At a first glance, we can assume that long-term letting is fairly straightforward; List your rental property, find a tenant, sign a contract and ensure your income for a set period of time – super!
But is it really that easy? And could your efforts be put into other places? Are you really maximising your profits with long-term letting?
Long-term rentals are typically around the length or 6 months to 1 year long. However, it can be longer. Anything under 6 months would usually be considered as a short-term rental.
Keep reading to see the ups and downs of long-term rentals and whether or not it’s best for your rental property.
The Upside of Long-Term Rental
Your Financial Stability
Possibly the best incentive as to why a landlord would rather rent out their property long-term than short-term is for financial stability.
When you draw up and sign a contract with your tenant, they will have agreed to occupy the property at a fixed monthly rate for a fixed period of time, ensuring that you are receiving the same amount of revenue, month after month.
Long-term letting is perfect if you need a consistent stream of income and want to avoid risk when it comes to your finances, unlike short-term rentals.
Aside from your low risk factor, you can also guarantee that your rental prices don’t fluctuate throughout the year, so even in off-peak seasons, your revenue is steady and flowing in.
When we compare long-term to short-term rentals, we can expect to see fewer overall expenses and outgoings for long-term lettings.
The reason for less expenditure, is purely because with long-term lettings, you typically would spend less money on outside expenses, like: advertising, frequent cleaning, linen hire, as well as, your amenities because, you are less likely to offer that WOW factor to your tenants, unlike actual guests.
You can expect your tenants to clean the rental space after themselves, and provide their own linen (bedding and towels). After all, it will be their home space for the duration of the signed contract agreement.
As tenants, they’re not expecting to be treated like short-term guests, so while they should expect your rental space to be in working order, you don’t necessarily have to offer them gift baskets, discounted activities and tickets, as well as, fresh bedding every time you visit.
Take a look at what amenities you should supply as a short-term rental.
The great thing about long-term letting as a landlord is that it can be relatively hassle-free, leaving you with a lot more time on your hands.
As a landlord with a long-term rental property, you’re saving yourself lots of time by avoiding small tasks such as, not having to conduct multiple vetting processes for the large amount of guest overturns, or deal with guest communications and enquiries frequently – although, you should still keep an open communication with your tenants regardless.
Simply put, long-term rentals are much easier to manage than short-term rentals and can be somewhat seen as a passive income.
The Downside of Long-Term Rental
The Initial Set Up
Although owning a long-term rental will save you time in the long run, your initial set up is where you’ll put most of your effort in.
Your Vetting Process
As your tenants will likely be staying in your space for quite a long period of time, it’s important to run a thorough vetting process and work to a specific requirement list of who your ideal tenant would be.
You definitely will want to spend your time making sure your process is thorough when it comes to tenants. As they will be occupying your rental for a good length of time, it’s important to take your time and work to a check list of what your prefect tenant would be.
It’s up to you how thorough you want to be with your tenants vetting process, however, if you have a hard time with your tenants, it could be difficult to amend any contracts to remove them from the premises.
Contracts – they’re long, complicated and specific, yet, they’re super important to your long-term rental set up. Ultimately, they’re there to protect both you and the tenant. You don’t want tenants overstaying their contract or missing their rent payments to you.
With a contract, you can state your terms for their stay. You might want to include requirements such as, no smoking inside and no redecorating or repainting. It’s important to state in your contract about the rent payments that you’ll be expecting from your tenants every month and any consequences that can happen for late payments and/or no payments.
You Could Be Making More Money
Like we mentioned before, long-term letting ensures a steady stream of income and a piece of mind from your rental. You might need that sort of consistency in order to cover your overheads, like your mortgage, bills and any ongoing maintenance needed along the way for your rental.
However, you could actually be making more money, and faster too, with short-term rentals.
It’s be reported that short-term rentals can charge up to around 30% more than long-term rentals. That’s a pretty big profit gap!
Let’s say you need a minimum of £1,000 a month to cover your long-term rental outgoings. With short-term letting, you could be turning over that monthly sum in a matter of days, depending on your location and your properties prospects.
By owning a long-term rental, your profit margins are lower when in comparison to short-term rentals. It could be worth taking a look at your pricing strategy for your rental and compare it with estimated profits for short-term rentals.
The Overall Score
Long term rentals are perfect for that low risk, relatively hassle-free and low maintenance stream of income. You’re able to get what you want securely, with less effort compared to short-term rentals.
However, by being a long-term rental, you could be missing out on a big revenue difference. If you have a mortgage, you could be able to pay it off faster with short-term renting. Not to mention, when it comes to bad tenants and long-term lasting damage to your property, long-term rental can be a bit of a headache.
Still not too sure if long-term letting is the best decision for you? Speak to one of our expert advisors, here at Keey, to help you along the way, to make a decision that feels right for you and your rental.