Long or short term letting: Which option yields greater returns?

Long or short term letting: Which option yields greater returns?

Private Property South Africa

Should we holiday let or should we look at long term letting? This is a question that property practitioners are asked on a regular basis by property investors on Durban’s North Coast. This question is being raised even more frequently as investors seek ways to maximise their returns as we ease into our new normal.

Deciding whether short or long term letting is more profitable is not a simple calculation. To reach a decision, investors should carefully consider the pros and cons of each option to get a better idea of which option is better suited to their needs,

suggests Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

To help investors reach a decision, Kim Peacock, Broker/Owner of RE/MAX Dolphin Realtors, explains the market conditions for letting homes on Durban’s North Coast: “When it comes to long term letting, the properties that are trending at the moment are: lower-end one and two bedroom apartments, freestanding pet-friendly homes in secure estates featuring three or four bedrooms, and freestanding three and four bedroom homes outside of estates that offer pet friendly options. Here on the North Coast, we are seeing freestanding properties and two-bedroom apartments that aren’t on the beach yielding the highest returns.”

“For short term letting, Airbnb is a well-known platform that is becoming more popular here on the North Coast, with more people considering holiday rentals for their investment properties. One-, two-, three- and four-bedroom units closer to the beach are especially popular for this option. The lack of hotels on the North Coast, combined with it being a popular destination for young families and its close proximity to the airport, is adding to the success of properties listed on Airbnb,” Peacock explains.

No matter where you are, some truths about long- and short-term rentals remain the same across all parts of the country.

The pros of long term letting include:

  • The investor has a known or fixed income being generated monthly, and therefore is able to ascertain the exact profit / monthly returns.
  • Less wear and tear on the property as tenants are not in and out frequently
  • Annual increase of around 10% (depending on your market)
  • You know that your home is being maintained as there is always someone on site giving feedback should something go wrong
  • From a security aspect, there is lower risk of break-ins as your property will not be standing empty for lengthy periods of time
  • There are two types of rental services available: a stress-free option that sees a rental agent maintain and deal with the tenant from the beginning of the lease to the end, or a procurement option that sees the agent secure a suitable tenant using all available credit checks and risk assessments for a once-off fee and the landlord manages the lease themselves and all maintenance issues going forward.

The pros of holiday letting on platforms like Airbnb include:

  • The platform is easy to use, and very popular worldwide
  • Payment is guaranteed
  • The platform has proven its credibility during COVID-19 by refunding deposits for people who could no longer travel
  • Your property is shown to people all over the world, giving you a large audience
  • The reviews safeguard both the “traveler” and “host” congruently, allowing the platform to “self-cleanse”

Whether you are looking to do a long-term rental or are looking for an investment property to holiday let, assistance from a team of real estate experts will be incredibly helpful to landlords who are hoping to navigate through these challenging market conditions.

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