Holiday let or assured shorthold tenancy?

Holiday let or assured shorthold tenancy?

Do you own a rental cottage and are wondering if you should go down the holiday let or assured shorthold tenancy (AST) route? In this article we will focus on the pros and cons of both options, helping you to make an informed decision.

The idea of renting out a property can be very lucrative! But, there is often a debate about whether to rent out as a short term holiday let or a long term assured shorthold tenancy. Traditionally, many people would purchase an investment property to rent out on a long-term basis to cover costs, while making a bit of a profit on the rent. This approach was popular due to predictable rental income flows and also because tenants generally looked after the property. However, with changing property market conditions, this approach isn’t as reliable as it used to be. And recent events, such as the pandemic and staycation boom, have led to increased demand for holiday homes, making this an attractive option for property owners.

With the rise of short-term letting platforms such as Airbnb, it has become very appealing to consider renting a property out as a holiday let. In particular, holiday lets could potentially generate a higher rental yield than long-term rentals, especially during peak seasons and popular holiday periods. Additionally, rent charged for holiday lets is usually three times as much as that for long-term rentals, even if downtime outside peak periods are taken into account.

There are, however, some factors to keep in mind before making the switch from traditional long-term rentals to holiday lets. A property must conform to specific criteria to qualify as a holiday let. The property must be fully furnished, available for sale or rent for at least 210 days per year, and let for at least 105. Owners can’t count any time that they stay there themselves, and they need a consistent marketing effort to ensure the property is continually let out.

Ultimately, it’s essential to research whether to go down the holiday let or assured shorthold tenancy route before deciding which one is most suitable for you. While long-term rentals can offer a stable income and low upfront costs, holiday lets offer great potential financial returns, flexibility, and unique experiences.

Here are some pros and cons for both options:

Pros of Letting as a Holiday Home:

• Higher rental yields: Holiday lets tend to generate higher rental yields compared to long-term buy-to-lets, especially during peak seasons and popular holiday periods.
• Flexibility and control: You have more control over the use and availability of your property. You can choose when to let it out and when to use it yourself, allowing for more personal enjoyment of the property.
• Showcasing the property’s unique features: You can highlight the character, charm, and amenities of your cottage. In turn attracting renters who value a distinct holiday experience.
• Potential tax benefits: Furnished holiday lets (FHLs) are classified as a business, providing certain tax benefits like full mortgage interest tax relief.

Cons of Letting as a Holiday Home:

• Seasonality and vacancy periods: Depending on the location and demand, there may be seasonal fluctuations in bookings. There may also be periods of time when the property is vacant and not generating rental income.
• Increased management and maintenance: Holiday lets require more frequent turnovers, cleaning, and maintenance compared to long-term rental properties. This can be more time-consuming and may involve additional costs.
• Higher wear and tear: With short-term rentals, there may be a higher turnover of guests, potentially leading to more wear and tear on the property and its furnishings.

Pros of an AST Let:

• Stability and consistent income: With a long-term AST, you have a more stable rental income and a reliable tenant for a fixed period of time (usually six to twelve months).
• Less frequent turnover and maintenance: Since AST tenants typically stay for a longer duration, there is less turnover and maintenance required compared to holiday lets.

Cons of an AST Let:

• Limited flexibility and personal use: With an AST let, you have limited flexibility to use the property for your own purposes or make modifications during the tenancy period.
• Potentially lower rental income: The rental yields from long-term ASTs are generally lower compared to holiday lets, particularly in popular holiday areas.
• Dependent on tenant reliability: The success of an AST let relies on finding reliable tenants who pay rent on time and take care of the property. There is always a risk of difficult tenants or potential rental arrears.

At the Best of Suffolk our research has shown that holiday lets generate higher rental yields than buy-to-lets. With some properties achieving up to 30% more yield than their long-term counterparts! And what’s more, during peak seasons, some holiday lets can earn you as much in a week as you would in a month from a buy-to-let.

Using a holiday let agency like Best of Suffolk can be a game-changer for holiday homeowners, and here’s why:

1. Time and Convenience: Managing a holiday property can be time-consuming, with tasks like dealing with enquiries, bookings, and guest requests taking up a significant amount of time. By partnering with an agency, such as Best of Suffolk, you can free up a considerable amount of your time. We will handle all the administrative paperwork, including booking enquiries, contracts, and sending out welcome guides.
2. Local Presence: If you live far away from your holiday property, using an agency is especially advantageous. We have experienced staff who are situated nearby, ready to assist you and your guests whenever needed. While also having the expertise to handle any issues efficiently. From dealing with emergencies to resolving complaints, we will take care of it all on your behalf.
3. Financial Management: Setting up payment details, ensuring compliance with PCI standards, and managing overdue payments can be expensive and stressful for holiday homeowners. However, as a holiday let agency we can handle all of these financial tasks for you. We will manage payment details, handle refunds, and even re-let your property to ensure you are not out of pocket.
4. Local Knowledge and Market Expertise: As an experienced agency we have an in-depth understanding of the local area and rental trends. This knowledge is invaluable when it comes to setting the right prices for your property throughout the year, maximising occupancy rates, and ultimately increasing your rental income.
5. Efficient Marketing: Marketing your holiday home is crucial for attracting guests. We have a comprehensive marketing plan in place to target your ideal guests. We will take care of photography, copywriting, and create an online presence for your property. With our established database of past and potential guests, we can give your property a head start in gaining bookings.
6. Safety and Property Maintenance: Security is a top concern for holiday homeowners. By partnering with an agency, you can increase the occupancy of your property throughout the year, reducing the time it remains unoccupied and vulnerable to burglaries. We can also inspect your property on your behalf and have access to a reliable network of tradespeople for maintenance, cleaning, and emergencies.
7. Compliance with Regulations: There are various rules and regulations related to health and safety and legal matters for holiday cottages. We will ensure that your property is compliant with all necessary requirements, including electrical PAT testing, gas boiler servicing and inspection, and safety/fire risk assessments.

By entrusting the management of your holiday property to Best of Suffolk, you can enjoy the advantages of time saved, professional management, local expertise, effective marketing, increased security, and compliance with regulations. Contact Best of Suffolk today to see how they can make the management of your holiday property a breeze!

Please note that these are general benefits and may not apply to every situation. It’s important to consider local regulations, market conditions, and your personal preferences when deciding whether to go down the holiday let assured shorthold tenancy route.

If you are interested in finding out more information about letting your property as a holiday home we’d love to chat to you.