As discussed in our previous post, there are quite a few key differences between short and long-term rental investment properties. Since both deserve a rather in-depth analysis, 77 Great Estates felt the need to further elaborate on said differences.
1. Tenants vs Travellers/Vacationers
Occupants who rent the property as a residential place have completely different set of requirements than short-term or vacation rental guests. Thus it’s of utmost importance to keep this distinction firmly in mind.
A tenant will be occupying the property for the long-term and their tenancy normally depends on their reputability. The property owner will probably want a detailed background about the type of individual(s) who will be residing in their space. The property owner has every right to ask relevant questions such as type of employment (i.e. whether freelance, part or full-time), and the nature of job, as this will determine the suitability for the property and the ability to meet monthly rents.
The property can either be unfurnished or furnished, depending on how it is advertised. That said, nowadays the majority of long let properties are being rented out as fully furnished, equipped with all the necessary appliances. With regard to the landlord’s role, his main obligation is to make sure all the appliances, pipes and electricity are in good working order. He must also ensure that regular and emergency maintenance is carried out.
A rental guest on the other hand, is generally a vacationer or business traveller who wants to have everything supplied, from comfortable and well-furnished accommodation to general supplies like toilet paper and soaps. Expectations of hotel-like services are common and many property owners of a short-term rental place will need to appreciate that to be successful, there needs to be a certain level of hospitality. Typical rental guests may include but are not limited to the following kinds of people:
• Vacationers looking for an alternative to a hotel to accommodate a couple or family on a seasonal break
• Business travellers visiting for meetings or on short-term assignments
• Conference attendees and exhibitors
• Home owners needing short-term accommodation during construction on their primary residence
2. Once again, it’s all about Location
Typically, residential tenants will look for practically the same features and facilities that residential home owners would find attractive. This means an area close to all amenities, schools, gyms and perhaps even the workplace or university. This is a determining factor whether a person would consider renting the property or not.
On the other spectrum, short-term guests want to be in the central part of the island, particularly if they’ve come during a peak season and want to be out and about while on holiday. Buyers interested in purchasing a property for short-term purposes need to do their homework to ensure a steady stream of bookings.
3. The Monetary Aspect
Apart from giving you the return you want, a good rental investment, whether for a long or short term basis, will provide you with a positive cash-flow. While long-term rentals can give you the peace of mind that you’ll be receiving a fixed sum, guaranteed for a set number of months, short-term rentals can command almost twice as much rent as a regular tenanted apartment – sometimes even more.
However, keep in mind that it’s not as simple as signing a lease for a year – there’s a lot more involved including furnishing, maintenance, property management, and professional cleaning. And let’s not forget the part where the landlord needs to make a thorough check of all the itinerary, to see if there is any need to replenish any supplies for each changeover.
A good property purchase will appreciate over time, which can only translate to a promising financial future. Additionally good rental investment – irrespective of the occupancy duration is bound to generate a good cash flow, if dealt with properly and expert advice from a reliable estate agent is sought. However, before getting excited about the potential for an additional income, you need to make sure you’re aware of the unpredictability of the revenue stream with the potential for vacancies and cancellations.
While income properties have traditionally been bought with residential rental in mind, it really depends on how much the property owner would like to use it for his/her own personal use. Long-term rental is an ideal solution for owners who don’t use their property for long periods of time. The management of long-term rentals is generally much easier than short-term rentals.
Nevertheless, if you have somewhat of a difficult tenant, it’s rather hard to get rid of him/her, once that dotted line is signed and you’re legally bound by the contractual agreement. Perhaps this is the beauty of a short-term let, because there’s never the issue of dealing with character dynamics, since no sooner the occupants arrive, the time will come when they have to vacate the premises.
As evidenced in this, as well as our previous blog post, buying to lease property is all well and good, but then there’s the conundrum of deciding whether you want to rent it out on a long or short term. This is why learning everything there is to know about the market is essential as it enables you, as the property owner to know both your and your tenant’s rights. Let’s face it, plain and simply put, renting out a property is a business transaction between two parties.
We hope you’ve found these blog posts helpful. Remember, if you’re interested in finding out more, don’t hesitate to contact us for more information. 77 Great Estates has property consultants who are always ready to lend a helping hand.
Don’t forget to follow us on Facebook and Twitter.