How Hostmaker increased Sonia’s income through flexible lettings and property management.
The problem: paying the mortgage while still making a profit
Like lots of Hostmaker hosts, Sonia – owner of a 1.5 bedroom property in South Hampstead – had spent years refining her home. She’d dedicated time and care to choosing the best furniture, paying for renovation work, and making happy memories to last a lifetime. That’s why, when she outgrew it, she was reluctant to sell. She approached Hostmaker with a view to seeing what short-term letting her home might involve, but having only used a traditional high street letting agency in the past, she had a few (valid) concerns:
Would the lower tourist numbers in winter allow her to cover her mortgage payments and utility bills, and still make a profit?
With Brexit’s impact on corporate travel to the UK, and EU student resident numbers, how could she guarantee occupancy year-round?
Would she have to find time to manage viewings, greet guests and clean her place herself?
How would the London restriction on short lets impact her income and occupancy?
The solution: fully managed, flexible lettings
Sonia approached us to initially discuss managing her home on a short-term rental basis. But with our expertise and years of experience, we knew that a fully managed, customised flexible letting solution would provide the biggest income. It would also guarantee a leading level of occupancy across the year, in comparison to other managed property services.
Hostmaker’s unique pricing and channel optimisation strategy
Our clever pricing and channel optimisation strategy meant that Sonia’s property was listed across short-term channels for the summer, while simultaneously being listed on longer stay channels (bookings over 90 days) for the rest of the year. That allowed us to maximise her profit from short-term lets across the fruitful summer period, while still getting amazing long-stay bookings for the rest of her availability.
Better still, through our intelligent pricing algorithm, we ensured that there were almost no gaps between bookings, achieving an impressive 94.8% occupancy across the year.
A one-stop letting solution for your home
Because Sonia chose Hostmaker to manage both her short and long-term bookings, we were in a unique position. We could plan viewings for longer stays in between her short-term rental guests, and our intimate knowledge of her property meant we could recommend services that made it even more attractive to guests – like a deep clean, or repair work.
Pay less and earn more with flexible lettings
Sonia’s results were impressive – if we do say so ourselves. They included:
A 12.3% increase in net revenue compared to traditional high street letting agencies.
94.8% occupancy across the year.
A 24.4% increase in summer income compared with other short-let management agencies.
All this, while paying less in fees. Win win.
With Brexit looming – throwing the property market into uncertainty – it’s more important than ever to make sure your rental property is occupied, and making you enough money to pay the mortgage while also turning a profit.
As 2018 comes to an end, and with the uncertainty of Brexit looming, property owners in London are left scratching their heads as to what the best rental strategy is.
Is it a great time to buy new property, as prices seem to be going flat or down in some areas of the British capital? Is it better to go for long-term tenants as a stable income stream?
What about short-term lets – are they a good option in the current climate? These answers, and more, below. Or scroll down for the conclusion!
Rental strategies in 2019: long lets vs short lets
We’ve talked about the main differences between long and short-term lets before, to highlights their pros and cons for property owners. But there is more to it, if we want to go into the details. Here, we’ll review some of the main reasons to pick one or the other.
The main differences between short, mid and long term rentals or lets
Here’s a quick refresh of the main differents, and adding the further distinction of mid-term lets:
long-term lets (long lets): the traditional letting arrangement, with contracts from 6 months to 2 years,
mid-term lets (mid lets): a growing segments of lettings, from 1 month to 6 months, typically for professionals or students,
short-term lets (short lets): the fastest growing segment, from 1 day to 30 days, which originated in vacation rentals and is popularised by platforms such as Airbnb, HomeAway, TripAdvisor or Booking.com and traditionally earn property owners the most.
Each strategy has its benefits and risks, and adopting one or the other depends on:
the economic environment – short lets are best when tourism is doing well for instance,
the property – its location, type and availability,
flexibility requirements – do you prefer to be able to get the property back easily should you need to, or to organise viewings easily?
bandwidth – and how much time you want to spend doing things yourselves or through agencies,
revenue expectations and risk profile – how much money would you like to get out of the property, and how risky would you like it to be?
Comparison table with pros and cons for short lets, mid lets, and long lets
As a rule of thumb, here is how short, mid and long lets compare:
How to pick the best rental strategy for your property or properties in 2019
Now that the benefits and risks of each type of letting is clear, we can look at 2019 together, and determine what is your best. To do that, we’ll first evaluate the property market in London for next year, and then look at the tourism forecasts for the capital. As we saw in the comparison table, this will help you decide between short and long lets.
Rental strategies in 2019: the property market, tourism forecast, and overall environment
The property market in London in 2019: looming Brexit and other factors
Long-term rents likely to go down in 2019, with slight rebound in 2019, making long lets less attractive
There is no avoiding it: the specter of Brexit looms. And with it, the uncertainty has taken a hold of many buyers and sellers. Whether the U.K. leaves the E.U. with a deal or without, the 29 March 2019 cut-off date is months away and all bets are still off.
This has taken a toll on the property market: London houses prices overall are showing worrying signs of stagnation or even decrease in some areas. The general mood is best described as “wait and see”, as the November 2018 numbers show: listings for homes being sold on Rightmove in London declined by 24%.
This climate will also impact the attractiveness of London for new and existing residents. While it is unlikely to drive drops in rental incomes right away, there will be an effect for homeowners. The type of Brexit chosen has already limited foreign investments in the country, as well as delayed expansion plans for existing businesses. Most forecasts point at a modest growth overall in 2019 and 2020, up to 2.1%.
Finally, the Bank of England’s main interest ratehas steadily increased in 2018, to now reach 0.75%. It’s making variables mortgages more expensive for 3.5 million U.K. homeowners, and is likely to rise again in December 2018 to fight off inflation. The pressure for homeowners to increase rental income will grow, and it is unsure whether it can be met in London with long term rentals alone.
Travel in the UK in 2019: even better than a record 2018?
Travel forecast strong for 2019 and 2020: the demand for short lets will increase
London can easily take advantage of top 2019 travel trends such as a bigger focus on sustainability, and meaningful local activities.
This will fuel a strong demand for homestays in London in 2019, and ensure a good occupancy at a fair rate.
Conclusion: the best rental strategy in London in 2019 is… short, with a bit of mid
Short lets best bets to take advantage of growing tourism flows, especially with Brexit uncertainty looming
When all is said and done, the best strategy for 2019 is likely to be a mix of short and medium lets. As we’ve seen, the tourism forecast for London is very positive, guaranteeing a strong demand for short lets in 2019. On the other side, the growing demand for medium lets make them an attractive alternative from September to May. The risks are minimal – as the demand is strong – and the upside is big.
While the outlook for long term rentals isn’t completely negative, it is looking flat at best (after inflation). Thus, introducing short or medium lets to your mix makes sense. If the operational side is your main issue, there are a number of short let management services you can try. This commission-based model helps because you only pay them if they deliver revenue for you. And they will take care of the operations of listing, pricing, welcoming and cleaning – and often more.
In fact, specialised property management services, such as Hostmaker, can even manage your home on short, medium AND long term rentals. Their local experts will help you to pick the best option depending on your property, your profile and your goal.