Paul Winder, our Senior Investment Consultant and Short Term Let Manager discusses Short Term Lets - the Facts and The Need to Know Information

 I am lucky enough to be involved in all aspects of the short term let process, from selling options that allow you to explore this option, through to the managing or sourcing of management of the apartments on this basis. As a company we started exploring this option on some apartments for our landlords on Chester Racecourse some 12 years ago, so on that front we have been going longer than Airbnb and active in this market a LONG time before it was even an option for investors to buy such properties.

Over the last year, every other enquiry we receive from a potential investor, seems to revolve around the serviced accommodation model, and unfortunately it seems to be seen as the new “get rich quick” scheme with all sorts of numbers being thrown around and scant disregard to the complexity of what it is to manage an apartment and what the costs are, never mind the legality about actually running the option on the property you run it on. This all sounds very negative, and it is not, I would struggle to find any of our clients who do not earn significantly more than they would do on a Long term let, but that comes down to locations and the management involved and the access to the providers that these companies, like ourselves use.

The idea of this blog is to give some thoughts and guidance on something we are actually fully invested in on all counts.


The Popular Misconception:

You cannot run short term lets on just any property, it is just not that simple – saying that, in theory you can, but whether you are doing it legally or not is a different matter. What happens if the mortgage broker sees you are breaking the rules of your mortgage arrangements (which can include short term let use) then they can request your full mortgage remainder back, this very rarely happens, however if your lease explicitly prohibits short term lets then you are going to find yourself in a bit of a situation.

If you are going down the rent to rent route then just don’t take the word of the owner of the property you can do this, same with an agent who does not operate in this field, it is an easy selling tool for agents now.

As a company the process of getting the legal allowance of short term lets start at the very conception of the idea, so we know that when the property is marketed we have the full backing of the developer that short term lets are NOT prohibited giving the investor the confidence that they know they have options on how they decide they want to manage and rent their apartment out.


The Trade Off!!

I will discuss the actual managing agent at a later point. Managing a short term let property takes time, and the amount of time taken gets significantly greater with the amount of properties you own, cleaning, accounting, bookings, juggling etc. However it is more profitable as you don’t “bill” for your own time, so in a perfect world you will have the free time to manage these properties and they are going to be close to your home – basically meaning property and managing these properties is your full time job and you don’t have to travel any sort of distance – otherwise, to run something effectively you are going to need help and that is when you decide on who you get help from.

At a recent exhibition which was focused on the short term let market, there was a lot of talk about how the entire system can be automated, I am afraid to say that is a little bit of a pipedream – I see the phone calls at 11pm, the boilers that fault without warning, tenants not being able to operate a keybox or open a door, automation cant arrange flowers or balloons for special occasions. This is a people on people business and when any business involves dealing with people then there are variables involved, and those need to be dealt with at any point and any time.

1 or 2 properties local to you, maybe it is manageable if you are willing to give up your free time, but you also have another job this can get tiring – if you are looking for better returns in up and coming areas and you are not local, trust me it is a very hard job to juggle everything yourself, and that is the trade off – run it myself and give up my time and juggle without any on hand control but save 15-20% or let someone else do it professionally and without hassle?

This business is also very much a review based business, and if anything slips, it will get reported, bad news travels further than good news and with review sites available everywhere your desire to save money can ultimately end up costing money down the line.

But, as mentioned, if you are doing this full time, local or local-ish and it is your sole business then it is very manageable.


Selecting a Managing Agent:

This is obviously going to cost you money, it goes without saying, you are choosing someone to look after the day to day running of your property, but these services vary dramatically, and so do the fees involved, anywhere from 5% + VAT of the booking to 20% + VAT of the booking. That is quite a difference, but this is reflected in the service and bookings you achieve, the old adage of what you pay for what you get is often right.

As an individual looking after your own property, the very real likelihood is that you will be using the likes of Facebook, local ads,, Airbnb, Trip advisor and Home & Away for example, these are standard and easily accessible avenues to market. The downside is that in most cases these are “short term” short term bookings which will average out at 2-3 days (not always the case) – these come at a cost with the likes of BDC charging anywhere between 15-18% + VAT commission on the booking. More short bookings equals more footfall and more cleans, more line and more cost.

For 5% as a management fee you can use companies that will merely offer your property and facilitate the booking (aka a shop window), however you will have to arrange a cleaner, arrange your linen, arrange your own access facilities and all other aspects of the day to day side of it – what they offer you is the coverage. For example a large company who operates a service like this only use Airbnb as a window – and to give you an example of the actual target market is for Airbnb then over the 40+ units we operate, Airbnb is around 4% of our supply.

Then you look at the other companies, what so they offer for 18-20% that the others don’t – well this allows you a fully hands off operation, all aspects dealt with and all you have to pay are your ongoing costs as you would normally, all cleans arranged, all linen arranged, all problems dealt with (and there are a lot but you wont know about them) 24/7 service to the tenants, that is all great. However where the value really lies is the access they have to other avenues of suppliers of long term corporate lets, or the direct bookings that are generated through a workforce behind the scenes. These are not areas a individual can go to as the companies that the likes of the large suppliers use have to be recognised suppliers of properties. The work behind converting bookings from BDC to direct, which saves everyone money and the tenant gets a deal as well.

Companies often have dedicated employees working on price plans and marketing and making sure that your price is relevant to the demand and supply out there, if an event is on a certain weekend where prices can be inflated to achieve maximum income, or vice versa where the market is quiet and you have to be more competitive to secure bookings.

With long term lets (and we can be talking up to 6 months) you do charge a lower nightly rate, but it is far more profitable than a bunch of shorter ones, you have 100% occupancy, less cleans, less commission less hassle. When you get direct bookings then you have zero commission and usually repeat business.

The money the company invests into the marketing of your apartment is significant, SEO work, contacting and updating clients and a 24 hr service. For ourselves, relocation agents and direct bookings constitutes around 48% of our business.


What Makes a Good Location?

It would be obvious to think that popular tourist locations would be high on the list, and that would be true, for example we have a very strong tourism market in Chester and it does very well, but again we are talking shorter, short term lets in the main with a good split of long term corporate lets. The modern world is changing, and how accommodation is sourced and options available has changed for the better, and I have no doubt whatsoever that probably 1 in 2 of everyone reading this has had to travel for work for some extended period of time  whether that is 2 days or 6 months – it could be you have stopped in a serviced apartment or that you stopped in an Hotel but I can guarantee you that if it is a period over 1 or 2 weeks then it will be an apartment, more cost effective, more comfortable, and more pleasurable – try looking for a Hotel for a month in one of the major cities and look at the cost involved.

So on that front it is actually in areas where there is a strong economic workforce, areas where there is growth, areas where there are plans, where there are cranes – regeneration areas. One example is the Leeds Southbank area, over the next 5-10 years this is going to be one vast workforce building a City Centre, every single trade, whether physical, digital or technical will be on hand and will need accommodation for those contracting in that area. Developers look for the best now, not the most local, so you will have those that NEED short term let options. Then once the regeneration is going on you have the companies coming in who employ masses, and so on and son on, then when you have the new City, you have the new tourism market, it is self-perpetuating income.

Other factors to take into account is infrastructure, for example Crossrail and the Elizabeth Line, HS2 and the plans however distant away – smaller cities that are undergoing significant investment and hold large corporate businesses. 

We generally feel areas like Manchester, Leeds (Southbank), Preston, Bolton and Reading are our key locations, and where we see great potential.


The Units:

For our investors and for who we try to target to stop in these properties then it is important to remember that these are generally not “holiday cottage” lets – these aren’t for those looking for the great outdoors. The clients we are familiar with are 1) Business clients or contractors or freelancers on ongoing or short contracts working away from home OR 2) Going to an event, a trip away to a City, easy access to somewhere in particular or something else that is revolved around a social aspect.

What both 1 & 2 have in common is that where they stop revolves around ease of access to the areas they need and to all local amenities and or restaurants and bars, they want nice, functional and convenient properties, and if that is in a City then you are looking at apartments.

From an investor point of view, when buying an apartment then look at the value, for example if a 600 sq ft unit is on the 2nd floor and the same 600 sq ft unit is on the 5th floor, looking at the same thing, located in the same place then I can tell you that any nightly rate will be the same for either apartment – which actually means that if the 5th floor is (for example) £10,000 more expensive, then your returns will be higher on the lower priced unit.



The great news is that short term let income is now seen as a recognised revenue stream by a growing amount of lenders, so you are on a Buy to Let mortgage which will still be based on the AST income but it will not be forbidden that you can run short term lets on the property. This actually highlights how the property you buy to run this model on still has to be a solid investment, either completed, under construction or off plan. The lender lends based on the security of the normal route to market, which basically means that there is value in the property or the rent will cover the outgoings of the mortgage and other costs. This ultimately means that lending for short term lets is very much accepted now through quite a lot of specialist brokers out on the market.


The Basic Pros and Cons:

The pros of having short term lets are obvious, higher yields on your investment and invariably you have a well kept apartment that goes back to showroom standard every week once cleaned, having a higher yield gives you significant advantages when it comes to selling on. However it has to be noted that there are not any guarantees when it comes to short term lets, you can have quiet months, just like you can have 100% occupancy, as a rule you never really lose, but it cant be guaranteed. If you want guarantees then you have the option of AST (6/12 month tenancies).

That is the beauty of having options, they give you flexibility – if you need to ensure your mortgage is paid for 12 months then get an AST in and switch down the line, if you are more confident then go straight to short term lets.

I feel it is important to remind you that every experienced investor will tell you (correctly) that historically you do not get rich on rents, they are designed to cover the outgoings and give you a small income, that income grows as rents increase over time, the money was historically made in the appreciation of the property that was bought in an area that was seeing property values rise, like London, Manchester and Leeds. What Short term lets has given the investors now is that extra income during rental returns, it is a bonus, it’s a benefit but you still have to look at the investment first of all.

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Paul Winder, Senior Investment Consultant and Short Term Let Manager

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