HOLIDAY LETTING vs. PERMANENT LETTING: WHICH SHOULD YOU CHOOSE?
Some investors who have decided to buy a holiday home will have a specific strategy in place and a goal that they want to achieve. There are, however, several advantages and disadvantages to having a short-term rental compared to a long-term rental which homeowners should be aware of if they are looking to dip their toes into the water and try it out.
Advantages of short-term vacation rentals
1. Higher rental income potential
Not only can you set fluctuating rates depending on your area’s high and low season, but you can also set a minimum length of stay for your most popular times of year to ensure you receive maximum profits.
2. More flexibility
For owners who rent their properties short-term, there is a lot more flexibility involved for you and yours. You can specifically block off calendar periods that you want to keep free for your personal use without inconveniencing anyone.
4. Tax breaks and deductions
Owners are entitled to certain tax breaks or even deductible property expenses because the property isn’t being let long term. Be sure to consult your financial professional and seek your own advice on this.
5. Less wear and tear
In general, vacation rental contract lengths range from a few days to a few weeks maximum. Receiving guests in short bursts like these ensure that guests are simply visiting your property, and so won’t be thinking about redecorating or rearranging furniture.
Challenges of short-term vacation rentals
1. More maintenance and upgrades
When your business is holiday rentals, you need to maintain a great general upkeep of the property or you could receive some negative reviews. Not only does this include things such as regular cleaning, maintenance such as drain unclogging and paint fixes, it also takes into account changing technologies and modern inventions. You’ll need to update your rental amenities every so often to include all the essentials and more for a pleasant stay – and this can come with a hefty price tag.
2. Not guaranteed income
One frustration many vacation rental owners face is the effect of seasonality on their business. While their high season is fully booked, off-peak bookings are scarce which can ultimately cause them to lose money. While rates can be adjusted to compensate for this seasonality (cheap deals off-peak and more expensive during peak times), income and bookings are not always guaranteed.
3. Competition from surrounding properties
Unlike the housing market, whereby apartments and houses are swamped with interest by renters, the vacation rental or short-term market sees many more homes listed than travelers searching. This may put some owners at a disadvantage (again, depending on location and availability) because competition for vacation rentals could be rife in your area.
4. Too many things to manage
While for some owners, vacation rentals are a retirement hobby-turned-vocation, for others they’re a full-time job. There are plenty of tasks to keep you occupied throughout every guest’s stay. From ensuring calendar availability is correct to facilitate a smooth booking process, plus a simple and easy check-in and check-out, and not to mention cleaners, gardeners and the rest – vacation rentals can be hard work if you don’t have the right tools.
Advantages of long-term rentals
There are certain advantages of investing in long-term properties; here are a few of the major advantages:
1. Consistent income
One of the key advantages of renting your property on a long-term basis is knowing that you have a monthly rental income that you can rely on. This can help take the pressure off new homeowners who have a lot of other expenses to worry about. Additionally, long-term renters are generally responsible for paying monthly and quarterly utility bills for electricity, gas, water and even the internet.
2. Easier to manage
Whether you choose to hire a property manager or manage the property yourself, it will require less time than a short-term rental. You don’t have to promote the rental property as much, tackle frequent rental turnover or make sure it’s ready to rent.
3. Less turnover
If you’re renting to long-term guests, you’ll find you’ll have less to worry about when it comes to administrative tasks such as paperwork, key handover, and even marketing. Once your renter signs the lease, you know how long (to a certain extent) you can expect them to stay. You only need to worry about filling the house again once you know it will be vacated.
4. There may be no need to furnish
Some (though not all) long-term guests come with their furniture in tow. This can make the decision easy if you’re thinking about leasing your unfurnished property. Not only will you have a guaranteed monthly rent payment coming in, but you also won’t need to fork out on new furnishings for your home
Challenges of long-term rentals
Some of the challenges worth noting are less earning potential and higher occupancy rates. Some other cons include:
1. Less earning potential
Holiday rental properties are rented over a longer period of time and are therefore rented at a lower rate.
2. The owner has less flexibility
Unfortunately, in the world of long-term rentals, there are no spontaneous trips to your holiday property for a long weekend or getaway. If you have a tenant in your home, you can’t ask them to leave for a weekend here and there. This can be a huge turnoff for many owners who are renting out their property simply to gain some extra income in the months and weeks it’s not used.
3. Less control over the property
Most of the time, nothing goes wrong during a rental stay. There is, however, a big difference between the short-term and long-term options when it comes to checking up on your property.
For short-term rentals, owners benefit from being able to inspect the property between each guest, to check everything is in working order and that nothing is broken or damaged. For long-term rentals, however, it’s a bit more complicated. You would likely have to give considerable notice (from 24 hours to one week) before dropping by for routine maintenance and security checks.