Well-managed short-term lets can outperform long-term lets for landlords

Well-managed short-term lets can outperform long-term lets for landlords

Landlords face complex decisions between short-term and long-term lettings amid rising costs, tax changes and new tenancy laws. Effective management and local market fit are now crucial to maximising returns.

Landlords are reconsidering the merits of short-term versus long-term lettings following the abolition of furnished holiday letting tax relief in April 2025 and the introduction of the Renters’ Rights Act. While long-term rents increased sharply after the pandemic, the removal of Section 21 eviction notices under the new Act has reduced landlords’ flexibility and increased administrative burdens for long-term tenancies. This has prompted many landlords to explore short-term lets as an alternative.

Alexander Lyakhotskiy, chief executive of holiday let management franchise Pass the Keys, highlights that the choice between letting models depends heavily on how well the property is managed and its suitability to the local market. He notes that short-term lets can outperform long-term lets financially, but only when managed professionally and in the right location.

Comparing financial and management factors in letting models

Long-term rents rose significantly post-pandemic, and losing furnished holiday letting relief initially made short-term lets less attractive on paper. However, the Renters’ Rights Act’s removal of Section 21 notices means landlords now face more complex tenancy rules and record-keeping requirements, increasing the cost and complexity of managing long-term lets.

Lyakhotskiy points out that many landlords underestimate the refurbishment costs when a long-term tenancy ends. Properties often require substantial work, including new carpets, furniture upgrades, bathroom replacements and garden landscaping. In contrast, short-term lets typically benefit from regular cleaning and inspections between guests, which can catch minor issues early and reduce refurbishment expenses.

Short-term letting is not without its challenges. Licensing requirements are already in place in Scotland, and in London, planning permission and a 90-night limit apply to whole-property short lets. A national registration scheme for short-term lets in England is also expected soon, adding further regulatory costs and administrative work. Additionally, mortgage lenders may restrict short-term lets on standard buy-to-let products, necessitating specialist finance for some landlords.

Importance of professional management for short-term lets

Lyakhotskiy emphasises that not every property is suited to short-term letting. Location is a critical factor, as properties in areas with limited leisure or business tourism demand will struggle to maintain occupancy. Property design and size also influence suitability; for example, studio flats in family-oriented areas may not attract short-term guests.

Professional management is key to maximising short-term let returns. Well-managed short-term lets can command higher rates and occupancy levels. Economies of scale in larger portfolios reduce costs for laundry and maintenance, while dedicated teams can provide a guest experience that individual landlords may find difficult to replicate consistently.

Management fees for short-term lets typically range from 15 to 20 per cent of revenue plus VAT. Income from short lets tends to be more seasonal than long-term rent, so poor management or low-quality service can lead to underperformance compared to traditional tenancies. Landlords must budget for higher furnishing and setup costs than standard lets require.

Strategic considerations for landlords choosing letting models

Both short-term and long-term letting models can be profitable but also carry risks of failure if not managed carefully. Landlords who set a letting strategy and neglect regular reviews risk declining returns, whether by leaving long-term rents unchanged for years or failing to update short-let pricing and presentation.

Lyakhotskiy advises landlords to continuously assess pricing, costs and management arrangements, treating letting as an ongoing process rather than a one-time decision. Understanding the local market, budgeting appropriately for each model’s costs, and choosing a management approach that can deliver expected returns are essential steps.

What landlords should consider now

• Review local demand and suitability for short-term or long-term letting, considering location, property type and nearby amenities.
• Understand the full cost implications, including refurbishment after long-term tenancies and regulatory compliance for short-term lets.
• Check mortgage lender permissions and explore specialist finance if considering switching to short-term letting.
• Consider professional management for short-term lets to maximise occupancy, rates and guest satisfaction.
• Regularly review letting strategies, pricing and management arrangements to maintain profitability.
• Stay informed on upcoming regulations such as the national short-term let registration scheme in England and any changes to tenancy law.

Keeping your rental properties compliant

Membership of The Landlord Association (TLA) offers landlords and letting agents access to up-to-date compliance resources and practical guidance relevant to both short-term and long-term lettings. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, helps members organise property records, manage rental documents and keep track of key actions such as inspections and communications. This can be particularly useful in managing the increased administrative demands brought by the Renters’ Rights Act and upcoming short-term let regulations.

Exploring TLA membership provides landlords with support to navigate regulatory changes, maintain evidence of compliance activity and prepare for new obligations. ORBIT’s developing tools aim to assist with efficient property management and record-keeping, helping landlords focus on maximising returns while meeting their legal responsibilities.

Landlords should monitor regulatory developments closely and seek expert advice tailored to their portfolio and local market conditions before making significant changes to their letting strategy.

Sources: Landlord Today