Long Term Lets Vs Short-Term AirbnbWritten By PropertyLoop February 11, 2021
In becoming a landlord, a rental property owner will need to make a series of bold decisions about their business. How much will you charge for rent? What kind of tenants do you hope to attract? Will you let out the property furnished or unfurnished? Regardless of the question, for the most part the intent is to streamline the letting process and hopefully increase the rental income you receive.
For some this has meant bucking the traditional lettings trend and opening the doors of the rental to Airbnb guests. The main appeal for hosts that wish to utilise Airbnb for longer stays it the dependable income and heavily reduced workload, seeing months of rental income be somewhat guaranteed, providing the guest doesn’t cancel the booking, whilst saving the owner thousands each year in cleaning costs between guests and potential management and administrative costs. Whilst there is an argument to be made about gaining a higher rental income through accepting an increased number of shorter bookings, owners that have guests stay for longer periods can more easily sustain their rental business.
The rise in rental opportunities available on the letting platform is undeniable, with the Guardian reporting that from 2016 to 2019 the number of listings on Airbnb had tripled, souring from 76,000 to over 225,000 over this three-year period. But does this present an opportunity for all landlord? And would short term lets work for you?
- What Are the Advantages of Airbnb?
- What Are the Disadvantages of Airbnb for hosts?
- Advantages of Assured Shorthold Tenancies
- Disadvantages of Assured Shorthold Tenancies
- Is Airbnb Good for Long Term Rentals?
- What Is the Difference Between a Long Term Let and a Short Term Let?
- Airbnb vs Long-Term Rental
- What Short Term Rental Law Do UK Landlords Need to Know?
What Are the Advantages of Airbnb?
- Free to list with only 3% charge per booking
- Earn up to £7,500 without paying tax (Rent a Room in your main home)
- Can adapt your rent price to suit current market demand
- Can take the property to market without worrying about fixed term or existing tenants
What Are the Disadvantages of Airbnb for hosts?
- More tenants means more admin
- Property management companies want payment
- Increasing competition
- Renters not inclined to look after your property as well
- Difficult to get insurance
- Income can fluctuate (average occupancy in London is 11%)
Advantages of Assured Shorthold Tenancies
- Tenancies are usually for a six-month minimum
- More security over income
- Tenants more likely to look after your property
Disadvantages of Assured Shorthold Tenancies
- You can’t increase the rent until the end of the tenancy contract
- If you want a bad tenant out legally then eviction can be long and costly
- Management companies charge a fee
Is Airbnb Good for Long Term Rentals?
Whilst the online platform may have earned its name through short term lets, as of December 2020 over 80% of property owners listed on Airbnb accepted longer terms stays to accommodate for a surge in demand.
Although there may be little notable difference on the part of the owner in terms of listing the property on Airbnb for long term lets, it is essential that the owner considers their charges and cancelation policy.
In order to incentivise renters into taking a longer stay through Airbnb, the platform encourages owners to offer renters a weekly or monthly discount on their stay, a discount set out by the landlord. In regards to the cancelation policy, the good news for owners is that this is automatically applied for bookings that make a reservation for more than 28 nights. Renters are able to obtain a full refunded from their booking providing that they submit their cancelation no later than 48 hours after the booking and this is no sooner than 28 days before the check in was intended to take place. After this initial 48-hour period guests are still able to get a refund however the costs of the first 30 days and the service fee will be deducted from the amount being returned.
However, there are a number of adjustments an owner may wish to implement to make their property more appealing to long term guests. Whilst this may not be a huge concern to guests that are only residing within the property for a few nights, those that are intending to stay for a longer period will come to heavily depend on the facilities that your property can offer. This could mean that owners could miss out on securing a couple of months rental income because they didn’t provide a sufficient kitchen, cooking and cleaning facilities, or for traveling professionals or students a reliable internet connection could swing the balance in your favour.
For those looking to turn their hand to becoming an Airbnb host, the location of the rental cannot be overlooked. Whilst it is of course well noted how the location of a property can influence the interest it receives from prospective renters, with letting with Airbnb there must also be an overwhelming demand to visit the town or city where your rental is situated, in order to maintain an occupied property after each letting period draws to a close.
Although those that choose to opt for the short-term letting model may have to regularly prepare their property for new occupants’ ad regularly update their listing, alongside managing bookings, when the time comes to sell the property, the transition is far smoother. Whilst this is not always the case for long term lets, landlords will typically have to wait until the end of their current fixed term before reselling the property, giving their tenants a chance to find a new home as an alternative to selling a tenanted property, which could be a far less appealing prospect for some.
What Is the Difference Between a Long Term Let and a Short Term Let?
When typically discussing a tenancy agreement between a landlord and a tenant, a long-term tenancy will be referred to. This is because for the overwhelming majority of landlords this is the “standard”, offering temporary possession of the rental property in exchange for regular rental payments.
In most cases landlord will offer their aspiring tenants anywhere from a six to twelve-month rental period, referred to as the “fixed term.” Once this period comes to a close the tenant is able to vacate the property and rent elsewhere, leaving the landlord to find new occupants, both parties could sign a new tenancy agreement, or if neither party agrees to a new tenancy but the tenant remains in the property a rolling tenancy will automatically begin.
As can be expected if a landlord Is able to secure a tenancy for a longer period, then this will in turn secure their rental income, allowing the owner to have the peace of mind that they can depend on regular, periodic payments to help them pay their buy to let mortgage and manage their rental property portfolio.
Airbnb vs Long-Term Rental
With this being said some research has found that landlords that have been in the industry for a number of years have come to prefer offering their aspiring renters a shorter fixed term as they are able to remove problem tenants from the property before any significant rent arrears can be accumulated, or any damage can be carried out to the interior of the rental property. However, this could prove costly in the long run as landlords that turn to traditional high street letting agents or their online counterparts to help them find new tenants will have to deal with exorbitant referencing fees, marketing costs and other charges at every turn; making it a far cry from the “passive” income that longer term tenancies can offer.
Many landlords that have turned to the short-term letting model have done so for the promise of a higher rental income that can come with a high turnover of guests. As mentioned however, the location is essential in the rental’s success and appeal, but those fortunate enough to have a property within these key areas could see far greater returns. There is however the major caveat that the appeal of these short term lets is largely seasonal leaving many landlords with a vacant property over the less desirable months, commonly the colder winter period.
What Short Term Rental Law Do UK Landlords Need to Know?
Typically, landlords have chosen to class their rental property as a short term let as this will allow them to navigate their tax relief as a business, however there are a number of regulations that must be abided for this to take hold. When running a furnished holiday let the property will be entered into a “probationary” period for the initial twelve months, with this status become permanent providing the landlord enacts specific measures. To ensure that the property is not being used as a permanent residence by the owner the furnished holiday let must be available for a minimum of 210 each year, with the rental being let for at least 105 days annually. Further to this if a tenant resides within the let for over 31 days, then their stay cannot exceed 155 days. And, if the owner, their family or friends wishes to stay within the let, these periods will not contribute towards the quota of annual occupation.
As properties listed on Airbnb will be managed as a business the owners, similarly to traditional long term lets, will need to comply with the Regulatory Reform (Fire Safety) Order 2005, seeing the owner of the rental carry out “general fire safe precautions” including a written fire risk assessment. Owners must also ensure that a minimum of one smoke alarm is fitted on each floor of a property where there is any space being used as living accommodation, alongside any carbon monoxide alarms in any rooms that are being used to store fuel.
It is also essential for landlords to note that by listing their short-term letting opportunity on Airbnb they may be found in breach of the terms of their mortgage or any insurance policies they have taken out against the property.
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