As Property Management & Letting Agents we are often asked if we offer a short-term letting service and if indeed we would recommend this as an option for our clients. We do offer the occasional holiday let service but only in rare cases or if it is strategically opportunistic, however, on the whole it is a market we currently do not have any plans to enter full time.
We see short-term lets as a fantastic opportunity in the situation where the owner lives locally and is happy to do much of the booking, guest interaction, management, cleans, meet and greets themselves. Long-term letting agents invariably charge between 10-15% for their services depending on quality, scope of works and level of involvement. However, clients who have moved to Chapmans long-term letting service after trying out the short-term option, often report to us that the agency costs for short-term can be closer to 30% plus. And from our own experience we do understand why the costs are much higher. The level of involvement and coordination for managing bookings; listings; checking and monitoring the all-important guest reviews; keeping on top of calendars; reducing voids; sorting out breakages; replacements and redecorating etc is very time consuming and needs to be very carefully monitored – often through a 24/7 service. Guests can arrive late, flights can be delayed and check-ins can be at very antisocial hours of the day. You can also find that the “couple” who booked actually turn out to be a stag or hen party of many more guests than agreed.
If a landlord wishes to self-manage we would always pose the following questions to them to test their resolve… “Could they be doing something better with their time or earning more elsewhere for the number of hours needed to put into this role?” and “Do they really want to be contactable 24/7?” – In today’s competitive market place people expect rapid response rates…48 hour turnaround times just don’t cut it!
We would also warn prospective short-term let landlords that it can take time to build up a clientele base along with positive reviews – which are essential for repeat and new bookings as well as rankings. Properties must be marketed in a timeous manner – for example, the Edinburgh Festival is great for short-term lets but often the most successful bookings are actually achieved in the preceding December or January, not in the few months running up to the Festival.
There are also a lot of ‘hidden’ costs with short-term lets such as council tax, heating, lighting, provision of broadband, the supply of bedding, towels, toiletries, tea, coffee, welcome packs, cleaning and turn arounds etc which can all erode the overall profitability. On a long-term let the tenant will usually pay these himself or the inclusion of them can be negotiated within a higher monthly rent.
On-going maintenance can also be a little higher in short-term lets in order to maintain the high level of furnishings and decor expected from today’s market place and to guarantee the best reviews. Although maintenance is essential for long-term lets, often properties can be let for a few years or more at a time. This mean the frequency of decoration and replacements can be less and crucially, the timing of works can be more easily dictated by the owner’s financial circumstances and not be an immediate need for a weekend booking. In addition, we are witnessing an increasing trend in unfurnished long-term lets which means set up costs can be lower, changeovers easier and fewer replacement costs when things break or wear out.
We do recognise though that there can be other added benefits to holiday lets over and above the desire for a good return on investment. For example some clients like to use properties themselves for parts of the year and they may view the short-term lets in-between as a way of funding the property which they personally benefit from. One potential issue here though, is that every trip to your property can feel like you are working, if you are unable to ignore the small DIY jobs that need doing and sorting – and so enjoyment levels of being in the property for the holiday it is supposed to can dwindle.
It is also important to note that income can also be quite inconsistent and lumpy with holiday lets due to seasonality and this can have an impact on cash flow – this is important to bear in mind if there is a mortgage to be paid and regular utility accounts to settle.
We feel that with the impending change in the Private Rented Tenancy (“PRT”) regime (replacing the old Short Assured Tenancy “SAT” in 2018), whereby there will be no initial term for an ingoing tenant, it will open up the long term-let market to more short-term, profitable corporate lets. Often a large corporate may need to place an executive on a short-term contract and have opted to rent a holiday let due to the restrictions of the AST (under the AST regime a landlord is given greater protection to recover his property in the event of an undesirable tenancy). However, the minimum term required of 6 months could have been an obstacle to a corporate. So one of the advantages of the new PRT will be to open up the short-term let market but give the landlords a bit more visibility of income, a premium rental level but clear recovery routes for repossession if things go wrong!
Naturally anyone considering either option should take good professional advice from agents, accountants and lender permissions etc as each person’s individual circumstances would need to be considered.
We will continue to watch and monitor this market and review our own judgements but for now we feel long-term lets are our speciality and we love to work in an area where we know we excel!