of work needed to manage the property and, if you do opt for an agent, it can be fairly hands off.
In conclusion, whether you opt for holiday lets or long-term residential tenancies, each choice offers distinct advantages and disadvantages. Consider your personal circumstances, investment goals, and the level of involvement you're willing to commit to when making your decision. What is most important to you strategically - a longer term, more stable income from a long-term tenancy or the greater flexibility of a holiday let. Remember, you're not alone in this journey; professional letting agents can provide valuable assistance, helping you navigate the complexities of the property market.
