Although long-term lettings to professional tenants are easily the most hands-off way of being a landlord, they’re not your only option.
So having previously covered renting to families, attracting high-income earners, and even being an eco-friendly landlord, we’re now going off-piste into other areas of the lettings market.
If you’re curious about the nuts and bolts of alternative buy-to-let models, make yourself comfortable as we take a look at:
- The pros and cons of diversifying your portfolio.
- Student lettings.
- Holiday lets.
- HMOs (Houses in Multiple Occupation).
- Short-term & corporate lettings.
Just like any investment strategy, there are plenty of factors to consider before you make the leap, so let’s explore the different options to see if any are right for you.
THE PROS AND CONS OF DIVERSIFYING YOUR PORTFOLIO
Many successful landlords pick a single rental sector, fully master it, and stick with it forever. For others, variety makes life more interesting, so here are some general pros and cons to mixing things up.
- Diversifying your portfolio can widen the opportunity to expand into new locations, learn about different markets, and even explore your inner interior designer.
- Along with all the fun stuff, there are new rules, regulations and tax policy to learn which can be useful for wealth management, but also complex and time-consuming.
- Although other models can give you a higher income from a property, they all come with extra costs, more work, and a greater time investment.
In a nutshell, the additional income from diversifying your portfolio isn’t entirely passive and doesn’t equate to pure outfit, so consider your time and enjoyment as well the money.
STUDENT LETTINGS
Renting to students means you can let each room in a property as a bedroom and significantly increase the rental income, but there are some basics to getting things right.
- Choose a location that’s close to at least one university campus and that has a cheap supermarket and some budget-friendly places to socialise.
- Furnish each bedroom with a sturdy wardrobe, bed and desk (skimping on quality will mean forever replacing things), and fit a lock on each room’s door.
- Ensure the kitchen is large enough for you to include a dining table, lots of cupboards and plenty of fridge space (you may need to buy two).
As a final tip, remember that students are young, sociable, and often hang out at home with friends to keep things cheap, so look for properties where that won’t cause a disturbance to neighbours.
HOLIDAY LETS
Living like a local while on holiday has become hugely popular among tourists seeking a more authentic experience than a hotel, and a stylish holiday let in the right location can be a real earner.
That said, there’s a lot of initial setup and ongoing work (or higher management costs if you use an agent), and there are certain criteria you’ll need to meet.
- To qualify for the special tax rules, a property must be available as a holiday let for at least 210 days per year and rented for at least 105 of those, with each booking no more than 31 days.
- To bag those all-important five-star reviews, you’ll need a full-proof check-in process plus a reliable cleaner and handyman to keep your property in perfect condition for every booking.
- Guests will expect loo roll, shower gel, hand soap, washing up liquid, dishwasher tabs and cooking basics, along with local tips and clear instructions for heating, recycling, Netflix, etc.
Remember: the most successful holiday lets are in year-round destinations to avoid long periods with no bookings. If everything’s closed in the winter months, your income and occupancy rate will drop.
HOUSES IN MULTIPLE OCCUPATION (HMOs)
Also known as a multi-let, a house in multiple occupation (HMO) is a property with three or more tenants who live as separate households.
By renting out rooms separately you can generate extra income, and more single tenants are choosing this option as rents continue to rise, but there are some things to consider.
- Living in one room is not a life goal for most people, so expect a higher turnover of tenants than a group of friends sharing a home together.
- Properties with five or more occupants generally need additional health & safety measures, which can affect the future sales value if buyers need to remove things like fire lobbies.
- Unconnected people with completely separate lives are less likely to resolve conflicts between themselves, and you may need to step in and mediate over what feel like trivial issues.
If you’re thinking of turning your buy-to-let into an HMO, check first with the local authority about licensing restrictions and any required planning permissions as these can vary from street to street.
SHORT-TERM & CORPORATE LETS
The short-let market is mostly a mix of people in need of temporary accommodation (perhaps from renovating their own home), or from visitors on business trips or work secondment.
They’re generally looking for all the comforts and convenience of home, rather than simply a base for sightseeing, so expect more cooking and general activity at your property than with a holiday let.
- Short-term and corporate lettings tend to be near city centres, business areas or conference venues for optimum accessibility.
- Bookings can be anything from a few days to a few months, but are generally longer than a holiday home and shorter than a typical tenancy.
- You’ll have fewer changeovers than holiday lets, but you’re still responsible for cleaning, fresh towels and new bedding during and between stays, as well as all the bills.
With a suitable location and sufficient investment in furniture and luxury gadgets, short-term lets can fill the middle ground between the stability of long-term lettings and the constant churn of holidaymakers.
Should you diversify your lettings portfolio?
If you’re wondering whether any of your buy-to-lets in area would suit the switch to another model, or if you’d like to increase their profitability as long-term rentals, why not get in touch?
If you’d like any advice around finding the best tenants, getting the best rent, or working with a letting agent in your area to handle it all for you, call Richard Cook on 0790 909 3141 or email him at richard.cook@fifeproperties.co.uk for a friendly and expert chat about making the most of your buy-to-let and getting a premium rent.
