Short-Term Letting: A Guide For Landlords and Investors

First things first, what is it?

It may seem self-explanatory and in many ways it is, but there is often a degree of confusion as to exactly what is considered short-term letting.

In the majority of cases, short-term letting is when a property is rented out for a period of less than 90 nights. However, short lets typically last anywhere from a couple of nights to a month.

Incidentally, until platforms like Airbnb came along, short-term rentals usually didn’t count for anything less than weeks or months.

But now, last-minute bookings of one or two-night stays – made easily through the company’s website or mobile app – have transformed the industry.

Perhaps the main difference between this and having a long-term tenant is that there can be significant variations in what is classified as a ‘short stay’.

For instance, people going for a two-night city break or a three-week holiday abroad all fall under the ‘short-stay’ umbrella, expanding the potential customer base for property owners.

This indicates just how broad the market has become and how lucrative a short-term rental property can be if managed and marketed correctly.

Due to the nature of what people are availing of the service for (usually a holiday or travelling for a particular event), short-term tenants are generally prepared to pay significantly more per night than what will be earned from a long-term tenancy.

Either way, short-term lettings mean hosting tenants for short periods of time and have the potential to earn you a lot of extra income – that’s all you really need to know for now.

So how exactly do you go about investing in short-term lettings UK?

Importantly, there are a number of ways to invest in a short-term rental property that can make the endeavour more affordable and maximise its capital growth potential.

One such strategy is investing in off-plan property, which means purchasing a unit in a property while it’s still in construction.

While this might mean you have to wait slightly longer before making a return, investing off-plan will usually enable you to pay for the property in stages, making it much more financially manageable.

Additionally, based on current UK property price growth predictions, if you purchase a property now, it will likely have increased in value by the time it’s complete and ready for tenants, creating an excellent capital growth opportunity!

In any case, there are a number of things that new hosts or landlords should be aware of prior to investing in property for short-term lettings.

These include:

• Planning Permission
• Short-Term Rental Law UK
• Purchasing a Short-Term Rental Property
• Potential Return from Short-Term Lettings

Planning Permission

For potential investors interested in short-term lettings UK, planning permission regarding letting out property for short periods is one of the most common queries.

In simple terms, you do need planning permission if you want to rent out your property for short lets that together amount to more than 90 days per year.

If you are not required to pay council tax on the property in question, then you will also need planning permission if you have any intention of renting it out.

Either way, ensure that you have obtained the required permissions from the council or relevant local authorities in your area before advertising the property for short lets, as regulations can vary from place to place.

Short-Term Rental Law UK

Following the swift rise and recent transition within the short-term rental market, Governments across the world have had to adapt regulations to keep up with these fast-moving developments.

Due to the speed of this shift in the rental accommodation sector, there have been concerns that regulations that hotel and B&B owners must abide by have not yet reached properties listed on platforms like Airbnb. Therefore, governments have been developing new ways to better regulate and control areas of the market.

This has sparked some recent changes to UK law, leading to a number of new rules for short-term rentals that prospective landlords and investors should be aware of. These are:

• The Deregulation Act
  The Short-Term Licensing Scheme
  The Registration Scheme for Short-Term Lets

Read more about these rules in our next section.

Deregulation Act

One such example of a recent legislative change brought in by the UK Gov is the Deregulation Act of 2015.

Before this particular act became law, homeowners in London were not allowed to rent out their properties for less than a period of three months without planning permission.

Now, however, properties can be legally rented out for up to 90 days without the need to go through the process of applying for and obtaining planning permission.

Short-Term Licensing Scheme

In another recent development, the Scottish Government introduced the short-term let licence which is now a requirement for all owners of short-term rental properties.

As the industry continues to expand, short-term lets licensing is likely to become more common. Therefore, it’s important to keep up to date with the latest announcements from the relevant licensing authorities whether you’re a prospective or existing host.

For example, since the 1st of October 2022, landlords of all such properties in Scotland have been required to have one of the following four types of licences:

• Home Sharing
• Home Letting
• Secondary Letting
• Home Letting and Home Sharing

Registration Scheme for Short-Term Lets

In a similar attempt to monitor short-term lettings in England, the government has committed to introducing a registration scheme through the Levelling Up and Regeneration Bill (tabled in December 2022).

Citing the need to develop a ‘responsible, high-quality and competitive short-term lets sector’, the thinking is that registering short-term lets would provide data enabling local authorities to have access to relevant information on properties being rented out in the locality.

This also stems from a concern about the potentially damaging effects of the increase in short-term lets on local housing markets where a ‘hollowing out’ of communities and thus a rise in anti-social behaviour have been highlighted as possible problems.