The pros and cons of short term letting

The pros and cons of short term letting

So, you’ve got a spare room and your friends have told you to list it on one of those portals, you know the ones. It’s a great way to make easy money, they tell you. Or perhaps you’re taking off on holiday and could do with the cash or maybe, you have a second property and are attracted by the lure of high rents.

Short term letting is a booming business at the moment, as a means of providing both tourist and domestic accommodation. In London, the boom is putting untold pressure on the availability of housing as well as the hotel industry and even Airbnb agree there’s a need to monitor and regulate.

So, should you jump on the bandwagon and make your buck or is it more trouble than it’s worth?

Let’s start with what a short let is?

A short let is generally considered to be anything less than 6 months and normally the rent includes utilities, TV and internet. The premises in question is also normally fully furnished and equipped, with bed linen provided. Beyond that, there’s a great deal of diversity. Your short let might be letting your spare room, letting your house while you’re away or letting your second property / buy to let property. It might mean letting for a day, a week or 5 months.

The pros

bank-17816The main and obvious advantage is that tenants will normally pay more for short term lets. For example, lets of 3 months may earn you double the going rate of a 6-month tenancy and lets of a month or less, can earn even more. The rental transaction costs to landlords of using some of the popular portals are also usually lower than using a letting agent.

If you own your own place and are going away, a short term let in your absence can provide a great solution. Someone to water your plants, feed the cat and pay you rent while you relax and unwind. Or perhaps a lodger in your spare room a few nights a week may be enough to help make ends meet.

The cons

But don’t get carried away. For a start, don’t forget you’ll have other expenses to pay. For most short term lets, you’ll probably have to pay the council tax and water bill. If it’s a holiday let you may also have other services to cover like electricity and Wi-Fi.

Another key consideration is making sure your property is health and safety regulation compliant. That means risk assessments, gas and electricity inspections and appropriate fire precautions. In most circumstances you will need to ensure that you have a Energy Performance Certificate (EPC) and this requirement applies to holiday lets (if you let your property for more than 4 months in a year) and room rental if the room is self contained and has its own bathroom, toilet and kitchen. In short, check the regulations carefully to make sure you comply.

beer-414914_1920You also have to consider the demands of a high turnover of tenants. That’s cleaning, marketing and managing your property in between tenants. And the chances are you won’t have much opportunity to vet them. Ask anyone who has let property on short term lets and you’ll probably find they’ve had mixed experiences: some tenants leaving their property spotless, others leaving it in an absolute tip. And there’s not much you can do about that if they do.

There’s also the day to day management of the let and the state of your accommodation. Short term tenants have high expectations of your property and if something goes wrong, they usually expect it to be dealt with within the day. Not much fun, if you’re on holiday the other side of the world or caught up in your working day.

Finally, as the owner of a property with a mortgage to pay, the big problem with short term lets is that you face a very real risk of long periods when your property is empty.

Don’t forget the legalities

There are of course always the legalities you need to comply with as well. In London, you cannot let your property on a short let for more than 90 days a year. Wherever you are, you should always check with your lender if you have a mortgage, whether that’s a buy to let mortgage or not, to see what the terms are about letting. And don’t forget you’ll need appropriate insurance, then there’s the tax implications of extra income and the question of whether you’ll need an accountant.

You should also check with your local council and if you’re a leaseholder, check the terms of the lease. After all, if you fail to comply with the legal requirements, those attractive rents will be eaten up very quickly if something goes wrong.

Is short term letting for you?

Short term letting has been revolutionised by the likes of Airbnb, and although controversial, short lets are here to stay. Whether it’s right for you will remain a personal choice depending on your particular circumstances but don’t just get caught by the pull of high rents. Make sure you consider all the implications and take appropriate advice from a professional before you jump on the bandwagon.

www.ewemove.com/dorkingGraham Faulkner is Branch Director of EweMove Dorking and he’s also a portfolio landlord, as well as specialising in helping other landlords. Apart from his own experience and expertise, he can also recommend the right professionals, as tried and tested by him, to advise you.

Multi award winning EweMove in Dorking is a residential property sales and lettings agency who pride themselves on being refreshingly different and standing out from the crowd. EweMove Dorking covers from Ockley to Oxshott.

Enquiries to 01306 406 506 / 01372 701 702, or via email to dorking@ewemove.com

Avoid being gazumped

Avoid being gazumped

In the face of gloomy predictions from the Government about the state of the property market, what is clear is that the demand for property is greater than ever.  In the south-east, that means if you’re a buyer, you face fierce competition.

Recent research by Market Financial Solutions (MFS) found that on average, 5% of buyers across the UK have been gazumped. That’s a whopping 1.5 million buyers with the figures, much, much higher in London. The costs of being gazumped are also high. There’s the stress and distress of losing out on the home that you loved as well as the potential to lose thousands of pounds in unrecoverable fees.

The practice of gazumping is not illegal. Even after your offer is accepted, and until contracts are exchanged, in theory, there is nothing to stop a seller accepting a higher offer. Even if you’ve spent money on surveyors and / or on solicitor’s fees.

hand-819279As spring approaches and the property market bursts back into full swing, if you’re looking to buy, now is the time to take all possible steps to protect yourself against the possibility of the dreaded gazump!

  1. Get your finances in order

Cash buyers or buyers who have already sold their own property are always an attractive prospect to sellers. Get your current property on the market well in advance of your search and if possible, make sure you have your finance in place. If you’re getting a mortgage, try and arrange to have an offer in principle.

Funding a deposit is also often a challenge but there are various Government initiatives available including the Help to Buy ISA*. Whilst it may mean a delay in your purchase, having funds puts you in a stronger position.

  1. Insist it’s taken off the market

stamp-1726355_1280When your offer is accepted insist the property is taken off the market and monitor what happens. If the property listing remains as it is (not marked sold or at least as under offer) that could be an indication that all is not well, as is a seller who refuses to take it off the market. Forewarned is forearmed.

 

  1. Keep in touch

Once your offer has been accepted it’s important to keep the sale progressing as quickly as possible. That may mean keeping in touch and chasing your solicitor if necessary. But it is also important to build a rapport with your estate agent. You want to both keep your estate agent in the loop and be kept in the loop, and a good estate agent will not condone the practice of gazumping.

Should the worse still happen and you are gazumped, the relationship with your estate agent could stand you in good stead. Not least if the gazumper’s purchase falls through, you may still be in with a chance.

  1. Consider protection

Ask your solicitor or estate agent about the possibility of insurance against gazumping or a lock-in agreement. A lock-in agreement normally requires a payment of a deposit and prevents the seller negotiating elsewhere for a set period of time. If they do, they forfeit their deposit which might not save you heartache but should cover any wasted fees.

*If you are saving for a deposit for your first home, and are eligible for a Help to Buy ISA, the Government will boost your savings by 25%. So, for every £200 you save, you receive a government bonus of £50. The maximum government bonus you can receive is £3,000.

Multi award winning EweMove in Dorking is a residential property sales and lettings agency who pride themselves on being refreshingly different and standing out from the crowd. EweMove Dorking covers from Ockley to Oxshott.

Enquiries to 01306 406 506 / 01372 701 702, or via email to dorking@ewemove.com