Short-term Rentals - Are They Worth It For Investors?

Short-term rentals are an accessible way to get into property investment, thanks to their flexibility and opportunity for future growth. The trend for ‘staycations’ or holidays in the UK continues to increase, meaning that short-term rentals or STRs are a popular property investment choice. Our guide to short-term rental investment will help you choose your first STR property, stick to your budget, and maximise your rental yield. Read on to find out more, including potential pitfalls of STRs and other important information for a new property investor.

Table of Contents

What is a Short-Term Rental?
Pros and Cons of Short-Term Rentals
Guide to Investing in Short-Term Rentals

What is a Short-Term Rental?

A short-term rental is a property that is let out to tenants for a short period, i.e. less than 3 months. Short-term rentals are often used for holidays or people visiting an area for a short time. A short-term rental can be for as little as one day or up to 90 days. Platforms like Airbnb have really opened up the short-term rental market, allowing more people than ever to make some money by letting out a room in their house or an entire property. You can usually charge a lot more per night than you would for a regular residential letting, so short-term rentals can be very lucrative for property investors.

Pros and Cons of Short-Term Rentals

There are several benefits and drawbacks to investing in short-term rentals that you should be aware of before investing.

Pros of short-term rentals

They have higher income potential: You can charge a premium per night compared to long-term rentals.

They offer more flexibility than residential lets, and you can adjust your calendar around demand.

In some areas, STRs aren’t subject to the same legal restrictions and regulations as long-term tenancies.
You can use your short-term rental property as your own holiday home.

Because stays are short and varied, you’re less likely to see damage from prolonged use.

Cons of short-term rentals

You will need to clean the property, restock supplies, and manage bookings more frequently.
The demand for short-term rentals can vary depending on the season, and you may experience long void periods.
The additional costs of cleaning services, utilities, furnishings, and booking platform fees can soon add up and cut into your profits.
Some councils have introduced rules to restrict STR use, particularly in popular tourist areas.

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Guide to Investing in Short-Term Rentals

Choose the Right Location

Tourist hotspots, seaside towns, cities with regular events or business travel, and countryside retreats are popular locations for short-term rentals. Look for nearby attractions or points of interest, good transport links and parking availability, and year-round demand potential – beach towns are great in the summer but few people want a beach holiday in the winter, so consider locations that have something to offer visitors year-round. Avoid areas where councils are cracking down on STRs or where there’s a strong anti-tourism sentiment. Look into the local authority’s rules on short-term rentals and holiday lets to find out if there are any restrictions you should be aware of before investing.

FAQ: Can I still get a mortgage for a short-term rental?

Yes, but you’ll likely need a holiday let or commercial mortgage, not a standard buy-to-let one. Speak to a mortgage broker for tailored advice.

Understand Local Regulations

Some local authorities in the UK require planning permission for STRs, or only allow for a certain number in the area, to avoid locals being pushed out of their communities. For example, in London, short-term rentals can’t be let for more than 90 days per year unless the local council grants special permission. Some local authorities require a licence to be granted for STRs to ensure hosts meet quality standards and to regulate this growing market. Always check with the local council and understand your responsibilities under the Deregulation Act and any other applicable legislation.

Budget for Setup and Ongoing Costs

You’ll need to fully furnish and decorate the property to a high standard, including high-quality beds and linens, all kitchen equipment from fridges and cookers to cutlery and pans, reliable Wi-Fi and a smart TV, plus essentials like cleaning supplies and toiletries. I recommend setting aside a budget for marketing, platform fees (like Airbnb or Booking.com), maintenance, and professional cleaning between guests..

Market Your STR Effectively

Use a professional photographer to take photos for your STR listing and take the time to write compelling descriptions to make your listing stand out. Keep calendars updated and respond promptly to enquiries. Good reviews are key to continued bookings, so guest experience is critical. Consider listing across multiple platforms to reach a wider audience and reduce reliance on a single source of bookings.

Maximise Rental Yield

There are a few ways you can increase the rental yield of your STR. Consider adjusting prices dynamically using pricing tools or software to make the most of busy periods. Offer discounts for longer stays to reduce changeovers and encourage direct bookings through a simple website, or offer discounts to returning guests. You can also upsell extras like early check-in, pet fees for visiting dogs and cats (yes, some people bring their cat on holiday), or welcome hampers.

Prepare for the Risks

Keep a contingency fund saved for months with fewer bookings or emergency maintenance. You also might need specific insurance for short-term rentals, as standard home insurance or landlord’s insurance might not provide adequate cover – look for insurance companies that specialise in STRs. Also, have clear guest rules and use damage deposits or booking platform protections to mitigate losses from damages or cancellations.

Short-term rentals can be an excellent property investment option, especially for beginners who want flexibility and the potential for higher income. However, they’re not passive and require good organisation, legal awareness, and guest service to run effectively. STRs offer higher returns in the right setting but also come with more work and potential risk. If you choose the right property in a good location, manage it well, and prepare for the challenges, a short-term rental could be a very rewarding investment and a great addition to your portfolio.

Find out more about how to succeed with short-term rentals and other property investment tips with one of Assets For Life’s FREE property training events and in-person property investment courses – sign up via the link below.