Are you contemplating diving into the lucrative world of property investment but find yourself at a crossroads between short-term and long-term rental properties? You’re not alone in this dilemma. This pivotal decision is one faced by many in today’s dynamic UK housing market.

Recent years have seen a seismic shift in the UK housing market. Platforms like Airbnb and Vrbo have catalysed the rise of short-term rentals, offering enticing returns. Concurrently, the attraction of long-term single-family rentals persists, heralding stability and a steady income.

So why choose short term lets over the more traditional long-term.

1. INVESTMENT GOALS AND STRATEGY

Short-term rentals are suited for investors who aim for higher returns and can undertake active management. However this is not as burdensome as it might appear. Though the short term rental does require more hands on involvement this can be placed in the hands of short term letting agent who can provide the day to day to management of the property for an arranged fee.

2. FINANCIAL RETURNS

Short-term rentals present opportunities for superior rental yields, especially in areas with high tourist traffic. However, these returns are not constant, ebbing and flowing with seasonal trends and occupancy rates. However if a rental agent who has access to corporate clients for relocations and contractors then rentals become less seasonal.

3. MARKET SENSITIVITY AND RISK FACTORS

Short-term rentals are acutely responsive to tourism trends and broader economic shifts, potentially raising some legal and regulatory challenges in certain regions these still represent a far less problematic landscape than traditional long term rentals.

4. OPERATIONAL AND MANAGEMENT DEMANDS

Short-term rentals demand a proactive management approach, encompassing regular upkeep, guest services, and maintenance. It is no longer the case that these operational issues need to be met by the owner with third party organisation’s able to deal with a raft of properties on owners’ behalf.

5. LOCATION AND PROPERTY TYPE

Short-term rentals thrive near tourist attractions and unique destinations, appealing primarily to vacationers, but with markets for contractors, relocatees etc the need for properties to be in leisure hotspots is no longer key to good returns.

6. TAX IMPLICATIONS AND LEGAL CONSIDERATIONS

Short-term rentals must consider specific tax considerations and adhere to regulatory and licensing requirements. Though generally the short term letting market has fewer legislative hurdles it this may change over the coming years with Government looking at licensing of short term lets.

7. INVESTMENT SCALABILITY AND GROWTH

Short-term rentals can offer the potential for rapid revenue growth but come with a parallel increase in managerial demands but gain if investors find reliable third parties, they only need to sacrifice a small proportion of their rental income.

8. AVAILABILITY OF MORTGAGES

The availability and terms on mortgages for rental properties has been squeezed over the past few years. Though buy-to-let mortgage deals generally start at around 4.2% and can have LTV up to about 80% the short term rental market is not far behind with rates starting at around 6.5% and with LTV up to 75%

Though the idea of buying property to let has been around for a very longtime – the purchasing of property for short term lets is a newer investment opportunity. If the investor has a number of properties, is geographically distant or simply does not want to manage them then management companies can run these efficiently ensuring the best return for each invested pound.

The owner of a famous house with a 25ft shark sticking out of the roof has been told he can no longer rent it out on Airbnb.

The quirky property, known as the Headington Shark House, has been available for short term let on the site for the last five years in Oxford, with visitors flocking to see the shark sculpture crashing through the roof. It’s also a hit with guests and can sleep up to 10 people, with prices for a two-night stay reaching as much as £2k.

However, owner Magnus Hanson-Heine has now been ordered to remove it from the site because he doesn’t have the right planning permission.

The issue arises out of Oxford City Council requiring private residences to get planning permission to become a short term rental.

The short-term rental market came under the Governments spotlight – sparking a review which included a consultation with local authorities that closed in June last year.  Scotland has now introduced new licensing rules which are being challenged in the courts.

In England the rules are currently piecemeal depending on local authorities to decide if they wish to bring in requirements for landlords to get planning permission.

The reason for this push to licence is that Airbnb type lettings are being blamed for shortages in the traditional rental market.

This is at best a simplistic view of a very complicated issue where the building and provision of affordable housing in the UK has been an issue for decades. Thinking that regulating less than 300,000 homes across England will improve the situation is not addressing the real problem especially when you consider that there are 261,189 long term empty properties in England alone.

According to one estimate commissioned by the National Housing Federation (NHF) and Crisis from Heriot-Watt University, around 340,000 new homes need to be supplied in England each year, of which 145,000 should be affordable. In 2023 only 210,320 new homes were built of which only 63,605 were classed as affordable.

The provision of Short Term accommodation has created thousands of jobs across the UK as well as providing Landlords with an alternative to long term rental in a difficult financial market and should not become the scapegoat for a historical failure in the UK housing market.