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Short-Term Lets in Liverpool: Is It Right for Buy-to-Let Investors?

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    Why Buy-to-Let Investors Should Consider Short-Term Lets in Liverpool?

    When getting into buy-to-let property investment, there are many decisions to be made.

    What kind of property should you invest in? Where should you invest? What are the different types of property investment?

    These are all important steps to the process, but one of the most important questions you need to ask yourself should happen after you have invested your money: how long do I want the leases on my property to be?

    In the same way that there are different types of investment properties, there are different kinds of rental agreements. The two different kinds of rental agreements, long-term lets and short-term lets, each come with advantages and disadvantages.

    They can appeal in different ways to different kinds of renters, and landlords should be aware of each when investing in buy-to-let property.

    Today, we’ll be comparing short-term lets and long-term lets. In addition, we’ll be taking a look at the short-term and long-term buy-to-let market in Liverpool and establishing why this city could prove vital to any short-term let property investment strategy.

    Finally, we’ll look at one of the top serviced accommodation opportunities available to buy in the area right now: Sky Gardens.

    Landlord handing keys to the tenant

    What Is Short-Term Let?

    Short-term lettings are agreements between the landlord and the renter that can be anywhere from a couple of weeks to six months.

    Offering a cost-effective alternative to staying in a serviced accommodation like an Airbnb property or hotel, short-term lettings are ideal for renters staying in an area for a short period.

    These are ideal for tenants travelling a lot for work or other reasons, as well as landlords in areas with more demand than supply in the real estate market. This is because they can adjust rental prices more efficiently and get an increased return vs long-term letting.

    However, short-term rental properties can be riskier for landlords, as it means having to regularly find new tenants to occupy the property. You may also have additional fees that long-term tenants would pay themselves, like furnishings, Wi-Fi, and bills.

    Tenants may cause more wear and tear to the property due to not seeing it like a home, as with long-term agreements. Additionally, neighbours may not appreciate the constant coming and going of tenants.

    The hand is pressing calculators, piggy bank with wooden house. buy or rent question on note with calculators on desk. Save money and buy house concept.

    Pros of Short-Term Lets

    • Higher Rental Fees

    Landlords can make the most of the rising prices in the rental market through the ability to increase rental fees regularly. This means you can collect higher rent payments from tenants to match the rental market as a whole.

    • More Flexibility

    If you are having issues with a tenant, it is easier to move on from them with a short-term let. This means you are less likely to be stuck with troublesome tenants, as you do not need to wait as long for their contract to run out.

    • Easier for Convenience

    Tenants needing somewhere to live fast are more likely to sign a short-term lease than a long-term one. In addition, a tenant on a short-term lease may ask to make it a long-term one. They are less likely to negotiate heavily, unlike with long-term contracts.

    • Lower Exit Costs For Tenants

    Unlike a long-term let, tenants do not have to wait a long time to move on from a tenancy if they choose to. This means they will not still be paying for the property if they move out for whatever reason.

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    Cons of Short-Term Lets

    While short-term lets can be lucrative, investors should be aware of the following:

    • Risk of Empty Properties

    With a short-term tenancy agreement, landlords run the risk of empty properties as they have to find new tenants regularly. This makes it more difficult to maintain a steady income through your investments.

    • Additional Costs

    Short-term tenancies often mean renters will not want to pay for or supply things such as furniture, utility bills, or Wi-Fi. This means extra costs for property owners, so you will see less of a net return on your investment.

    • More Time and Effort Required

    Landlords will spend more of their time dealing with short-term lettings. A higher turnover of tenants means more tenancy agreements to be drafted. Ensuring they move in and out without any issues means landlords have more work to do than with long-term tenancies.

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      What Kind of Mortgage Do You Need for Short-Term Lets?

      As a buy-to-let investor, it’s important to know which mortgage you’ll need to rent out a property on a short-term basis. Some people assume they need a specific type of buy-to-let mortgage. In the majority of cases, most lenders provide standard buy-to-let mortgages.

      However, lenders will insist you meet their buy-to-let requirements. Typically, lenders will place restrictions on how long you rent out the property throughout the year. However, some lenders are more flexible than others. Shop around for the best mortgage to suit your investment strategy.

      You can also apply for a holiday let mortgage. Many lenders consider this a better option than a buy-to-let mortgage. These are less common than standard buy-to-lets, and lenders will have their own regulations and quirks, so make sure you consult a mortgage advisor beforehand.

      However, if you plan on renting out serviced accommodation, you will need a specialist mortgage. Serviced accommodation mortgages or commercial mortgages are two options for this type of property.

      Serviced accommodation loans are more difficult to find and allow landlords to rent our properties on a short-term basis.

      Serviced accommodations are considered a trading business. As such, you’ll need a commercial mortgage to purchase this type of property. Luckily, these properties are purpose-built and require C1 planning, which removes any cap on the number of days they can be rented out. As such, your potential ROI is considerably higher than other short-term rental properties.

      Alternatively, you can buy your short-term rental property with cash. This forgoes any potential mortgage headaches and makes the entire sale process more streamlined.

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      Long-Term Letting Meaning

      Long-term lettings are generally agreements between tenants and landlords that will cover a period longer than six months. They are ideal for those looking to stay in an area for a long time.

      Long-term leases offer more stability for both the landlord and renter. The landlord receives a consistent cash flow of rental income, and the tenant avoids fluctuating rental prices and the awkwardness of having to move locations often.

      However, landlords cannot make the most of changes in rental prices, and if long-term tenants cause problems, then it can cause issues in solving them.

      There can also be more work for landlords due to additional legal requirements they have to meet throughout the tenancy. Property management companies can help manage this for you, but this does come with a fee.

      Renters may find somewhere else that suits their needs, but being stuck in a long-term lease means they have to remain at their current location.

      Long-term rental properties are often highly sought after by renters as they offer stability and allow both renters and landlords the ability to make long-term financial plans.

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      Pros of Long-Term Letting

      • The consistent cash flow for landlords

      This guaranteed income allows you to have peace of mind that you are making a return on your investment. While it will not increase over the term of the tenancy, it is a stable source of income.

      • Avoids the hassle of finding tenants

      Having to find tenants for your rental property can be a pain, so knowing you will have tenants for the long-term future makes your life much easier. It allows landlords and tenants to operate in good faith.

      • Allows for flexibility in negotiations

      Seeing as landlords offering a long-term let expect to be working with their tenants for an extended period, tenancy agreements may be more flexible to ensure the relationship between landlord and tenant remains smooth.

      • Less time and effort

      One of the key benefits of long-term rent is that, quite often, there is little for landlords to do once the tenancy agreement is set up. Many renters set up bank transactions to automatically send rent money every month, so it is often just a case of upkeep and collecting your money.

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      Cons of Long-Term Let

      • More complex negotiations

      As renters will be living at the property for a longer period, there are likely to be deeper negotiations involved when setting up the rental agreement.

      • Fixed-term contracts

      This is a weakness for both landlords and renters. With the average tenancy agreement lasting around a year, this means the rental price is capped. If the rental market sees a rise, then landlords are not able to see the benefits of this until the tenancy agreement ends.

      • More legal obligations

      Tenants in long-term lettings will see the property as a home rather than just a place to sleep. Part of being a landlord is ensuring your tenants have a safe service, and so there are additional legal obligations that you will need to deal with.

        The Gateway Liverpool

        Liverpool Long-Term Rental Market

        The average property price in Liverpool is £177,628 as per the HM Land Registry House Price Index. puts the average rental cost at £1,150 PCM. This equates to £13,800 a year. In addition, investors can expect yields of 7.77% on average. However, some areas offer yields exceeding 10%. In comparison, the UK rental yield is only 5.19%.

        According to the Homelet Rental Index, the North West has enjoyed a healthy rental growth of 9.70% over the last year.

        Property Type One-Bedroom Apartment
        List Price £170,000
        Occupancy Level 100%
        Gross Rental Income per Year £11,100
        Gross Rental Yield 6.50%
        Management Fee (12.5%) £1,387.50
        Building Insurance (North West Average) £112
        Service Charge (Average) £1,863
        Contents Insurance (North West Average) £59
        Total Costs £3,421.50
        NET Rental Income £7,678.50
        NET Rental Yield 4.50%

        The following table represents a long-let net yield for a typical one-bedroom apartment in Liverpool. Fixed costs such as utility bills, council tax and similar bills have not been included [September 2023].

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        Want to become a successful buy to let investor? Get our free investment guide today for all the latest tips!

        Download Guide Guide - Buy to let investment guide

        Liverpool Investment Guide

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        Download Guide Guide Liverpool Investment Guide
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        Liverpool Short-Term Rental Market

        Liverpool is a city that attracts tourists. Thanks to the Beatles, Liverpool and Everton Football Clubs, more museums than any other place in the UK outside London, stunning architecture and no fewer than seven universities, the city is a fantastic option for your short-term rent strategy.

        The North West is predicted to experience 11.70% capital growth by 2027. This will provide more opportunities to attract visitors to Liverpool and the surrounding areas.

        The city welcomed 71.7 million visitors in 2022, which was 40% more than the previous years. In addition, landlords do not have to worry about rental restrictions in the city – London investors can only short-let apartments for 90 days. Read more about some of the latest property investments in London with our guide.

        The average occupancy rate for the city is 48%. The UK average is 52%.

        Airbnb puts the average daily rate for short lets at £145 in the area. So, if you were buying property for Airbnb purposes and renting it out at the average price and occupancy rate, you would earn £25,520 per year. This would cover your mortgage, pay your overheads and provide a nice profit as well.

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        Sky Gardens

        Sky Gardens: One of the Top Short-Term Lets Liverpool Has to Offer

        If you are interested in short-term lets, check out Sky Gardens.

        These serviced apartments come with state-of-the-art fixtures and integrated appliances. The building has 24-hour concierge service and a roof garden for panoramic views. The building also has C1 planning consent, and apartments can be let out without restrictions.

        Sky Gardens is in one of the most popular Liverpool suburbs, Crosby. It is a short walk from the beach and an 18-minute rail commute into the city centre. The Times dubbed Crosby as one of the top places to live in the UK. The area has plenty of fantastic eateries and amenities. Crosby is also home to sports stars and celebrities.

        Units start at £149,950 and promise strong rental returns. In addition, the properties are already built, which means you could let them out straight away.

        Take advantage of Liverpool’s thriving tourism sector and enter into one of the best short-term rental markets in the UK.

        Unit A-401 Back on the Market!

        Completed Manhattan apartment back on the market in our sold out, award-winning development with £9,097 Net rental income. Move quickly to secure this unit.

        Monthly Net Yield Forecast for Crosby Sky Gardens Short-Term Lets

        Property Type One-Bedroom Apartment
        List Price £149,950
        Target Monthly Occupancy 75%
        Rate per Night £79
        Gross Rental Income per Month £1,778
        Gross Rental Yield 14.23%
        Listing Platform Fee (Airbnb, 15%) £267
        Management Fee (18% + VAT) £384
        NET Total Income per Month per Unit £1,127
        NET Rental Yield 9.02%

        Calculated on the basis of 30 days per month. Net total and net rental yield are an estimate based on costs listed in the table. Other fixed costs, such as council tax, Wi-Fi costs, and utility costs, are still unconfirmed and will need to be taken into account when considering an investment [September 2023].

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        Dale Barham

        Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.

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