Buy-to-Let, which tenancies should you go for?

by | Jun 23, 2022 | Blog

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Buy-to-Let, a tenancies guide for property managers

With buy-to-lets, you will need to decide if you want long-term or short-term tenants. In most cases, this decision will be easy to come to, but in other cases, it might need a bit more thought. We will be covering reasons for and against both options in this blog.

The Advantages of a Long-term Tenancy

It goes without saying that the main advantage of long-term tenancies is that you have guaranteed income for at least a year. Of course, this is subject to the tenant fulfilling their payments on the property. Long-term tenancies become more desirable when there is a buy-to-let mortgage on the property.
Long-term tenancies are usually a lot less hassle compared to short-term. Once you have managed to find a and they have set themselves up in the property, there is not much management to do other than routine maintenance as well as rent collecting.
Because of the fact that the tenants are long-term, it is likely that they are going to take better care of the property. This does not mean there won’t be routine maintenance and the replacement of current aspects of the property, however, this will be less frequent compared to short-term lets.
Long-term tenants are more inclined to report maintenance issues with the property This is because they don’t want to have to put up with issues for a long period of time. When issues are reported quickly, you can action them before they turn into a bigger issue.

Disadvantages of Long term

The main disadvantage of long-term tenancies would be the risk of having a problem tenant. The process of evicting a tenant can take months. In the event that the tenant stops paying rent or causes damage to the property, you could be losing money while you wait for the eviction process to complete.

Market rents are usually lower when it comes to the long-term when you compare it to how much can be charged for a short-term let. This is the reason why landlords with popular tourist areas are more likely to opt for websites such as Air BNB where you can set up short-term lets at a high rate.

The Advantages of Short-term Lets

Location and the property type are usually what decipher the rental income. A cottage near the sea would be much more desirable than a mid-terraced property in a small city for a short-term let/holiday. Short-term rentals are actually more profitable. Landlords could list on Air BNB and get their monthly rental income in the space of 7 days. Due to the rates being seasonal, a premium can be charged during months when the property would be in higher demand.

As well as this, the property is available for yourself at your disposal. This can be of use for properties in nicer locations, such as beach locations. At any point, if you would like to travel there for a holiday, you can mark the property as unavailable for the dates you wish to travel and then go back to renting as standard.

If you decide to sell the properties, you don’t have to wait around for your tenant to move out. The property can be sold as and when subject to having no bookings.

The Disadvantages of Short-term Lets

You may find that when looking for a buy-to-let mortgage, a lot of lenders will not accept short-term lets. Most require a minimum tenancy of 6 months in place. If using a buy-to-let mortgage, you may have to switch lenders and seek alternatives.

Short-term lets require more management. Each property will need to be cleaned after guests leave, and someone has to manage the key collection and meet the guests. This can all be outsourced through agencies however this takes a percentage of your rent away. Long-term rental is more of a passive income once a tenancy is in place. Short-term lets can be continuous work when taking many new tenants.

Short-term lets should be furnished. This will need to be of decent quality to attract new customers and maintain returning tenants.

Your situation should be able to decipher which option is best, however, take into account what has been mentioned and use this as a guide when making your decisions.