Long-term or short-term letting? Which yields greater returns?

Holiday letting

Should we holiday let or, should we look at long-term letting?” This is a question most often asked by property owners on Durban’s North Coast. This question is being raised even more frequently by property investors as they seek ways to maximize their returns as the country eases into the ‘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.

In order to assist investors to reach this 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.

Below are some truths about long-term and short-term rentals across the country:

The pros:

  • Investors have a known or fixed monthly income with the ability to ascertain the exact profit or monthly returns.
  • There is less wear and tear on a property as tenants are not in and out frequently.
  • You can consider a 10% annual increase, depending on your market.
  • You know that your home is being maintained and there is always someone on site giving you feedback should something go wrong.
  • From a security point of view, there is a 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 which sees a rental agent maintain and deal with the tenant on your behalf 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 throughout the leasing period.

The pros of holiday letting through platforms such as Airbnb include:

  • The platform is user-friendly and popular worldwide.
  • Payment is guaranteed.
  • The platform’s credibility has been proved during Covid-19 by refunding deposits for guests who can no longer travel.
  • Your property will be shown to users all over the world.
  • The reviews safeguard both the ‘traveler’ and the ‘host’ congruently, allowing the platform to ‘self-cleanse’.