What is a Short Let?
To use the adage "It is what it is", a Short Let is exactly that, a tenancy period shorter than a standard AST (Assured Shorthold Tenancy). Short Lets are typically 1-3 months, but can be anywhere from a couple of days up to 6 months.
Short Lets are not conducted via a standard AST and therefore the "guest" is technically not a "tenant" and so does not have the typical rights a tenant would under AST. An example of a short let contract would be a Licence to Occupy.
Rental payments are also paid entirely upfront.
What is a Long Term Rental?
A long let is a tenancy covenanted by an AST (Assured Shorthold Tenancy), created by The Housing Act 1988. AST's have a minimum length of 6 months and provide the tenant with the right to live undisturbed in a property for an agreed period of time.
Under a Section 21 Notice the Landlord must give the tenant two months notice to end the tenancy and regain possession of the property.
Higher Profits
Being a Landlord, you are essentially running your own business and the number one aim for all businesses is to earn a profit. Just as a car cannot run without petrol, a business cannot operate without profit.
Short Lets typically charge a 50% premium on standard AST's, meaning if you were currently achieving £3000 PCM, on a Short Let you would be able to command £4500 PCM.
Short Lets also have more places to advertise, not only can you market your property on Rightmove & Zoopla, but you can also take advantage of Short Stay market places such as Airbnb, VRBO and Expedia.
By constantly keeping an eye on the market and upcoming bookings, you can tweak your prices weekly, or even daily to ensure that you always achieve maximum market value and keep void periods to a minimum. For example, if you have no scheduled bookings for the month of December, you can reduce your 50% premium to a 40% or 30% premium to attract new guests and ensure your property is never vacant. Once you have a long run of bookings you can then increase your prices back up to a 50% - 70% premium, knowing comfortably that you have plenty of time to generate new bookings.
Management
With long term tenants, you can sometimes go 12, or even 18 months without the property being inspected. Tenants may also fail to report potential issues with mould, damp, faults with the property, this can lead to expensive bills and void periods between tenancies.
On the flip side, property management is far more engaged in short lets. Cleaners will be entering the properties often and with a constant cycle of guests, issues will be spotted and reported early on. Due the nature of short lets, the quality of tenant is also higher. They are paying a premium price for a short period of time, they have higher standards - imagine if you moved into a hotel for two weeks and noticed damp in the bathroom, I bet you wouldn't be too happy?
In summary, short let properties are better maintained and have more engaged management systems in place.
Record high demand for Short Lets
Short term rental demand is at an all time high, Yahoo Finance reported:
"Global Short-term rental market is valued at USD 100.8 Billion in 2022 and is projected to reach a value of USD 228.9 Billion by 2030 at a CAGR (Compound Annual Growth Rate) of 10.8% over the forecast period 2023-2030."
London has a population of 9 million people, there are 3 million dwellings, do the maths. Basic supply / demand principles indicate that rental prices only have one direction to go... Combined with the rise in popularity and demand for short term accommodation, short let properties are primed to excel.
The Model is Proven
Back in the early 700's, Japan registered the worlds first two hotels. By the 1600's more than 600 inns existed in England and by the early 1800's the first modern hotel (as we know them today) was built.
As of September 2023, London currently has 109,357 hotel rooms and 69,000 rooms available on Airbnb.
One third of London's 3 million dwellings are privately rented.
In May 2023, London hotels saw their revenue per room at the highest rate since November 2022, accompanied with an occupancy rate of over 80%
The short term rental model has been operating as a viable business model for over a thousand years. It's easier than ever to enter the market and demand is rapidly increasing.
Tax advantages
There are two things that are certain in life, death and taxes... not true! There are many tax advantages to operating as a short let. Benefits may include interest relief and lower capital gains tax payments - please speak to a tax advisor for more information.
How much could your property earn using the Teddy Method?
Try our income calculator here
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