Can you make a quick buck renting out your property as a short-term let?
Here at lovemoney.com, we always advise landlords who are just starting out to view their buy-to-let properties as long-term investments, rather than trying to use them to make a quick buck.
But, if you do take a long-term view and plan a sensible investment strategy for durable growth, then there’s no harm in trying to make a quick buck as well, in the meantime.
I’m referring, of course, to short-term lets.
Unlike the majority of assured shorthold tenancies, which usually last at least six months, short-term lets typically last just a few weeks or even a few days. And while most landlords naturally prefer the security of a long-term tenant, a short-term let can be a very lucrative way of filling voids in rental periods, particularly during the holiday seasons.
What’s more, the market for these rentals has blossomed recently, as lots of new internet sites have sprung up this year, making it easier than ever before for UK landlords to advertise their rooms and, most importantly, for tenants all over the world to find them.
The buzz around the Olympics has helped as well, with homeowners encouraged to cash in on their homes during 2012, making the concept of a short-term rental more popular with UK residents too.
If you can attract the right tenant, the potential income on offer is ludicrously high, as I explained in Make £5,000 a week from your home. It’s not unusual to see very ordinary homes in good locations being offered for nearly £1,000 a week or more on highly-targeted websites.
So which websites should you consider advertising on? And what potential pitfalls do you need to be aware of when renting out your property as a short-term let?
Websites to advertise on
[SPOTLIGHT]It’s free to advertise short-term room rentals on two of the biggest UK websites - spareroom.co.uk and Gumtree - so it’s well worth putting ads up on there. A new one, called, templettings.co.uk is also totally free at the moment. And it's free to advertise on sites like Crashpadder.com, wheretosleep.co.uk and myfriendshotel.com but a commission charge (typically 10%) will apply once a tenant has been found.
Remember that a lot of short-term tenants will be international visitors, either looking for somewhere to stay for the short time they are in the country or looking for a short-term base to explore the area from while they find somewhere more permanent (and cheaper!).
So it’s well worth considering international sites which allow free UK advertisements and then take a commission. These include roomorama.com, which charges a ‘facilitation fee’ of 12% of the total transaction for stays of up to 30 nights and 8% for stays in excess of 30 nights, and airbnb.com, which charges landlords just 3% of each accepted transaction as a reservation fee (but whacks the tenants with a 6% to 12% fee).
If your property is near a tourist attraction or a holiday hotspot, consider holiday rental websites like istopover.com, holidaylettings.co.uk and holiday-rentals.co.uk. Just bear in mind you may end up with a tenant with very high standards (they may have been dreaming about and saving up for their holiday for quite a while, after all)!
One site I particularly like if your property happens to be vacant at the time of a major tourist event - such as the Edinburgh festival or the Battle of Britain air-show - is eventfulstays.com. This clever site allows the tenant to search for accommodation according to the event they are interested in attending but it does charge a hefty 15% of the rental fee for its managed booking service. Still, judging by the rental prices of the properties on offer, the clientele of this website are prepared to pay more than most.
Similarly, if you have a swanky London pad lying empty for a short period, then you may want to advertise on accommodatelondon.com and onefinestay.com, both of which command premium rental prices. Accommodatelondon.com charges 15% of the gross rent and the minimum stay allowed is usually a week. Onefinestay.com, meanwhile, takes a case-by-case approach to fees but as it provides concierge-type-services to your tenant and aims to turn your property into an ‘unhotel’, be prepared to pay more than usual. Your well-to-do tenant is likely to have a tidy sum to spend, however!
Pitfalls to avoid
- Bill disputes. Short-term lets usually include bills in the rental price, just to avoid any disputes which may arise after the tenant has exited the property. It also avoids the problem of trying to recoup costs once the tenant has left the area or even the country!
- Negative online feedback. One thing you will have to accept as a landlord of short-term tenants is the need for frequent, thorough cleanings of the entire property. If you can’t be bothered to do it yourself as frequently as you change tenants, factor the cost of a cleaner into the rental price you ask for. Make sure this person is prepared to replace lightbulbs and clear outside areas as well as cleaning inside - the place should be spotless before each tenant moves in, or you may get negative feedback (if not to your face, then online, which could put off future tenants).
- Dissatisfied tenants. Bear in mind your tenants may not bring their own towels and linen - in fact, many assume this will be provided. Similarly, most want wi-fi so they can use the internet to communicate with friends and family abroad and in this country. If your competitors in your price range supply these items, then you’d be wise to, as well. Whatever you decide, be clear about what your tenants should and should not expect when they arrive, so there are no nasty surprises later.
- Lack of payment. Short-term tenants are often unsettled in their plans and change their minds at short notice. Always get a non-refundable deposit before you take the property off the market and ensure the funds have cleared before the start of the tenancy. Set up a dedicated account for funds to be transferred into, so you always know where you are, no matter which tenant is moving in and out.
- Allowing the keys to be collected from a third party. The Association of Residential Letting Agents warns against handing keys over to a third party for collection (other than one of its “reputable” agents, of course). Instead, it says it is far safer for landlords to meet and hand over keys in person, then explain the workings of the property and agree when you will collect the keys at the end of the tenancy.
- Sign a contract. Even in a short-term let, your rights and your property need protection. Always create and sign some sort of contract with the tenant.
- Insurance problems. Notify your home insurer that you have short-term tenants, and make sure your contents and buildings insurance are still valid.
Got any tips of your own?
If you’re an experienced short-term landlord, and you’ve got some tips of your own, please share them with other lovemoney.com readers using the comments box below!
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