Our monthly ‘Advice Clinic’ series shares the answers to questions our landlords have been asking. This month in our Advice Clinic, Marc von Grundherr, Lettings Director, explains the facts about short letting your rental property.
Short lets are in high demand in prime central London – properties in areas such as Knightsbridge, Mayfair, Kensington, Chelsea, Westminster and Bayswater are extremely sought-after by visitors to London. Tourists are clearly a key market but many large corporations now choose this option when relocating their executives for relatively short periods, usually from one week to six months. There is also high demand from sporting professionals and spectators looking for temporary accommodation close to sporting venues such as Wimbledon.
For visitors, this type of rental property can be a real home from home – it offers more space and is usually more economical than staying in a similar standard of hotel. Generally short-term rental properties offer a more flexible, relaxed lifestyle than a hotel.
With rentals for short lets 30% to 100% higher than for a long let, it would seem a sure fire way for landlords to maximise the income from their rental property. But, of course, it’s not as simple as that.
There are a number of factors a landlord should consider before deciding whether to rent out their property on this basis. First, they should realise they will be losing the continuity of income offered by a long let. While rents can be considerably higher than for long lets, there will almost certainly be longer void periods, when the property is unlet between tenancies. Summer is clearly the peak season while other times of year are usually quieter – these voids will eat into rental income quite quickly.
Landlords will also incur greater expenses. The property will need to be cleaned regularly and letting fees will be higher as there is more work involved – organising tenancy agreements, inventories and securing deposits.
With different tenants moving in and out regularly, wear and tear will also be higher. We find that landlords need to redecorate every year, not every three to five years, as is usual with a long- term rental. On the plus side, landlords may find that the new Replacement Furniture Relief, which replaces the wear and tear allowance, may benefit them if they need to replace furnishings more frequently. The new rules mean they can deduct the actual costs of replacing furnishings in the property which could be an advantage.
Short-term rentals involve a lot of additional administration and clearly this can be time-consuming. The property must be fully furnished and equipped to a high standard and landlords should remember that the same regulations that apply to long-let properties, also apply to short lets. Gas Safety and Electrical Safety certificates are needed and furnishings must comply with Fire Safety regulations. Landlords will also find there are additional costs involved – they are responsible for bills such as utilities, telephone, council tax and TV licences as well as providing essentials such as linens and crockery.
For many landlords, one of the real advantages of offering short-term lets is that, as well as generating a higher income, they offer real flexibility. This can be useful if the landlord is working away, perhaps overseas, but does wish to use the property occasionally. Or they may wish to bridge a gap, perhaps over Christmas and New Year, when the traditional rental market is slow.
One last but very important point to consider. Some local authorities impose restrictions on short-let properties. And some London boroughs, including Westminster and Kensington and Chelsea, do not allow it at all. This could lead to contravening planning regulations and possibly a large fine. If a landlord is considering offering their rental property on this basis, as well as checking with the Local Authority, they should ask permission from the freeholder of their apartment block, as well as their mortgage and insurance companies.
For landlords, it really is a matter of choice. They must decide if they wish to take on the additional expenses and work involved in providing a short let and whether they wish to sacrifice a steady income for a higher, though much more irregular and therefore unpredictable rent.
If you are thinking about short term lettings for your property, call us on 020 7435 9681 for further details.
View all posts by Marc von Grundherr