Airbnb vs Long Term Lets – Head to Head
Is Airbnb more Profitable than Long Term Renting?
In our latest blog post we are going to compare long term renting and Airbnb.
And provide you with the answer to “Which investment is the best property investment strategy for you?”
First let’s cover the basics when it comes to airbnb and long term lets then we will get onto telling you is Airbnb more profitable than renting in 2019.
What is an Airbnb Rental?
Airbnb is a platform that connects people who are willing to share a space with guests for money. Basically, what you have to do is to list your room, house, villa, or even yacht on the website, and wait for reservations. Airbnb rentals are considered a short term rental strategy for the properties are usually rented up to one month only.
What is a Long Term Let?
Traditional rentals are one of the long term investment strategies. In traditional renting, a real estate investor buys a rental property in order to rent it out for at least 6 months, during which the tenants will pay rent on a steady basis agreed upon in the lease agreement.
Airbnb vs Long Term Lets – Pros & Cons
Now we have the basics covered it’s time to take a look at some high level benefits and disadvantages to both long term lets and Airbnb.
Airbnb – The benefits
When it comes to listing your property on Airbnb you can expect the following benefits;
Adventure
Well, if you are the type of person who loves to meet new people all the time, then this is for you. Since Airbnb rentals are based on short term stays, you can enjoy having a new guest every few days. On the other hand, with long term rentals, you will have the same tenants for a long time.
Potentially Extremely Lucrative
Commands a far higher rate than long term rentals. Some short-term properties can make more in one week from short-term stays than the property commands from one month on a long-term lease!
High demand for short-term property
Short-term renting is certainly becoming more & more popular. Not just for holiday-makers looking to make their trip more authentic but businesses are also starting to favour renting flats & houses for their staff rather than putting them up in hotels for short periods. This means that, providing your property is of a decent standard and within an area/city of relatively strong demand, you shouldn’t have a problem attracting prospective tenants.
Greater flexibility for tenants & landlords
Tenants can extend their stay if required (depending on bookings) or can book numerous stays at the same property throughout the year. Landlords can also get access for personal use as and when they require.
Long Term Lets – The Benefits
Free Time
Well, if you are not that good with people, you might not want to rent your property on Airbnb. It requires dealing with your visitors directly, while in long-term rentals you will only have to deal with your tenants when signing the lease and if any situation occurs.
Property management
You will also have to manage your property alone if you want to make the most money with Airbnb rentals. This also means you will have to invest a lot of your time in this. In traditional rentals, meanwhile, you have the option of hiring a property management firm to take care of your property for you. They are going to handle tenants, rent collection, and other operations related to your investment property. Therefore, you will not have to deal with your tenants unless a situation requires your presence.
Stability & Financial Consistency
Long term tenancies require a monthly rent to be paid. This provides peace of mind in the knowledge that your residual income will be received month on month into your bank account. This allows you to budget accordingly and manage your own finances. It also helps with your annual tax planning.
Ability to select the right tenant for your property
As a landlord looking to rent a property long term, you have the ability to screen all prospective tenants. By reviewing previous landlord references, employer references and requesting financial statements, you have far more choice in who will live in your rental investment. This provides peace of mind and potentially a lot less headaches!
Less time consuming
Assuming you have quality tenants & a quality agency in place to manage your long-term property investment, you technically don’t have to do very much! You don’t need to commit time to complete move-ins, move-outs or property inspections. All issues are dealt with by the agent so, providing there aren’t too many remedial issues throughout the year, all you really need to do is communicate with your agent when necessary and reap the monthly rewards of net rental profits!
Airbnb – The Disadvantages
Now that we have looked at the benefits of both in our blog post Airbnb vs Renting it’s time to look at the disadvantages to both.
Void Periods
Much like a hotel, it’s nearly impossible to coordinate one tenancy with the next while aiming to run at full capacity all year round. When you then bring into play seasonality & Scotland’s extremely volatile weather, short-term lets tend to generate erratic lump-sum income.
Higher levels of Wear & Tear
The greater amount of tenancies, the greater the wear & tear to the condition of furniture, furnishings & decoration. Pure and simple. Your costs to repair, replace and redecorate increase with every move-in & move-out!
Time Consuming if managing personally
Being available for every move-in and every move-out is extremely restricting. The time then required to clean, change beds and essentially turn the property round for the next tenancy can be quite over-whelming. If you’re aiming to do this every week to ensure a high occupancy rate, expect your own social life to suffer.
Long Term Renting – The Disadvantages
Now let’s have a look at the disadvantages to renting and long term lets;
Void periods (Again)
Same as the short-term market, there are risks involved when renting out property long-term. Void periods are the main concern! The quality of your BTL and the chosen location to invest in are critical to ensure that you don’t have issues with occupancy rates.
More onerous regulations
As of January 2018, the rental market is now regulated by ARLA Propertymark. With a new private rental agreement in place, an amended code of practice for all letting agents, ever-evolving & increasing regulatory requirements and a greater need to educate both landlords & tenants, there is an argument to suggest that landlords have a lot more ‘hassle’ and legislation to consider these days. You don’t have the same stipulations and registration requirements when renting short-term.
Late or missed payments
Although a long term lease requires monthly rental payments, tenants can and will have their own financial difficulties. This can lead to late payment or even worse, no payment at all! This can be a big problem when you haven’t built up a surplus and have your own mortgage payments to pay for the rental property. Too many late/missed payments can of course lead to eviction/court action which in itself can be extremely costly and time-consuming.
Airbnb – The Stats
- To make sure we give you all the info when it comes to looking at Airbnb vs Renting let’s take a look at some of the statistics available about Airbnb;
- A report by the Residential Landlords Association (RLA) shows a 75% growth in the number of multi-listings on Airbnb in the last year.
- If Airbnb were classed by the industry as a hotel chain, it would represent more than 22% of the UK hotel inventory, according to Magnuson Hotels.
- One extreme example of Airbnb success is a landlord with over 881 properties in London who made over £11 million in one year alone.
Long term Lets – The Stats
Now time for long term lets to show us the stats and figures in the battle of Airbnb vs Long term lets!
- A 2017 profile of private UK landlords found that 62% owned a single rented property, 7% owning 5 or more rental properties.
- In a survey conducted by ARLA Propertymark (formerly the Association of Residential Letting Agents) 59% of lettings agents say that they expect rents to rise in 2018
- One third reported an annual income of between £5000 and £10,000.
Is Airbnb more Profitable than Renting?
Time to wrap up our Airbnb vs renting – Is Airbnb more profitable than renting in 2019 guide.
Cox & Co believe that the best property investment strategy is still investing in long term lets. So in this battle of Airbnb vs Renting, Renting wins!
Property investment should be a long term plan that you can grow into an additional passive revenue stream that you spend little or no time to managing. Ultimately this can only be done with renting and not Airbnb.
If you are looking for property investment or management advice or if you are looking to grow your portfolio get in touch with Cox & Co today.
