A new investment approach has arrived in the UK and reportedly promises landlords high returns with lower risks.
The idea, which originated in the US, sees a building split between short and long term rentals.
With short term rentals being allocated 10% to 20% of the property, while the remainder is dedicated to long-term rentals.
The first few buildings invested this way have popped up in central London, as well as Glasgow and Edinburgh.
The new hybrid approach allows a residential building to capitalise on both the short and long term rental markets.
The dynamic allows short term let’s to achieve success during peak pricing periods, with long term lets there to carry the strain of void periods and seasonal slumps.
Matthew Pohlman, partner at Goodwin’s Real Estate Industry Group commented:
“A key factor influencing this increased investor interest in short-term rentals is the ability to drive stronger, more robust margins relative to units leased on a long-term basis.”
“Covid has accelerated a trend where guests are looking for more ‘in-room’ amenities – like kitchenettes and workspaces – to support longer stays in the destinations they are travelling to.”
While the idea of the ‘flex-lease’ is new from over the Atlantic, diverse and alternative investments are not a new idea.
Some landlords may choose to pick a side when it comes to short term vs traditional buy to let, whereas others have seen the benefit of using both.
This new approach favours using the same building, rather than splitting this investment across multiple properties.
Some landlords choose to steer away from short term let, due to the seasonality trends and the increase of tenant turnover.
Longer-term tenants could arguably provide security when it comes to keeping a property let, however, they cannot benefit from the perks of a short term let.
One thing to consider when adapting this mixed approach is the location of the property, the short term let aspect would need to fill a purpose, either to local workers or holidaymakers, for the market to remain prosperous.
Find out what makes a short term or holiday let different from a traditional buy to let on our holiday let mortgages page.