Investing in property involves spending your money wisely and earning a reasonable return. When it comes to a buy-to-let investment, the property market is not for the faint of heart. When considering renting out your home, you may be unsure whether to rent it as a holiday home or as a long-term residence. Several factors should be considered when making this decision, and this article may assist you in making the right choice.
A comparison of Airbnb and renting
Since holiday rentals command a much higher rate than long-term rentals, they have the potential to be extremely profitable. Property can make as much in a week from a short-term lease as it would in a month from a long-term lease, especially if the property is located in a popular tourist area. Holiday rentals, however, are heavily dependent on the tourist season.
In addition to holidaymakers, there is a high demand for short-term rentals among digital nomads and business travellers seeking a more relaxed environment during their stay. You can definitely benefit from its flexibility, as tenants can extend their stay easily, you do not need to give notice, and you can use it as you please for yourself, friends, or family.
It should be noted, however, that this flexibility is also associated with risky void periods. Especially if your property relies on seasonal tourism for an income, unforeseen events can leave you without income for long periods. It may be risky to rely solely on your rental income for your primary source of income.
It is also possible to experience cancellations. The likelihood of someone else booking in with such short notice is extremely unlikely if your next guests cancel last minute.
Hosting and maintenance
You can expect your property to undergo more wear and tear as many guests pass through each week. Your maintenance costs may increase as a result, and if you manage the property yourself, it can be a time-consuming task to keep the property clean and well maintained.
A host on Airbnb is responsible for interacting with guests, sharing details about the property, and distributing keys to guests. Additionally, you should be available to answer their questions as soon as possible. Despite the fact that Airbnb and other platforms provide some protection, any claims or losses are at the discretion of Airbnb (or the person you’re renting from) and may not be favourable to you.
Airbnb versus renting: Advantages of long-term rentals
In general, a long-term rental requires less involvement than a holiday rental. Several things need to be done before they move in, but once they are settled in, they should be able to stay for a few years at least.
It is only necessary to visit the property for routine inspections or maintenance once you have found a tenant and sorted out the administrative details (referencing, agreements, deposit security). It is common for landlords to conduct an inventory at the beginning of the tenancy, followed by a mid-term inspection about six months later.
If your tenant contacts you regarding maintenance or an emergency, it is entirely up to you how you wish to handle the situation. Most landlords prefer to handle maintenance themselves, particularly if they live nearby and have contacts in the trade or are handy themselves. There are also those who prefer to hand over the keys to an agent who will deal with maintenance issues on their behalf, however, this is generally more expensive.
Find the right tenant
In comparison with a holiday rental, a long-term rental provides you with the opportunity to screen your tenants and select the most suitable applicants. Viewings will provide you with an opportunity to meet potential tenants and determine whether they are the right fit for your property.
The tenant reference process involves credit and employment checks, as well as a reference from their former landlord, which gives you peace of mind that your tenant has a good rental history and is able to pay their rent.
Legal responsibilities differ greatly between short-term and long-term rentals. There are more regulations pertaining to long-term rentals, including safety inspections, Right-to-Rent checks, and other regulations specific to private rentals.
If you intend to rent out your home, you will need a buy-to-let mortgage or consent to let. Regardless of whether you are looking for a short-term rental, you should make sure it does not conflict with your mortgage agreement.
Renting with the wrong mortgage or without consent to let is a breach of your mortgage contract.
As a result, you should inform your lender of your plans to rent out the property when applying for your mortgage or contact your lender to obtain consent to let.
A consistent income
Investing in long-term rentals provides you with greater financial stability and a steady source of income. Keeping track of your income and expenses each month makes it easier to make budgets since you will know how much money is coming in each month.
As with Airbnb, there may be periods of vacancy, but the risks are considerably lower. Renting long-term is a less time-consuming income generator if you are able to find a good tenant who wants to stay.
Rent protection provides a financial safety net if your tenant fails to pay rent. Of course, there will be some repairs and safety checks to be carried out over time, and there is the possibility of nonpayment.
Despite the fact that tenants may not stay in your property for a long period of time, it will be much less frequent than renting out your property for holidays. Additionally, by marketing your property correctly and maintaining it well, you may increase your rent and maximize your return on investment.
How should you decide between Airbnb and renting?
Several factors determine whether short-term or long-term rentals are more beneficial. A number of factors must be considered, including location, costs, maintenance, and flexibility. Consider the following questions if you are still unsure which is best for you:
Do you have a lot of free time?
Is it possible for you to prepare the property each week for new guests, or do you need something less frequent?
Where is your property located?
Do you plan to maintain the property yourself, or will you need someone to clean, host, and maintain it for you? How many tourists visit the area, or is it primarily a residential area?
Do you have a specific income goal in mind?
Are you in need of a regular source of income that you can rely on every month, or could you manage a seasonal influx of income? Do you enjoy dealing with a wide variety of people and payments, or would you prefer to deal with one person or family for a longer period of time?
Can you get a buy-to-let mortgage?
Is it possible to obtain a mortgage for buy-to-let properties? You may also obtain consent to let and switch your residential mortgage. There are some mortgages that require an AST. If you live in a flat, does short-term letting violate your mortgage or head lease terms?
Have you checked your insurance?
Do you have any clauses in your insurance policy that may affect your coverage when renting short-term?
Who do you want living in your property?
This is perhaps the most important question of all. Is it important for you to know who is living in your home and have references checked, or are you fine with having many different guests over time?