Considering a holiday let vs. a long-term buy-to-let?
Since the rise of Airbnb in 2008, anyone with a spare room can, theoretically, make money on letting a property. A wave of interest in holiday lets sweeps over the property industry regularly, and the interest in becoming a landlord as a side-hustle often rises proportionally to the temperatures outside.
For some, this has indeed been the first step on a property ladder, and we have seen people starting with letting rooms which now have whole kingdoms of holiday lets and would not have it any other way. We also work with landlords specialising in long-term contracts and would never dedicate any of their properties to a holiday let enterprise. What are the pros and cons? Let’s have a look.
For this comparison, we assume a popular definition of a holiday let as a property rental lasting up to 31 days.
Holiday rentals – a quick win?
As ever with properties, location dictates prices. The pandemic has turned the public’s head into an internal market, coined the phrase ‘staycation’, which means holidaying in your own country, and we see this trend continuing after the lockdown.
A well-placed holiday let allows you to look at higher rates, earning more in a week than you would in a month with a regular buy-to-let. But occupancy is less predictable and more volatile. You are, after all, at the mercy of the seasons. And if you are starting out and looking to buy a property in a holiday destination, you will pay for it as these locations tend to be hyper-expensive – although that is likely to mean faster return as well.
You’ll have to cover the cost of tv licenses, internet, and for example Netflix. In a traditional buy to let a tenant covers these.
A holiday let mortgage can be a challenge to get. In addition, you’ll have to work to your guests’ schedule and perform any repairs between arrivals, otherwise, you may need to offer a discount.
You are not tied to a contract, so even if a guest misbehaves, you know they will be gone soon enough. However, a long-term commitment may be a pro and con. For this reason, it’s so important to choose the right tenant. If you want more information on that, we invite you to talk to us about our strategies for finding and checking who’s best for your property.
Faster turnaround means increased cleaning and general maintenance costs, as it just happens more often.
Long-term buy-to-let – is it as dull as it seems?
Long-term buy-to-let is stable, more predictable, and not as seasonal. Lenders prefer this and express that by offering a wider variety and more attractive mortgage deals. As we are on the subject of costs, the tenant usually covers electricity, gas, and water. They may also want to bring their own furniture, so you won’t have to kit the property out.
However, upgrades are a must, as required by law, and you need to have an appropriate EPC rating even to consider long-term lets. You are also responsible for the maintenance and repairs of all the ceilings, walls, windows, roof, and any leaks (the cost of repairs may be tax deductible, read our blog here on the subject if you are planning such actions).
|HOLIDAY LET +||–|
|Higher yield per calendar day||Seasonal peaks and troughs|
|Not tied to a contract||Unpredictable|
|Fewer responsibilities towards the tenant||You need to cover most of the costs|
|Flexibility on pricing||Have to work around guests’ coming and going|
|Possible faster ROI||Fewer mortgage options|
|Staycation still in fashion||Properties tend to be more expensive|
|LONG-TERM BUY-TO-LET +||–|
|Predictable and stable rent||Fewer options to change your rent per calendar month|
|You have occupancy for as long as defined in the contract||It could be an issue if tenants misbehave (contact us for advice on how to choose the right ones and what check to perform)|
|You’re more in control||You are responsible for the safety of the property|
|Tenants cover some of the costs||You still have to pay for the significant repairs (some of them are tax-deductible, though)|
|Better mortgage options||Long term ROI|
|Property management services tend to be less expensive than management services for a holiday let||DIY management is, of course, possible but very time-consuming and requires you to assume many roles (be a gardener, a plumber and a receptionist), available 24/7|
|Tenants need to have the right to let your property||You are responsible for performing those checks, and they can take a fair bit of time|
|You do not have to go it alone||Legislation (there are a lot of paragraphs to know and live by if you are a landlord)|
At Gallery Properties, we understand that when it comes to making investment choices, there are always two sides to consider. The key is to find the option that aligns with your investment goals. We believe the most significant advantage, regardless of which path you choose, is that you don’t have to go it alone. Our expertise lies in both types of property let, and we are dedicated to helping you make your journey as a landlord a fulfilling and rewarding experience.