The property’s location, local demand, and the level of your involvement are crucial
Deciding whether to rent out your property on a short-term or long-term basis can greatly influence your income and workload. Although both strategies offer advantages, the optimal choice often relies on your property’s location, local demand, and the extent of involvement you’re prepared to have as a landlord.
Here, we explore the pros and cons of each approach, along with practical tips to optimise your rental strategy.
Rental income and profitability
The income potential is where the two options diverge most clearly. Short-term rentals can command high nightly rates, especially in popular tourist destinations. For instance, renting out a centrally located London flat on Airbnb could earn £150 per night, while the same property on a long-term lease might generate £1,800 per month. Given high occupancy rates, short-term rentals could, theoretically, yield higher annual revenue.
However, it is essential to consider unpredictability. Short-term rental income can fluctuate greatly due to factors such as seasonality, evolving travel trends, or market competition.
To mitigate risks and optimise earnings:
• Research peak and off-season demand for your area.
• List your property on multiple platforms to maximise visibility.
• Price your rental competitively by monitoring similar properties.
For long-term rentals, while the income may not be as high, it is predictable. A tenant paying rent consistently for twelve months offers stability, protecting you from market volatility.
Tip: Use rental yield calculators to determine the potential income your property can generate. Compare figures for both short-term and long-term rental models.
Property management demands
Managing short-term rentals demands significantly more hands-on involvement. From cleaning the property between guests to coordinating key exchanges and addressing guest inquiries, being a short-term landlord can feel like a full-time job. Many landlords choose to employ property managers for short-term rentals, which usually incurs a fee of 10% to 20% of your income.
On the other hand, long-term rentals typically require far fewer administrative tasks. Once a tenant is secured, landlords primarily oversee ongoing maintenance and rent collection. Most issues that arise are infrequent and can be scheduled around a landlord’s availability. Consider long-term renting if you’re seeking a relatively passive income stream with less frequent tenant interactions.
To ease property management tasks, consider the following:
• Automate rental processes through management software, particularly for short-term lets.
• Set clear communication guidelines with your tenants to minimise misunderstandings.
• Research property management companies that specialise in short-term rentals if you cannot manage the workload.
Occupancy rates and voids
One of the key risks of short-term rentals is the potential for frequent vacancy periods. Even in high-demand areas, achieving year-round occupancy is nearly impossible. For instance, a rural holiday cottage may flourish during the summer holiday season but remain unoccupied for months in the winter. This uncertainty adds an additional layer of financial risk for landlords.
In contrast, long-term rentals provide more reliable occupancy. A standard rental agreement guarantees the property earns income for a minimum of six to twelve months, and possibly longer. Reduced vacancy periods can lead to greater peace of mind for landlords.
Tips for minimising voids:
• For short-term rentals, offer discounts during low seasons to attract travellers.
• Invest in marketing your listing with high-quality photographs and detailed descriptions.
• For long-term rentals, aim to renew tenancy agreements well before they expire to avoid lengthy vacancy periods.
Maintenance, furnishing, and decor
Short-term rentals often require a higher standard of maintenance and aesthetic appeal. Since guests typically seek a “home away from home,” the decor must be inviting, modern, and photogenic. Moreover, the high turnover of short-term renters leads to increased wear and tear on furnishings, meaning you may need to replace items like mattresses, sofas, or kitchenware more frequently.
Long-term rentals facilitate more practical and durable furnishings, prioritising function over style. The decreased guest turnover also implies repairs and replacements are less frequent. However, landlords must ensure the property complies with legislative standards for safety and hygiene.
Key tips for maintenance and furnishing:
• For short-term rentals, choose mid-range, durable furniture that balances aesthetics and affordability.
• Equip your property with essentials such as Wi-Fi, kitchen appliances, and toiletries for short-term guests.
• For long-term rentals, select materials and furnishings that are easy to maintain and economically sustainable over time.
Practical considerations before choosing
Here are some final factors to assist you in your decision-making process.
Short-term rentals might be ideal if:
• Your property is in a tourist hotspot or city centre.
• You have the time or resources to manage guest turnover and marketing.
• You’re comfortable with income variability and some financial risk.
Long-term rentals might be ideal if:
• Your property is in an area where tenant demand remains steady year-round.
• You prefer consistent income and a more hands-off approach.
• You want to avoid frequent refurbishments or tenant disputes.
Make the most of your investment
Ultimately, short-term and long-term rentals can be profitable, but the ideal choice will depend on your personal goals, availability, and risk tolerance. To maximise your success, understand the needs of your local market, evaluate your budget for property management, and consider how involved you wish to be in the process.
