Which is better? – Short-term VS Long-term rental strategies?

 

As I mentioned in my previous article, I get asked quite often whether they should start with Rent to Rent, or Rent to Serviced Accommodations. I know a lot of you can’t make up your mind on which strategy is best for you.

 

Let’s have a look at the two strategies closely today.

 

Similarity

 

With both strategies, you don’t need to have large sums of capital to buy and own a property. You lease a property, then rent out on short term (Rent to serviced accommodations) or long term (Rent to rent) basis. So you don’t have the hassle or risk associated with owning properties, such as mortgages, property prices going down etc.

 

Differences

 

The major difference is that Rent to rent is where you rent out the units long term, and Rent to accommodations is where you rent out the units on shorter term.

 

This means that you can usually charge a premium price with short term rental, but you would also suffer from vacancy and seasonal changes.

 

The regulations are also different with short term and long term. Long term accommodations are usually of primary residential nature; whereas short term accommodations are usually considered of commercial nature. So long term accommodations are subject to the relevant tenancy laws. Short term accommodations sometimes require a change of use through planning application (90 day rule in London for example).

 

Pros and Cons

 

	Pros	Cons
Rent to rent/ LT	- No risk associated with owning property - Market is more stable and predictable - No planning required - Less objection from landlords regarding 'overuse' of property	- Can't charge a premium price - Harder to find deals that achieve your target profit - Need to reference and manage tenancies - Higher requirements regarding property types
Rent to Serviced accommodations/ST	- No risk associated with owning property - Can charge a premium price - Easier to find deals that can achieve your target profit - More property types can be suitable	- Can be affected more by seasons and economic fluctuations and pandemics! - Need to beware of the 90 day rule in London and apply for planning - Higher occupant turnover so requires more management and cleaning

 

Conclusions

 

Ultimately, both strategies are great cash flow strategies for those who don’t want to invest large sums of capital, or who don’t want the risks of owning properties. Usually Rent to rent deals can be turned into serviced accommodations (with planning if permitted) and potentially achieve higher profit. With Rent to Serviced accommodations deals, you may not achieve as much profit if you end up having to fill the units with long term occupants (like during this pandemic).

I believe in having a PLAN B in all my investments. Always make sure you have at least 2 exit strategies that are profitable.

You can even mix and match your long and short term rental deals in your portfolio eventually. But when you are first starting out, make sure you FOCUS on ONLY ONE strategy so you get skilled at it. Once you have mastered one strategy, you can pick up the other one more easily.

 

Need Help? – Ask Me Now HERE

 

Have you made up your mind yet? ;)

Emma

*I can give you the step-by-step action points you need to take, to build an extra £2000/month income through property within 6-12 months – CLICK HERE to book a free strategy session with me.