Short-Term vs. Long-Term Rentals: Which Option Provides the Best Returns?

As landlord costs rise and the property market continues to evolve, many property owners are reassessing their rental strategies. Some are tempted by the higher potential yields of short-term lets, but others find that long-term rentals offer more consistent returns and fewer headaches. To help you decide which strategy best suits your investment goals, let's explore the key differences between short-term and long-term rentals—and why long-term lets often provide the best balance of stability and profitability.

1. Rental Income: Stability Over Fluctuation

While short-term lets can offer higher rental income on a per-night basis, especially during peak seasons or major events, this income comes with the risk of fluctuating occupancy rates. During off-peak times, your property may sit vacant for extended periods, leaving you with gaps in your rental income. Additionally, managing pricing to keep up with demand can be time-consuming and unpredictable.

In contrast, long-term lets offer a steady, reliable income stream. With a long-term tenant in place, you can count on regular rent payments month after month, providing the financial security and predictability that many landlords prefer. This consistent cash flow can be especially valuable for covering mortgage payments or meeting living expenses.

Beyond monthly rent, long-term rentals can also offer significant capital appreciation over time, especially in high-demand or growing areas. The combination of stable income and property value growth often results in strong, long-term returns.

2. Occupancy Rates and Voids: Minimising Vacancy Risks

One of the biggest challenges with short-term lets is managing occupancy. While they can generate higher income per night, short-term rentals often experience fluctuating occupancy rates. During quieter months or in less popular locations, your property could sit vacant for weeks at a time, leading to periods of no income.

On the other hand, long-term lets provide more stability with fewer void periods. Once a tenant is in place, there’s a good chance they’ll stay for a year or longer, reducing the risk of vacancies and offering landlords peace of mind. This stability can be particularly important for those who rely on rental income to meet financial obligations.

With long-term rentals, the risk of extended void periods is significantly lower, making them an attractive option for landlords seeking a hassle-free and predictable income.

3. Property Management: Less Time, Less Effort

Managing a short-term let can be a full-time job, especially when dealing with frequent tenant turnover. Each new guest requires check-in, check-out, and cleaning, along with regular maintenance and communication. If you're managing the property yourself, this can quickly become time-consuming and exhausting. Even if you hire a property management company, the costs can add up due to the more hands-on nature of short-term rentals.

With long-term rentals, property management is far simpler. Once a tenant signs a lease, the property typically requires much less ongoing attention. You’ll have fewer tenant turnovers to manage, and maintenance is generally limited to periodic repairs or minor updates. This makes long-term rentals ideal for landlords who prefer a more passive investment or want to minimise their day-to-day involvement in property management.

4. Location: Versatility and Demand

The success of a rental strategy heavily depends on location. Short-term lets often perform best in tourist-heavy areas, city centres, or locations with high demand for temporary stays, such as near transport hubs or event venues. However, if your property is situated in a quieter, rural area, it may struggle to generate enough short-term demand to make the strategy profitable.

Long-term rentals, on the other hand, are more versatile and can work in a wider range of locations, including suburban and rural areas. While urban areas typically provide the highest demand, there’s often steady demand for long-term housing in quieter areas, especially for individuals or families seeking stability.

With long-term lets, you have more options when it comes to location, and the demand for rental properties is generally more consistent than the seasonal or event-based fluctuations that impact short-term lets.

5. Furnishing and Décor: Keeping It Simple

For a short-term let, you’ll need to fully furnish the property with everything a guest might need, from kitchenware to linens, and invest in stylish, attractive décor. High-quality furnishings are essential to securing premium rates and drawing in guests. Additionally, regular updates and seasonal changes to décor are often required to maintain a competitive edge.

In contrast, long-term lets require far fewer furnishings. Typically, you'll only need to provide basic furniture, and the focus is more on functionality and comfort rather than aesthetics. This makes the setup and maintenance costs of long-term rentals lower, which can be a significant advantage if you’re looking to minimise upfront investment and ongoing expenses.

6. Maintenance Costs: Predictable and Less Frequent

Short-term lets often experience higher wear and tear due to frequent tenant changeovers. The constant influx of guests can lead to more cleaning, repairs, and general upkeep. This increases maintenance costs and can eat into your overall profitability. In addition, you'll need to account for the time and expense involved in keeping the property in top shape for each new guest.

With long-term rentals, wear and tear is generally slower due to fewer tenant changes. While you’ll still need to handle regular maintenance, it’s usually limited to periodic redecorating, repairs, and minor updates. This makes long-term rentals more cost-effective in terms of upkeep, as there’s less pressure to constantly refresh the property.

7. Flexibility: Adaptability for Your Investment Strategy

While short-term lets can provide high returns during peak seasons, the unpredictability of occupancy rates and the additional effort involved in property management may not suit every investor. If you're looking for a more hands-off investment strategy, or if you prefer the reliability of steady income, long-term rentals are the better option.

Moreover, with long-term lets, there’s greater flexibility if your circumstances change. If you need to sell the property or transition to another investment strategy, having a stable tenant already in place can help make the process smoother.

Which Option Is Right for You?

While short-term lets may offer higher yields in certain scenarios, long-term rentals provide a more consistent, reliable income stream and require less ongoing effort. If you’re looking for a less hands-on, more predictable investment with lower maintenance costs, long-term lets are likely the better choice for you.

The best strategy for your property depends on various factors such as location, your financial goals, and the amount of time you’re willing to commit to property management. If you're unsure which rental model best suits your needs, it’s always worth seeking advice from a local letting expert.

At Let Correct, we’re here to help you maximise your property’s potential. Contact your local branch today for expert guidance and tailored advice on whether a short-term or long-term rental strategy is the right fit for you.