If you have a spare property or are considering investing, then you may be trying to decide between renting it as a short-term holiday let or to tenants as a long-term let. There are a few things to consider, and not just the financial side either. Which one you choose will also depend on how much time you want to spend looking after your property.
Holiday letting or long-term letting: the difference
Holiday lets are furnished properties that are rented for days to weeks at a time, whilst long-term lets generally have 6-month minimum contracts and can be unfurnished. The tax implications are different for holiday lets, as they are recognised by HMRC as a trade rather than an investment. So, whilst you are still liable for the additional 3% stamp duty if purchasing a second property, keeping your property for holiday lets does give you additional tax benefits, not afforded to landlords – see the HMRC’s HS253 guidance for holiday lettings for more information.
The guidance is quite strict, so in summary, to qualify as a holiday let your property needs to:
· be furnished;
· be available for 210 days a year;
· be let to the public (not at a reduced rate to family and friends) for 105 days a year; and
· if let by the same guests for >31 days, longer-terms cannot add up to more than 155 days in a year.
How much money can you make?
Whilst long-term lets provide a steady income every month, short-term holiday letting can be far more lucrative, bringing in up 3–4 times more money than long-term lets. The price is variable too, so can be increased to accommodate the peak season. But, your income is not secured and depends on you filling your property, which may be easier to do if its located in a tourist hotspot. However, holiday lettings and sites like Airbnb appeal to a range of people, including business people, contractors, or people relocating and looking for more permanent accommodation in the area.
It isn’t just about the money you make however, as holiday lets likely have higher outgoings. For one, you will be responsible for all utilities, council tax, TV licence and WiFi, all of which need to be paid whether your property has guests or not – these would all be covered by tenants in long-term rental contracts. Furthermore, where long-term lets can be unfurnished, holiday lettings need to be furnished and your guests want to feel comfortable. You only have a short period of time to make an impression, so buying nice furniture and comfortable beds will increase your chances of getting good reviews.
How much work do you need to put in?
Long-term lets with tenants should predominantly look after themselves, although you may get contacted to sort the odd problem. Holiday lets on the other hand, are harder work. Not only do you need to worry about marketing your property and communicating with guests, properties also need to cleaned thoroughly between guests and you need to arrange arrivals and departures. But, the benefit is you can gain regular access to and keep an eye on the condition of your property – with long term lets you are relying on your tenants to look after your property and to communicate issues. Also, you can take advantage of the property yourself when no guests are booked – time for a holiday?
So, from a financial perspective holiday lets could be the way forward, but you may be worried you don’t have the time? Don’t worry, Elite Property Management can handle everything for you and can give your guests a great experience without you having to lift a finger.