How lucrative are short term lettings?

Short terms generate higher rents than long term tenancies but there are reasons for this.  

Recently we discussed the varying attitudes of Airbnb in Malaysia. With different laws across the country, Malaysia is fairly relaxed to this online platform. Whereas some countries, such as Singapore, are trying to discourage the operation of Airbnb by placing restrictions on short term lettings.

As a landlord in Malaysia – assuming that you are located in an area that permits short term lettings – leasing out your property on a short term basis is a lucrative option. Plus it could widen your net to prospective tenants too by including holidaymakers. After all you want to generate the best rental yield that you can. However there are a few points that you need to consider with short term lettings that are not applicable for longer term tenancies. (Note long term tenancies are usually anything over six months.)

So before you set up your Airbnb host profile, remember the following about short term lettings:

1. Longer void periods are expected.

The appeal of a long term tenancy is that it is guaranteed how long the property is let for. Whereas for a short term let the money may roll in thick and fast but there are likely to be times when the property is left empty with no income being generated. Project the rent over the course of the year and account for a void period in order to see which is the better option for you.

2. Management heavy.

Short term lets are labour intensive. It is fine if your sole job is to look after the property but if this is a sideline on top of your day-to-day job then you may find you don’t have time to deal with short term lets. Therefore this might be the time to consider hiring someone to look after this for you. As part of your costs you will need to include the management costs of moving people in and out of the property, as well as cleans in between tenancies and any other requests that the tenants may make.

3. Utilities needed to be included.

Electricity, water and Internet come as part of the rent for short term lets hence the rent is higher. Don’t forget that this is an additional are that you need to manage. Additionally tenants who are not responsible for their utilities may not use them as efficiency and could be prone to leaving the air conditioning on. This will then hike up your costs and cut into your profits.

4. Property needs to be fully furnished.

Tenants of short terms lets will want to turn up with just their suitcase. You will therefore need to provide everything from towels, teaspoons, bedding and electrical items such as a television, which is not always expected for long term lettings. Plus these items will need replacing should they go missing or get broken.