Holiday Let Investment vs Long-Term Tenants in Scotland

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The Scottish Government has announced new legislation that makes operating a holiday let more complex. With this in mind, we wanted to revisit our past article on Airbnb vs renting longer term

With this new legislation coming into effect, we’re even more resolute in recommending longer leases over holiday lets to our property investment clients. Keep reading to learn more about this new legislation for holiday let operators and the differences between running an Airbnb and renting to long-term tenants.

New short-term let legislation

The Scottish Government announced on 19 January 2022 that people will need to acquire a license in order to operate short-term lets going forward. Local authorities across Scotland have until the start of October to set up these licensing schemes, and landlords will need to apply for a short term let license by 1 April 2023.

This legislation is born out of frustration from local residents complaining about noise and antisocial behaviour from holiday let guests. Many have also criticised the effect holiday lets have on housing supply for locals.

Issues with short-term lets for investors

This new legislation will require landlords to jump through extra hoops in order to operate holiday lets and allows local councils to monitor and manage the number of holiday lets in their local area. There is also legislation already in place that allows councils to require planning permission from people wanting to transform their property into a short term let.

Beyond new legislation, there are several reasons why holiday lets are not a property investment route we recommend for most of our clients. Here are a few reasons why:

1. It requires lots of management

Managing your property’s online presence, taking bookings, conversing online with incoming guests, meeting them at the property and cleaning the property before and after their visit all takes a lot of time. Short-term lets also cause more wear and tear to your property and furnishings. Tending to these issues takes money and time.

Of course, you can always hire someone else to manage these things on your behalf, but this will cut significantly into your profit margins.

2. Lack of financial stability

With long-term lets, your tenants will sign a lease for at least six months, and you know you can count on stable rental income from them for the duration of that period, barring unforeseen circumstances.

With holiday lets, this stability doesn’t exist. Your property may be fully booked one month and completely empty the next. 

Especially those who own property in areas where tourism is largely seasonal may struggle to generate much income at all during certain times of the year because of this. The global pandemic enforcing limits on travel has also shown how unstable your rental income can be with a holiday let.

3. Location matters

The amount of demand your property will have will also depend on its location within your city. Whereas a flat on Edinburgh’s Royal Mile is likely to be in high demand consistently, a home in the suburbs with more than 30 minutes’ travel time to the city’s attractions will have fewer people interested. 

While in a higher demand area, you can likely charge visitors more than you could a long-term tenant, this isn’t necessarily the case in less central areas. Add to this the amount of money and time required to manage a short-term let, and this choice may not make much financial sense.

4. You don’t know who’s staying in your property

Yes, you can choose who you allow to rent out your property on websites like Airbnb where guests can be reviewed by past hosts. But how much can you really trust these reviews? And are you willing to rent to someone who has no reviews on their profile yet?

Additionally, if they make the booking on their own account but are travelling with other people, you’ll have no idea what kind of people your other guests are. This could pose risks to your property, and there are plenty of horror stories out there about guests trashing holiday lets.

In contrast, when letting out to long-term tenants, you can vet them carefully. You can meet them, ask for references and carry out credit checks to ensure they’re a responsible tenant who’ll treat your property well.

Why opt for long-term tenancies instead

Renting out your property long-term means more stability. While finding the right tenant can take some time, once they’ve moved in, you don’t have to worry as much. You’ll collect your monthly rent and tend to maintenance issues as well as carry out periodic inspections, but the rest of the time, you can focus on other things.

And if you hire a property management company to care for your property, you have even less to worry about – they can source and secure long-term tenants on your behalf, manage the day-to-day issues and collect rent from your tenants.

In the past, the strict legislation around long-term tenancies in Scotland could have been a reason for some to opt for holiday lets instead. However, now that there’s legislation in place to guarantee the standards for short-term let properties, this may no longer be the case.

All in all, long-term tenancies tend to cause less stress. If you’re interested in learning more about property investment and lettings in Edinburgh and across Scotland’s Central Belt, have a read through our website or get in touch with us. We’d love the opportunity to sit down with you to discuss the best ways you can generate passive income from your property.

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