Switching to Long Term Renting:
Considerations for Edinburgh Landlords
There is no denying that short term holiday lets are big business in Edinburgh – there were over 120,000 Airbnb stays booked in the city during August 2018 alone – but, now that the Festival is over, can short term rentals remain profitable? We look as some considerations for landlords considering switching to long term tenancies.
Short term holiday lets can be a lucrative venture for anyone with a property, or even a spare room, in or close to the city centre; there are plenty of landlords willing to tell you about the fantastic amounts of money they are earning per night during peak times. However, as more and more people are advertising their property for rent, the short term rental market is becoming increasingly saturated across the city. Although, (for most) the August Festival period and Hogmanay are still profitable, the overcrowded market means that, even at these traditionally busy times, some property owners are experiencing lower nightly rates and even void periods.
The long term rental market, on the other hand, is having the opposite issue – there are not enough properties – and this is especially true for good quality one and two bedroom flats. The shortage of properties available for long term let – partly due to landlords switching to holiday lets – is creating fierce competition between tenants and is pushing up rent levels. The average rent in Edinburgh is now £1,087pcm, and our average time to let is just 16 days, although it can be considerably less for one and two bedroom flats.
There are some key differences between short term holiday lets and renting to long term tenants. We have included some of the key considerations for landlords considering switching from short term to long term lettings below.
1. Monthly Costs
Although the rental income for a long term tenancy can be lower per month than that for a holiday let, you should find that your associated monthly costs are also lower. Monthly savings for landlords include:
|Short term lets||Long term lets|
|Gas and electricity||Landlord cost||Tenant cost|
|Council tax||Landlord cost||Tenant cost|
|Broadband||Landlord cost||Tenant cost|
|TV licence||Landlord cost||Tenant cost|
|Maintenance||Landlord cost||Landlord cost|
Landlords with long term lets also avoid the frequent – and costly – changeovers involved with short term lets. Changeovers for holiday lets can be required multiple times per week and include a thorough clean, changing bedding and towels, and replacing toiletries. For long term tenancies the outgoing tenant should pay for the clean, so the landlord will only have this cost for the first tenancy, and tenants provide their own bedding and towels. Although there is no guarantee on the length of a long term tenancy, changeovers will be significantly less frequent than short term lets, with most tenants staying for a minimum of 6 months.
Insurance will be another area where landlords will likely save on costs. Unlike short term rentals, landlords renting long term require landlords insurance, rather than costly (and sometimes difficult to secure) holiday rental insurance.
2. Furnishing and Decoration
Furnished rental properties are in high demand in Edinburgh, so switching a property from short term to long term lets should be straightforward. The main difference is that long term tenants do not require all of the items included for short term lets, some examples of items that should be removed include:
- Bedding and towels
- Decorative items (photo frames, art work, throws etc.)
- Kitchen ware (crockery, glassware, pots and pans etc.)
- Additional items (books etc.)
The key for a long term rental property is to provide a blank canvas that tenants can make their own. As with holiday lets, long term tenants value quality furnishings and are usually willing to pay premium rents for this. Long term tenants are also more likely to look after the property, meaning less wear and tear and lower costs to upkeep for the landlord.
3. Safety Requirements
Although most short term letting agencies do recommend that landlords have the relevant safety checks carried out, the safety requirements for short term holiday lets are currently unclear, meaning that many do not have the safety alarms and certificates required for long term lets.
Safety requirements for long term tenancies are stringent and must be adhered to. To begin a long term tenancy, properties are required to have:
- Gas safety certificate
- Electrical Installation Condition Report
- Portable Appliance Test
- Legionella Risk Assessment
- CO alarm
- Smoke and heat alarms
Find out more about the safety certificates and alarms required, including the prices charged by our contractors, for long term tenancies.
As the short term lettings market continues to grow, it is likely that stricter regulations will be introduced in the near future. Although we don’t know yet what form these regulations will take, they will likely include:
- Requirement to have a licence. Short term landlords would be required to obtain a licence from the Council to let their property for more than a predetermined number of days per year.
- Safety requirements. Safety requirements brought in line with those for long term rentals (as above).
Changes to regulation, and high levels of competition in an already saturated market, mean that, for some short term landlords, long term tenancies may be an attractive prospect.