Are you selling up for a short-term let?

Written by

Robert Walton

Robert Walton is a Senior Marketing Manager with many years of experience helping brands reach the right customers through clear, informative and straight-to-the-point comms. He's all about delivering top quality customer service and shouting about the great things we do here at Novuna. In his spare time, Robert dabbles with DIY and likes to write about his home improvement tips and tricks.

Friday 26th May 2023

Landlords across the UK are considering quitting the private rented sector. Recent tax changes and new regulations on the horizon are causing landlords to consider their position and ask themselves if the stress of managing mid-term or long-term rentals is worth it anymore.

In this guide, we’re explaining some of the benefits of investing in holiday lets and how you can get a new property up to scratch.

The rise of holiday let investments

Many landlords wanting to make the most of their property portfolio are transforming their homes into short-term lets or selling off older houses in order to be able to afford newer, better-quality properties to let out. In fact, according to Aspen Woolf, 16% of landlords solely focus on short-term tenancies already and a report by ARLA Propertymark suggests 230,000 landlords in the UK are likely to make the switch to short-term lets.

This may be particularly prevalent for landlords looking to sell some of their older housing stock in exchange for newer, potentially more profitable, homes. Not only do short-term lets diversify property portfolios, they can provide a new revenue stream for landlords wanting to take a step away from long-term rentals.

Research from insurance brokers Alan Boswell Group suggests owners of short-term lets could expect average yields of around 9.8% (the current average rental yield is 4.75% in the UK). So it could certainly be worth considering for landlords wanting to replace inefficient properties with more luxury homes that can be offered up on a short-term let basis for a much higher price point.

The difference between short-term, mid-term and long-term rentals




Those staying in the property (usually ‘guests’ rather than ‘tenants’) typically stay for a short period of time

Tenants can rent the property for a few months at a time, typically between three and nine months

Tenants are in place for twelve months or longer – it is seen as a substitute for owning their own property

Short-term rental owners can charge a higher price per night but steady income is not guaranteed

Ideal for tenants who want to bridge the gap between two living situations – such as university students or those waiting to move into a property of their own

Typically unfurnished, allowing tenants to really make themselves at home

Owners are able to use the property themselves on a flexible basis

Usually mid-term lets are furnished properties

Landlords must adhere to legal responsibilities and abide by the Housing Acts – which can be complex

As guests tend to stay for days or weeks, rather than months, there’s less chance of a bad tenant causing issues. Guests have no right to remain at the end of their booked stay.

As the property is typically furnished and let for a shorter period, landlords can often charge a greater amount for a mid-term let compared to a long-term rental

As rental income is the same each month, it provides financial security – ideal if a landlord has a mortgage to be paid

Owners are responsible for all bills, maintenance and cleaning costs

Landlords must deal with a higher turnover of tenants, including associated costs for finding a new tenant

There’s peace of mind in having just one tenant for a long period of time, particularly if they are a good tenant and look after the property well (if they don’t, though, that can be a big issue)

Welcoming and looking after guests can be a demanding task, particularly if there is a high guest turnover

As with a long-term let, landlords are bound by law to meet Housing Act regulations and obligations

Tenants are responsible for all bills, such as utilities and council tax

Depending on location, there may be restrictions in place on how many nights you’re able to let the property per year

Tenants are responsible for all bills, such as utilities and council tax

Long-term use increases the wear and tear of the property, resulting in more regular repairs which can be costly

Property owners can charge a deposit for guests staying in the property, which can be used to cover any accidental damage if necessary

There may be less downtime between new tenants, as landlords will know when the current contract comes to an end

Landlords won’t always know when a tenant plans to move on. In some cases, landlords will need to find a new tenant within just a few months

Owners have more control over pricing, so can change the price of their property depending on seasonality

As with a long-term rental property, landlords won’t need to be involved in day-to-day cleaning or upkeep

Landlords will be responsible for maintenance and repairs, but not day-to-day cleaning or upkeep

Furnished holiday lets may offer more tax relief opportunities

Buy-to-let investments are subject to Section 24, which can impact profits

Buy-to-let investments are subject to Section 24, which can impact profits

Holiday rental landlords will not need to register or pay a deposit to a Tenancy Deposit Scheme

Landlords must sign a legal tenancy agreement

Landlords must sign a legal tenancy agreement

Short-term vs long-term rentals

There’s no right or wrong when it comes to deciding whether to manage a short-term let or become the landlord of a long-term rented property.

Property owners usually make a decision based on financial security, the complexity of landlord regulations or the time and cost of property management.

Financial factors to consider

There was a time when landlords far preferred the financial security of having a long-term tenant. There’s no doubt about it – while short-term rented properties can demand a higher price per night, occupancy rates can be unpredictable. For landlords with bills of their own to meet, such as mortgage repayments, this can seem like a risky venture compared to simply renting a property on a fixed-term basis in return for guaranteed income.

However, with the introduction of Section 24, many landlords are finding long-term tenancies a lot less profitable. The tax changes mean landlords are only able to claim back mortgage interest costs up to the basic income tax rate (20%). With this significantly impacting the bottom line – particularly for those who’ve been pushed into a higher tax bracket as a result of the changes – some property owners are looking for alternatives.

Experts suggest landlords can earn up to 30% more revenue from a short-term let – if managed correctly. The average Airbnb host in the UK, for example, can expect to earn well over £6,000. Airbtics discovered that UK hosts can earn an average daily rate of £173 so, depending on occupancy rate, a short-term let could be a great way to make a steady income.

Guests do, however, expect short-term lets to be furnished and cleaned to the highest standard. This is the sole responsibility of the property owner, and it can be costly to ensure the property is well-maintained and furnished to an exceptional standard in order to justify a high price point.

Rules and regulations

Two major regulation changes are on the horizon: the Renter’s (Reform) Bill and the Minimum Energy Performance of Buildings Bill. Both are still being proposed but, if the new regulations do come into play, this is likely to make life a lot more complicated for long-term landlords.

For example, landlords of properties with an Energy Performance Certificate (EPC) of D or below will be legally obligated to spend up to £10,000 making energy-efficient improvements to the property. The aim is to ensure all new tenancies have an EPC of C or above by 2025, and this will apply to all tenancies in the private rented sector by 2028.

This alone is driving thousands of landlords to sell up their older properties in a bid to avoid spending thousands of pounds on upgrades and disruptive renovations.

Though all short-term rental properties also require a valid EPC certificate and will be subject to the proposed new regulations too, it’s likely landlords will sell older housing stock in return for newer, more desirable properties they can rent out on a short-term basis for a higher price per night.

The Renter’s (Reform) Bill also brings with it a myriad of question marks. The proposed abolition of ‘no fault’ Section 21 evictions is causing many landlords to wonder what their rights will be should they get a bad tenant. This is much simpler to manage with short-let properties as tenants typically only stay a few days or weeks.

Property management

Landlords of long-term rented properties have far fewer management responsibilities. While they’re responsible for repairs and long-term upkeep of the property, the day-to-day maintenance of the property is in the hands of the tenant. Landlords also have the option to outsource all aspects of managing the property to a letting agent for a fee.

Short-term lets can require a lot more work. They’ll need to be cleaned between each guest’s stay, new guests will need to be welcomed to the property and, of course, all bookings will need to be effectively managed. Property owners are also responsible for all the bills so, even if the property stands empty while waiting for new guests to arrive, you’ll need to pay for any bills and utilities.

Both short, mid and long term properties may require regular home improvements and refurbishments to ensure they remain habitable.

That said, those responsible for a short-term let may find they’re able to outsource a lot of the day-to-day management of the property (in a similar way letting agents are often paid to manage long-term rentals).

Regulations for short-term rentals

It’s always worth checking with your local authority to make sure you’re compliant with any regulations or restrictions. You may find you need planning permission for your holiday let depending on the type of property and how you intend to use it. Property owners in London, for example, are only able to let their property out for 90 days of the year without requiring full planning permission.

Owners of short-term rental properties may wish to register the property as a business. To do so, the property must be let out for more than 70 days each year, and be available to be rented out for 140 days of the year. Registering the holiday let as a business means council tax will not apply and you will be required to pay business rates instead. You may also be able to offset maintenance costs (such as new furniture or appliances) against tax.

You may also benefit from further tax advantages if the property is treated as a Furnished Holiday Letting but there are specific terms you must comply with.

All owners considering letting their properties out on a short-term basis must also keep the following in mind:

  • You must abide by any restrictions or rules set by your local authority
  • If you have a mortgage, make sure your provider gives permission for you to let out the property. You may need a buy-to-let mortgage product
  • If the property is leasehold, make sure your lease permits short-term letting
  • Ensure the property complies with all health and safety laws
  • The property must be inspected by a Gas Safe registered engineer every year, and you must have a valid gas safety certificate
  • You must have a smoke detector fitted in the property, and it’s recommended to also have a carbon monoxide detector if your property has gas appliances
  • A full fire safety risk assessment and general risk assessment must be carried out
  • All furniture and fittings should have a non-detachable fire safety label
  • All electricals in the property must be checked for safety
  • You must arrange suitable insurance, including buildings and contents, public liability insurance and employers’ liability insurance if necessary
  • You should be aware of the TV licences the property needs and ensure this is arranged
  • You should consider the accessibility of the property, and make reasonable adjustments if required
  • Your water supply must be tested every five years
  • You must pay tax on any profit from short-term rental income – always speak to a finance professional to ensure you pay the right amount of tax

However, new regulations are being discussed that could impact those wishing to let out their property. This could include a registration scheme for short-term lettings and new “planning measures to give local authorities greater control over the number of short-term lettings in their area”.

Getting your holiday let ready for the summer

Whether you’ve sold an older property in exchange for a newer home ready to let out to holidaymakers or you’re renovating an existing property in your portfolio to boost its Airbnb appeal, you could use a home improvement loan to help make the cost of a big renovation more manageable.

To benefit from being able to charge premium prices, property owners must ensure their holiday lets are fitted and furnished to the highest standard. The average kitchen costs between £15,000 to £20,000, while even something as simple as painting a house can cost up to £4,000.

Taking thousands of pounds out of your savings or having to wait for your budget to build while guests remain unsatisfied might not be ideal solutions. Borrowing the money you need and paying it back over time might be just what you need to get your holiday let back up to standard.

With a Novuna Personal Finance loan, borrow between £1,000 and £35,000 from 7.4% APR Representative (£7,500-£25,000) and pay it back between two and seven years. Get a quote today to find out how much you could borrow.