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Shorthold tenancy or holiday let?

Updated: Dec 7, 2023

There’s often debate about whether it’s better to rent out an investment property as a short-term holiday let or as a longer-term assured shorthold tenancy. We’ve asked our Account Manager Jake to give us his thoughts and advice.



"Traditionally, many people would go for letting out an investment property to the same tenants for as long as possible. This covers costs and also allows owners to make a profit on the rental income – obviously depending on market conditions!


One of the main draws of this popular approach is the ease of forecasting rental income. It’s also believed that tenants would take higher levels of care over a property they view as ‘home’.


However, with ever-changing property climates and regulations for landlords, this approach simply isn’t as reliable as it used to be. Recent events such as the pandemic and staycation boom have led to increased demand for holiday homes, making this an alternative and attractive option for property owners throughout the UK.


But is it a reliable source of income? With the rise of short-term letting platforms such as Airbnb, it has become even easier to rent a property out as a holiday let. In particular, this type of arrangement could potentially net a higher rental yield than long-term counterparts, especially during-peak seasons and popular holiday periods.


Despite the potential for increasing rental yields, many landlords are reluctant to move away from the traditional shorthold tenancy approach. Holiday lets are seen as a hassle – lots of admin and lots of changeovers mean a lot more input from the landlord. Therefore, it’s no surprise that there’s now an industry of short-term let property management companies willing to step in and shoulder the workload.


Before making the switch from traditional long-term rentals to holiday lets, there are a couple of factors to bear in mind. A property must conform to specific criteria to qualify as a holiday let. The property must be fully furnished, available to book for at least 210 days per year. Landlords cannot count any time that they stay there themselves, and they need a consistent and pro-active marketing effort to ensure the property is continually let out and look after any issues which could arise.


Ultimately, it’s essential to research whether to go down the holiday let or assured shorthold tenancy route before deciding which one is most suitable for you and your property. While long-term rentals can offer a stable income and low upfront costs, holiday lets can offer greater financial returns, increased flexibility, and unique experiences and interactions."


Have a question? Looking to find out more about how a short-term let management company could be just what you need for your property? Drop our team a line…. jake.mccabe@hostthreesixty.co.uk or call us on 0117 923 7947.


Comparing the advantages and disadvantages of short-term holiday lets vs assured shorthold tenancies

Holiday Let

Assured Shorthold Tenancy

Advantages

  • Higher rental yields: Holiday lets tend to generate higher rental yields compared to long-term buy-to-lets, especially during peak seasons and popular holiday periods.

  • Flexibility and control: You have more control over the use and availability of your property. You can choose when to let it out and when to use it yourself, allowing for more personal enjoyment of the property.

  • Showcasing the property’s unique features: You can highlight the character, charm, and amenities of your cottage, in turn attracting renters who value a distinctive holiday experience.

  • Potential tax benefits: Furnished holiday lets (FHLs) are classified as a business, providing certain tax benefits like full mortgage interest tax relief.

  • Stability and consistent income: With a long-term AST, you have a more stable rental income and a reliable tenant for a fixed period of time (usually six to twelve months).

  • Less frequent turnover and maintenance: Since AST tenants typically stay for a longer duration, there is less turnover and maintenance required compared to holiday lets.

Disadvantages

  • Seasonality and vacancy periods: Depending on the location and demand, there may be seasonal fluctuations in bookings. There may also be periods of time when the property is vacant and not generating rental income.

  • Increased management and maintenance: Holiday lets require more frequent turnovers, cleaning, and maintenance compared to long-term rental properties. This can be more time-consuming and may involve additional costs.

  • Higher wear and tear: With short-term rentals, there may be a higher turnover of guests, potentially leading to more wear and tear on the property and its furnishings.


  • Limited flexibility and personal use: With an AST let, you have limited flexibility to use the property for your own purposes or make modifications during the tenancy period.

  • Potentially lower rental income: The rental yields from long-term ASTs are generally lower compared to holiday lets, particularly in popular holiday areas.

  • Dependent on tenant reliability: The success of an AST let relies on finding reliable tenants who pay rent on time and take care of the property. There is always a risk of difficult tenants or potential rental arrears.


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