Have you ever asked yourself whether or not to switch your traditional long term rental into a short term rental?
Long Term Rentals
Long term rentals are the traditional method of renting. Usually, you would rent your home out on a fixed term, fixed fee schedule. Typically rentals last around a year but can be renewed on an annual basis whereby the rent may be raised by 5% per annum or similar. Some landlords may have tenants for 6 months, 2 years or even 20 years depending on their situation. So what are the benefits of this type of model?
Probably the most obvious benefit is the steady income you receive from a long term rental. So long as there are no issues with the tenancy, landlords can rest assured that they will receive the same amount of income on their property on a monthly basis for as long as the tenancy continues. This makes for easier forecasting for the property owner and peace of mind that their income is secured for the foreseeable future.
Minimal Set up Costs
Unlike short term rentals, long term rentals require very minimal costs to set up. As a landlord, you may want to spend some money getting the property updated or cleaned but other than that, the property is usually ready to rent quickly.
No Council Tax
If you are renting out your property on a long term basis, the council tax owed is passed onto the tenant and not the landlord. In some areas, this council tax amount is quite significant and could add up to the equivalent of a month or two in rent.
There is usually a lot less effort needed when it comes to renting on a long term basis. There is work required in setting up the property and sourcing good tenants, but once leases and contracts are signed, the only effort needed is to collect rent and make some repairs when necessary. Further still, if you use a property manager to manage your long term rental then you have even less work, just a small fee to pay.
So what about Short Term Lets?
Short term Rentals
The amount of short term rentals in the UK has increased rapidly within recent years. They have become an alternative source to make money on your rental property, and a way to subsidise your income if renting out your personal home.
So what are the benefits to short term rentals over long term rentals?
Potential for Greater Revenues
Short term rentals have the ability to yield far greater returns than long term rentals. Though this does depend on location, quality of rental, and personal revenue goals, there is a high chance that your short term rental will perform better than a long term rental in the same area. In fact, at Simple Getaway, we have seen short term rentals perform over 5 times better than long term rentals in some areas.
Since you are renting out the property on a short term basis, meaning anywhere between one night and a few weeks, you have far greater flexibility on your rental guests. With greater flexibility, you also allow yourself the ability to use the property for yourself or family and friends.
Short term rentals are frequently visited by cleaning staff who turn over the property after every rental guest. If you have good staff, they can notify you of any problems they come across so that you are able to fix them promptly. Utilising a maintenance service can also mean that you take preventative measures that will ensure that your deferred maintenance is at a minimum. When you rent your property long term, you have to rely on your tenants to report issues or make regular inspections to see them for yourself.
Tax Benefits of Holiday Lets
There are numerous tax benefits that can be had with your furnished holiday let. One important tax benefit is when setting up your home. With furnished holiday lets, you can claim capital allowances for purchasing furnishings which can later be deducted from your pre-tax profit. In addition, ongoing expenses to maintain your homes such as utility bills, products purchased for the property, maintenance and cleaning costs can all be offset against your taxes.
Furthermore, one of the advantages of a long term let is that you are no longer responsible for paying your council tax. With a furnished holiday let, you are essentially treated as a business and therefore required to pay business rate property tax instead of council tax. However, with a furnished holiday let, it is possible to claim small business rate relief which can reduce the amount of council tax equivalent that you pay on your home, even down to as much as £0!
There are many benefits to renting your property short term as opposed to long term but there is certainly more work involved. If you want to benefit from the advantages of renting your property on a short term basis but don’t want the hassle, give Simple Getaway a call. At Simple Getaway, we manage short term properties throughout East and West Sussex and would be delighted to speak to you about what we offer. Contact us today and find out more!