Choosing between holiday lets and long-term lets for your property in the UK can significantly impact your rental income, time commitment, and property maintenance. As we enter 2024, both options offer distinct advantages and drawbacks, according to estate and letting agents in Ilford, depending on your goals as a landlord, the type of property you own, and its location. To help you make the right decision, we’ll explore the key differences between holiday lets and long-term lets and examine the factors to consider when selecting the best option for your rental property.
1. Income Potential
Holiday Lets:
Holiday lets often have the potential to generate higher rental income due to their short-term nature and premium rates, especially during peak seasons. Depending on location and demand, holiday lets can command higher nightly or weekly rates compared to long-term rentals.
Long-Term Lets:
Long-term lets provide a steady, predictable rental income, as tenants sign contracts for months or years. This offers landlords financial stability and fewer concerns about vacancy periods.
2. Property Management and Time Commitment
Holiday Lets:
Managing a holiday let requires a greater time commitment and involvement compared to long-term lets. As a short-term landlord, you’ll need to manage multiple bookings, handle check-ins and check-outs, clean the property between guests, and maintain the property regularly.
- Frequent Turnover: With guests staying for short periods, the property will require frequent cleaning and restocking. This can be time-consuming, especially during peak periods with back-to-back bookings.
- Higher Maintenance: Since holiday lets are fully furnished and provide all the amenities, there is a greater need for ongoing maintenance to keep the property in pristine condition. Appliances, furniture, and linens need regular upkeep or replacement.
Long-Term Lets:
Long-term lets are less hands-on and require less frequent management once the tenant is in place. After the initial leasing process, landlords can expect fewer responsibilities compared to managing a holiday let.
- Less Frequent Tenant Turnover: With longer leases, landlords don’t have to worry about constantly finding new tenants. Tenants in long-term lets typically take on some responsibility for maintaining the property themselves, reducing the landlord’s workload.
- Lower Maintenance Costs: As long-term tenants often furnish the property themselves, landlords do not have to bear the cost of maintaining or replacing furniture and appliances, which can lower maintenance expenses.
3. Regulations and Tax Considerations
Holiday Lets:
Holiday lets are subject to different regulations and tax rules compared to long-term lets. In the UK, for a property to qualify as a “Furnished Holiday Let” (FHL) for tax purposes, certain conditions must be met.
- FHL Conditions: The property must be available for letting to the public for at least 210 days per year and let for at least 105 days. Additionally, individual lets should not exceed 31 days.
- Tax Advantages: FHL properties enjoy certain tax benefits, such as being able to deduct the cost of furnishings and claim capital allowances. They may also qualify for Business Rate relief, which can reduce the tax burden during periods of vacancy.
- Licensing and Safety Requirements: Many areas now require short-term rental properties to have a license or meet certain safety standards, such as having smoke detectors, carbon monoxide alarms, and gas safety certificates.
Long-Term Lets:
Long-term lets operate under Assured Shorthold Tenancy (AST) agreements, which provide tenants with certain legal protections. The legal framework for long-term lets is well-established and requires landlords to meet specific regulations.
- Tenant Rights: Long-term tenants have more rights compared to short-term guests, and evicting a tenant can be a longer, more complicated process if there are issues. It’s important for landlords to understand their legal obligations under tenancy laws.
- Tax Implications: Landlords of long-term lets are subject to income tax on rental profits. Unlike holiday lets, landlords cannot claim capital allowances for furnishings, though they can deduct certain maintenance and management expenses.
4. Location Considerations
Holiday Lets:
The location of a holiday let is the most important ingredient to success. Properties in areas that attract tourists, attractions, beaches, or city centers tend to have guests coming in regularly. If your property falls within these locations, then holiday lets can be the most rewarding option.
- Distance to Tourist Attractions: Mostly, closeness to popular holiday destinations can determine demand for holiday lets, especially during peak seasons.
- Seasonality: Tourist demand may vary according to the season and, for properties located in countryside or rural areas, guests may arrive only for a few months.
Long-Term Lets:
During a long-term let, the proximity of the property to school, workplace and other facilities such as stores, public transport, and parks are more relevant to the tenant. Properties in suburbs or residential areas are also more suitable for long-term letting.
Year-round appeal-Long-term lets are not dependent on seasonal demand; thus, they are ideal for locations with consistent populations or where students, professionals, and families have a need for housing.
Conclusion: Which Option Works for You?
Which is better for you in 2024: holiday lets or long-term lets? If you’re in a tourist-heavy area and ready for the added workload, the holiday let could be right for you. However, if you want an investment which is hands-off with regular income derived from it, then you are better off going for a long-term let. Weigh carefully the pros and cons to find out which option best fits your investment strategy and matches your lifestyle.