London Short Lets vs Long Lets
Which is best? We encounter this question almost every day - prospective clients call up, describe their London property and then ask us what they should do with it, short or long let it? I explain that we only do short lets (similarly known as vacation rentals, holiday lets) and of course whilst we’d love to take their business, I do my best to be impartial. And, as you suspected, there is no straight answer to which is better, it depends entirely on the client’s situation and their needs from their property. There are a few often-stated pros and cons to both types of lets, and these are often myths. I’ll try to shed light on these so you can make an informed choice on which is best for you. Let’s start with a definition: short lets are lets shorter than 6 months, long lets are lets longer than 6 months (and usually for an initial term of at least one year).
Landlords are often drawn to the idea of doing short lets because they hear they can earn much more this route. (One Airbnb management company I came across recently - and there are new ones popping up literally every week in London - cited “75% more” on their homepage.) This is at best a half-truth, and in the majority of cases, sadly completely untrue. It comes about because the market rates for short lets are, yes, typically much higher than long let rates. A two bedroom flat in Kensington which may rent for £2500 per month on a long let may be advertised for £850 per week on short lets, which is clearly a more expensive like-for-like rate (to the tune of £14,200 annually). Several factors need to be considered before being able to reach an accurate revenue comparison, most importantly occupancy rates and agent’s fees. In the above scenario, a high street agent (Foxtons, Marsh & Parsons, Chestertons etc) might take 10% fees, plus VAT, on a long let basis (in addition of course to those for legal agreement, inventory, professional clean, let’s say these total £1,400) whereas a short let agent, such as ourselves, will take more like 25% plus VAT (please curb your outrage until you read the “Hassle/Management” section below) - and some, which promise fine stays in London charge at least 50% as standard (for an identical service to Ivy’s, I’ll add!). So far, the landlord is netting annually £25,000 as a long let, vs £30,940 on the short let route. But this assumes (and it is a mighty assumption) that the property on the short let route is let 52 weeks a year (i.e. 100% occupancy), which is unheard of. We would consider anything over 80% occupancy to be an excellent result for short lets - taking such a scenario (80% occupancy), the annual net income is now £24,752, i.e. already below long let net revenue, and it could be quite a bit lower factoring in a less ambitious rate of occupancy. Additionally, you need to remember that for short lets, the landlord pays utilities, council tax and the internet, so these costs need to be factored in too.
So, when clients call and they tell me they have a home which they will never need to use themselves and from which they want maximum rental income, I tell them they should long let it. There is one exception here, and we have in our current portfolio 4 or 5 properties falling under it, which are the “unicorn” properties - ones which are so popular, in such wonderful locations, so alluringly furnished and owned by such charming landlords, that Ivy Lettings guarantees them a rental income which is higher than the rent they’d achieve long letting it. We assume the risk of occupancy ourselves, so confident are we that they’ll let extremely well.
Wear & Tear
A common misconception about short lets is that they incur more wear and tear on the property. I can see why people think that: if a property has multiple sets of guests coming and going, surely this takes more of a toll on the home than if you had one long term family living there? Well, this really isn’t the case, and in fact on this score, I’d certainly say short lets are better, for the following reasons.
Cleaning. When we let a home, it’ll be cleaned thoroughly at check in and check out, and if the guests are staying longer than 10 nights, at weekly intervals during their stay. These are not quite the same depth as end of tenancy cleans that you have after long lets (i.e. after they tenants have been there a year) but they are obviously very regular and more thorough than those undertaken by your day-to-day cleaner (who probably focuses on the washing up and laundry/ironing rather than the fabric of the home itself).
Relationship to the Home. Mostly, Ivy Lettings clients are visitors to London who want a base from which to explore the city. Lovely as our homes are, they don’t come to London to spend the majority of their day in their rental property, as is more often the case with long term tenants, which means a lighter “footprint". The idea that short term guests treat vacation homes worse than long term tenants, when it comes to Ivy Lettings at least, is prejudiced rubbish - I’ve heard many more nightmares about poorly vetted long term tenants who don’t pay rent, steal furniture and then are impossible to evict than those about vacationing families of four from Ohio coming to visit Big Ben and ride in the London Eye. (If you open up your home on Airbnb for the night over New Year’s Eve, frankly, you’re asking for it - at Ivy, we have a minimum of 5 night’s stay, strict vetting of clients and no unaccompanied under 30 year olds, all policies which have served us and our homes very well over the years.) Also, no long term rental agreement would dream of forbidding parties and gatherings (it’s the tenant’s home after all) whereas any Ivy guest is strictly warned they will lose the entirety of their deposit if they break our house rules about excessive noise after 10pm. Who’s the better neighbour now?
Hassle / Management
Without doubt, short lets require more management than long term rentals. Most landlords will elect to outsource this to their short let agent - you’ll save money managing the lets yourself, but spend a lot of your time doing it. This is the principal reason why fees for short lets are higher - long let agents’ fees generally constitute an introduction fee (yes they can also arrange the lease agreement, inventory and professional clean, but they’ll charge separately for these) whereas short lets involve, even for a let of 5 nights, cleaning upon check in and check out, bed linen, towels, soap, loo roll, detergent etc supplies, check in and management time (including out of hours coverage), fielding questions from guests who are unfamiliar with the property and much more besides. Occasionally clients question our fees, comparing them to long let rates. They are entirely different beasts.
So, anyone considering short lets needs to accept either the management work or the costs to pay for it.
Flexibility / Use of The Property
It goes without saying that if you have sporadic short lets throughout they year, then this allows you as landlord the opportunity to use your home yourself, and the vast majority of our hosts are people who short let their home precisely for this reason - because they want to use it themselves part of the time, but would like it to generate income when they aren’t. Conversely, by committing to a long let, you’re obviously giving the home over to someone else for an agreed period.
So Should You Short or Long Let Your London Home?
If you’re still awake and managed to digest the different considerations, you should be in a good position to reach a decision. The first question I ask a prospective host is: do you want to be able to use the property yourself? If they do, then this is often the last question I need to ask too, because having a home to enjoy in London, whilst earning income from it for zero hassle, is a win-win-win scenario. If you just want to make money from it and don’t need to use it yourself, unless you’re lucky enough to own a “unicorn”, you should look for a long let probably. And if you’re concerned about wear and tear and management issues on the short let route, don’t be, Ivy Lettings have you covered.
If you’d like to discuss short letting your London flat or house, or offering it for London vacation rentals, please be in touch with us: [email protected] / 020 7349 7015. More info can be found here: ww.ivylettings.com/hosts
Guy van der Westhuizen is Managing Director of Ivy Lettings, a professional manager of London short lets, vacation rentals and short stay homes. For more information, please visit www.ivylettings.com