When renting out a property, a big decision that landlords have to make is whether to offer a short-term lease, or a long-term lease. Each option comes with its own advantages, disadvantages, and suitability depending on your goals, the type of property, and the current market.
In this article, we’ll explain what a short-term lease and a long-term lease are, as well as exploring their key differences to help you decide which option is the right fit for you and your property.
What is a short-term let?
A short-term lease is a rental agreement that allows tenants to occupy a property for a limited period of time, typically with more flexibility than a traditional lease. Short-term leases are often fully furnished and cater to people seeking temporary accommodation such as tourists, business travellers, or those between moves.
How long is a short-term let?
A short-term lease usually lasts anywhere from a few days to six months. In most cases, anything under six months is considered a short-term lease, though some landlords and agents may class up to 12 months as short-term.
Advantages and disadvantages of a short-term lease
When deciding whether a short-term lease is right for you, it’s important to weigh up both the advantages and disadvantages. While this type of agreement can offer greater flexibility and convenience, it may also come with certain trade-offs depending on your circumstances. Here, we’ll break down the good and the bad about short-term leases.
Advantages of a short-term lease
- Greater flexibility: With a short-term lease, the property can be used for personal purposes during unbooked periods, for example, during off peak or out of season times.
- Higher income: Compared to a long-term lease, short-term leases can demand higher daily rates if the property is in a high demand or tourist-heavy area. This also allows for high rental yields in areas where demands for short stays are high.
- Less wear and tear: As occupants/tenants don’t stay in the property for a long period of time, there’ll be less damage to the property, ensuring a well-maintained rental. Short-term tenants are also less likely to alter the space.
- Better market responsiveness: The price can be adjusted to reflect changes in demand such as increasing rates during peak seasons, or around special events.
- Avoids long-term tenant issues: Short-term leases normally avoid some of the common problems that long-term leases may run into, such as delayed payments and long eviction processes.
- Helps you test the market: If you want to experiment with the different types of rental strategies, a short-term lease is best as you can experiment with what attracts the most interest and returns.
Disadvantages of a short-term lease
- Security and safety issues: With a constant change of tenants, security can become a concern. There’s also a potential for tenants to host parties or engage in behaviours that could disturb neighbours or damage the property.
- Insurance complications: Insurance for a short-term lease can be more complicated and expensive than a long-term lease. This is because there is a greater risk of accidental damage, disputes, and higher liability risks.
- Increased management: Managing a short-term lease can be time consuming. Management includes marketing the property, managing bookings, communicating with tenants/guests, handling check ins and check outs, and addressing any issues during stays.
- Fluctuating income: Income can be less predictable and more volatile compared to a long-term lease. Revenue can fluctuate seasonally, and external factors like economic downturns can impact demand.
- High operational costs: Due to frequent cleaning, maintenance, and the need to furnish the property with household items and amenities, costs can be higher.
What is a long-term let?
A long-term lease is a rental agreement where a property is rented for an extended period of time, and is commonly used in the private rental sector. The tenant of a long-term lease will normally make the property their primary residence. These types of agreements often provide stability for both landlords and tenants.
How long is a long-term let?
A long-term lease usually lasts six months or more, with many agreements running past 12 months. In the UK, this is often set up as an Assured Shorthold Tenancy (AST), which can be renewed or rolled over into the periodic tenancy after the fixed term expires.
Advantages and disadvantages of a long-term lease
While a long-term lease offers stability and consistent income, they also come with less flexibility and greater commitment for both the landlord and tenant. Below, we’ll take a look at the key advantages and disadvantages.
Advantages of a long-term lease
- Steady income: A consistent and predictable income is provided with a long-term lease as you can rely on regular monthly payments because tenants stay for more than 6 months.
- Low turnover costs: As tenants stay for longer periods in a long-term lease, the frequency of tenant turnovers is reduced. This means that fewer costs are incurred when finding new tenants such as advertising, tenant screening, and potential vacancy periods.
- Easier expense planning: Certain expenses can be more predictable, such as maintenance costs being planned and budgeted for in advance, and in some arrangements, tenants may take on the responsibility of upkeep.
- Market resilience: Long-term leases are normally less affected by seasonal fluctuations and short-term market changes. This makes them more of a stable investment during economic downturns.
- Simplified management: Compared to a short-term lease, in a long-term lease, tenants require less day-to-day involvement. Once there is a reliable tenant in place, the ongoing management tasks such as dealing with bookings or frequent tenant communication are diminished.
Disadvantages of a long-term lease
- Fixed rent: For the duration of a lease, the amount of rent is typically locked in and can’t be changed, preventing the opportunity of capitalising on market increases. Adjusting rent to match current market rates will have to be done until lease renewal, meaning a potential loss in income if the market is rapidly increasing.
- Increased dependency: Having a long-term tenant can create a dependency where the rental income is heavily reliant on their continued payment. Disruption, such as the tenant leaving unexpectedly, can impact finances.
- Limited flexibility: When a long-term lease is signed, you’ll have limited flexibility in changing tenants or using your property when you want. This can be restrictive if your circumstances change, or if you want to join in on the booming short-term rental market.
- Less control over property condition: As tenants treat a long-term lease property as their home, there will most likely be more wear and tear over time. Some tenants may make unauthorised alterations or neglect upkeep, leading to additional costs.
- Increased potential for tenant issues: A long-term lease can bring the risk of having difficult tenants for extended periods of time. Issues such as late payments, property damage, or disputes can become difficult to resolve.
So, which lease type is right for you?
Whether a short-term lease or long-term lease is right for you depends on your goals, the type of property you own, and how much involvement you want to have in managing the property. Both leases come with key advantages and disadvantages, and understanding the differences is key to making the best decision. By weighing up the level of income, flexibility and effort required for each type of lease, you can match your strategy with your priorities.
How Aspire to Move can help
If you’re not too sure on whether to choose a short-term lease or a long-term lease for your property, we can help guide you. With in-depth knowledge of the Bath and Bristol property markets, we can help you weigh up your options.
From marketing your property to managing tenants and navigating legal requirements, our team offers a personal service that takes the hassle out of renting. If you’re unsure on which route to take, get in touch with us today.
