Last updated on September 21st, 2023
short term rental vs long term rental in the UK
- If you’re wondering whether you should do short-term rental vs long-term rental in the UK this 2023, then Airbnb is the key to having better returns. But to make it work, Airbnb hosts must also do their part. Incorporating data analytics into your strategy can provide valuable insights for setting the right nightly rates. Fortunately, Airbtics offers macro and micro views of rental markets, enabling you to make data-driven decisions and increase your market rent.
While the UK is expected only to hit a minor recession in 2023 as compared to other countries, you may still be considering to restrategize your rental properties. But don’t worry, we are here to give you the numbers for your not to leave money on the table.
Whether you own short-term or long-term rental properties, this article provides you with valuable insights on how to make sound investment decisions. We believe that economic data should not only be accessible to analysts, but also to property owners. By incorporating easy-to-use data analytics, you can maximize your real estate investments and stay ahead of the game during the upcoming downturn.
Difference between Short Term Rental and Long Term Rental
Let’s first distinguish one from the other. As we all know, long-term rentals have been a traditional form of housing. They are offered to tenants who choose to reside on a property for at least 6 months with a binding lease agreement. Property owners decide to collect a higher rent than the mortgage to generate monthly income that remains unchanged regardless of the ever-changing economic circumstance.
On the other hand, the setup for a short-term rental is renting out a property to visitors or guests for a very short period. It works pretty much like hotels where guests can stay in for only a couple of days. This can viably extend to weeks or even months. Short-term rentals offer a cozy atmosphere as well as significantly cheaper nightly rates compared to hotels. This is why guests keep coming back to short-term rentals.
Since short-term rentals have become widely used all over the world, rental arbitrage is another popular trend. It has given a lot of nonproperty owners a steady stream of passive income by simply re-renting a unit and listing it on Airbnb, VRBO, or HomeAway. This is a wise, effective, and legal income-generating hustle. Just imagine having a side income from a property that you do not own.
Rental Regulations in the United Kingdom
As a landlord in the United Kingdom, you have several legal responsibilities that you must comply with. These include:
1. Ensuring that your rentalproperty is safe and habitable.
2. Making any necessary repairs and maintenance in a timely manner.
3. Complying with all relevant laws and regulations, including tenancy deposit protection schemes, fire safety regulations, and health and safety regulations.
4. Providing essential services such as water, gas, electricity, and heating.
5. Collecting rent from tenants in a timely manner and ensuring that you have a written tenancy agreement in place that outlines the terms of the tenancy.
6. Giving tenants proper notice if you need to access the property, make repairs, or end the tenancy.
As short-term rental regulations vary by city in the UK, it’s important to review each law to ensure that your requirements are met. To gain a better understanding of the overall legislation and short-term rental policies, kindly refer to our previous article A Guide to Starting an Airbnb Business in the United Kingdom.
Advantages of Long-Term Rentals in The United Kingdom:
Below are the advantages of operating a long-term or traditional rental property in the United Kingdom,:
• Growing population – While it does not enjoy very significant population growth, the UK has over 67 million people as of 2023. This number increased at 0.34% from 2022.
• A steady stream of income – You are ensured to have a steady and regular monthly income immune to erratic economic conditions. The average house rental price in the UK is £1143 per month.
• Steady operating costs – You do not need to shell out money upfront for furnishings since the tenants will most likely have their own.
• Laid-back management – You will have less interaction with your tenants, and you do not need to be hands-on with managing your property. This is risky, however, since damages on the property can get worse if they’re left unattended.
Advantages of Short-Term Rentals in the United Kingdom:
On the other hand, here are perks that short-term rentals can offer to Airbnb hosts in the United Kingdom:
• Strong travel and tourism industry – The travel and tourism industry plays a significant role in the United Kingdom economy, contributing substantially to its GDP. It is estimated that in 2021, this sector generated around £131.5 billion.
• Flexible pricing – You can adjust the nightly rate depending on seasonality or market demand.
• Experience managing the property – Building connections with people by hosting different guests. If this is not your thing, you can still manage the property remotely via automated management tools.
• Feel more control over the property – Since guests only stay in for a limited time, you can easily make changes to your property. Without getting worse, any damages can be repaired in no time and also be covered by Airbnb insurance.
UK Rental Markets
To know which setup can yield more returns to property owners, here is a view of various UK rental markets with their respective average yields from both short-term and long-term rental properties:
- Median Rent: £4,225 pcm
- Existing Airbnb listings: 4,198
- Airbnb annual revenue: £67,276
- Airbnb occupancy rate: 88%
- Seasonality: 36%
- Average daily rate: £262
- Median Rent: £795 pcm
- Existing Airbnb listings: 1,347
- Airbnb annual revenue: £26,508
- Airbnb occupancy rate: 77%
- Seasonality: 54%
- Average daily rate: £101
- Median Rent: £1,260 pcm
- Existing Airbnb listings: 3,169
- Airbnb annual revenue: £17,922
- Airbnb occupancy rate: 62%
- Seasonality: 49%
- Average daily rate: £93
- Median Rent: £1,095 pcm
- Existing Airbnb listings: 3,312
- Airbnb annual revenue: £23,454
- Airbnb occupancy rate: 68%
- Seasonality: 53%
- Average daily rate: £116
- Median Rent: £1,450 pcm
- Existing Airbnb listings: 3,001
- Airbnb annual revenue: £21,830
- Airbnb occupancy rate: 54%
- Seasonality: 50%
- Average daily rate: £110
- Median Rent: £1,100 pcm
- Existing Airbnb listings: 949
- Airbnb annual revenue: £21,310
- Airbnb occupancy rate: 60%
- Seasonality: 44%
- Average daily rate: £108
- Median Rent: £800 pcm
- Existing Airbnb listings: 1,038
- Airbnb annual revenue: £20,540
- Airbnb occupancy rate: 67%
- Seasonality: 51%
- Average daily rate: £91
- Median Rent: £895 pcm
- Existing Airbnb listings: 1,198
- Airbnb annual revenue: £18,406
- Airbnb occupancy rate: 65%
- Seasonality: 49%
- Average daily rate: £92
- Median Rent: £820 pcm
- Existing Airbnb listings: 1,841
- Airbnb annual revenue: £16,577
- Airbnb occupancy rate: 44%
- Seasonality: 69%
- Average daily rate: £101
- Median Rent: £1,200 pcm
- Existing Airbnb listings: 2,131
- Airbnb annual revenue: £23,059
- Airbnb occupancy rate: 49%
- Seasonality: 51%
- Average daily rate: £148
LOOKING FOR MORE PROFITABLE LOCATIONS?
Explore other best places to buy property in London for investment!
As an investor, you want to make the most out of your capital, which can range from hundreds of thousands to millions of pounds. However, real estate investments can be tricky, with limited options for property optimization. That’s why owners of UK rental properties should consider strategizing their rental business to ensure financial security, especially in the threat of an economic recession. Hence, researching the Airbnb data of UK cities is a must.
Now that you know the difference between short-term vs long-term rental income, Airbnb is the key to having better returns. But to make it work, Airbnb hosts must also do their part. Incorporating data analytics into your strategy can provide valuable insights for setting the right nightly rates. Fortunately, Airbtics offers macro and micro views of rental markets, enabling you to make data-driven decisions and increase your market rent.