Landlords are struggling in the current economic client, with people feeling the pinch of the cost of living rising and the government squeezing for more tax. This landscape has led to difficulties in making a profit on buy-to-let properties, especially in London where the property purchase price far exceeds the earned rent. Therefore, to manage the financial issues, many landlords have converted to short-term letting.
With websites like Airbnb providing easy access to the short let market, landlords are making a substantial improvement in their monthly income. Although short-term letting is a great way to make quick cash as a landlord, is it viable for long-term profit? We discuss this below.
What Are Short-Term Letting?
The majority of people are used to seeing let periods of a year or more, which helps guarantee the landlord has enough to cover the mortgage. If a rental agreement is signed for 6 months or less, it’s considered short-term. However, despite the flexibility to allow 6 months, people are looking for short term let London 1 month on average.
For the most part, short-term rentals are used for businesses and holidaymakers. The demand for such properties has risen significantly since people started working from home more often. These workers typically like to escape their usual surroundings and still get work completed, which makes a short stay useful.
Owning a property and renting it out for the long-term means that you can’t use it in times of need, or for a holiday. However, if you opt for short-term lettings, you can plan the time and take it off the market when you need to stay there. This flexibility allows property owners to benefit greatly from their portfolios.
Despite countless security and financial checks, there’s nothing a landlord can do about the occasional bad tenant, which can end up adding substantial repair costs when they leave. Unfortunately, the time it takes to evict a tenant can be lengthy, making it almost not worth it. However, when landlords face bad tenants in a short-let home, they vacate much sooner, and costs are limited.
When you compare the cost per day of short-term and long-term lettings, you will always find that long-term is cheaper. However, opting for the former will bring in more cash, which is a win for landlords. Further, if you compare the price of a week in a hotel to a short-term rental, you will find short-term rentals are much cheaper, which helps to increase the demand for short-term lettings.
Wherever there are advantages, the disadvantages aren’t far behind. When you operate a short-term portfolio, you can’t always guarantee the rent because it relies on social trends and seasonal peaks. For example, you may find that your business struggles through the winter holidays because not many people are heading out on holiday or business. Unfortunately, you still need to cover the costs. However, you can mitigate this risk by running to UpperKey, who can take over the management of your property and pay your rent for a guaranteed period.
If your property is based in London, you will need to adhere to tight government restrictions, most significantly the 90-day rule. The government ruling dictates that short-term lets are only allowed to be rented out for an accumulative total of 90 days. To get an increase on this, you will need to apply for a special permit.
Building a rapport with short-term guests can be difficult, which makes managing the property a mission because you have to deal with several guests over a short space of time. Further, because you will have more groups of people coming and going, certain areas of the house will wear quicker, which will increase the cost further.
Buy-to-Let Mortgages and Short-Term Letting
When you invest in a property for buy-to-let, you may struggle to switch over to short-term lettings. If you’re thinking of making the change, you will need to talk to your mortgage provider to find out if they will allow it. Alternatively, if your mortgage is for residential and you’re looking to start letting your property, you will need to switch over your mortgage first.
Securing consent from your lender will depend on your circumstances. For example, if you are moving away for a number of years with a view to coming back - you are more likely to be granted letting consent. However, if you’re moving to a new home down the road, you should expect your request to be denied. When you change renting styles, you need to be prepared for any quiet periods, which means having available cash to cover the costs in the absence of tenants.
Find a Property Management Partner
Managing a monthly rental London property will be time-consuming, which can get in the way of portfolio and business growth. Therefore, to help make life easier, you can find a property management service, that will oversee the running of your property. You are best off finding a property management service that specialises in short-term lets, like UpperKey.
Boosting Short Let Income
Doing well with short-term lettings means beating the competition and increasing your monthly revenue. Fortunately, there is a range of methods to do this including:
● Stunning photography. A picture speaks a thousand words, so don’t skimp out on the camera.
● Craft appealing descriptions. People are more likely to rent from you if the property sounds inviting and warm.
● Off-season marketing. During the winter you will find less football, which calls for a quality marketing strategy. Offer promotions and increase social media advertising. If you can make your property feel cosy, and with good value, you are likely to attract winter staycation guests.
● Get more reviews. Negative reviews can crush your presence on Airbnb and other platforms, so try everything to boost your review numbers.
● Automate admin. We have the luxury of living in the tech age, which means there’s an app for almost every admin task you can think of - it will save you lots of time.
The Post-Pandemic Staycation Boom
The pandemic taught people how to live life indoors, which saved them money on expensive holidays. However, many households are looking for staycations, which let them experience life outside of their usual environment. Therefore, monthly apartment rentals London have risen in demand, as more people look for a taste of life on the other side. If you own short term lets London 1 month properties, you will need to target the staycation audience to get the most out of your business.
The Rise of Remote Businesses
We already mentioned that remote workers use short term lets when they need somewhere with traditional amenities. Therefore, if you’ve got short term lets London 6 months in your portfolio, you need to direct your efforts at the business-minded clientele. To help avoid quiet spells, you can offer amenities that remote workers would enjoy, including a desk, comfy office chair, plants, and appropriate lighting. Then, when you’re setting up promotions, make generous offers for businesses. If you recover part of your mortgage through promotional lettings, you will be better off than paying the full cost.
Try Airbnb for Short-Term Letting
One of the most recognisable short-term let brands out there is Airbnb, which offers a secure platform to advertise your property. Putting your property up on Airbnb is simple, you will just need to pay a host fee of around 3-5%. You can find out more about Airbnb here. You don’t need to worry about your cleaning costs when using Airbnb because the guest is charged around 14% host fees, which account for any cleaning.
Managing a short-term let property can be time-consuming, which is why many owners outsource the task to a third party like Upper Key.
UpperKey is excellent for guaranteeing rental payment and needing little effort from owners, which is a win-win in anyone’s books. On a standard plan, owners benefit from a stable income and get to pass off all management responsibilities for a set time. Further, UpperKey can help you manage the impacts of the 90-day regulations. UpperKey's expertise in London makes us the perfect business partner for investors, as it can use its knowledge of popular tourist and business hotspots to utilise your property.
Despite being the target of high rental prices and short-term let regulations, London is still one of the most sought-after destinations in the world. The 90-day limitation on short-term lets causes concern for many owners as to whether it’s a viable business model. Fortunately, thanks to services like UpperKey, rent can be guaranteed over the long term, but the property is let out for short-term usage, which is an enormous benefit.
Therefore, to answer the question of profit, it depends on the approach you take. If you manage the property on your own and only have London-based properties, it likely isn’t a great plan - when you use property management services and rent guarantee schemes, short-term letting becomes a lot more profitable.