Short-Term vs Long-Term Lets: Which is the Better Investment in 2025?

The UK property investment landscape in 2025 presents unique challenges and opportunities. Investors face critical choices, notably between short-term lets (such as Airbnb) and traditional long-term buy-to-let (BTL) properties. Each strategy offers distinct advantages and trade-offs, particularly when factoring in returns, management complexity, and regulatory hurdles. Here’s how to make the right choice.

1. Short-Term Lets: Overview & Market Context

Short-term lets typically involve renting properties on platforms like Airbnb, Booking.com, and Vrbo for days or weeks rather than months. Popular markets include London, Edinburgh, Manchester, and tourist-heavy coastal towns. Driven by robust domestic tourism and a strong resurgence in international travel, short-term lets can generate attractive gross yields, often exceeding traditional rentals.

2. Short-Term Lets: Pros & Cons

Pros:

• Higher Income Potential: Peak seasons, special events, and tourism surges allow landlords to command premium rates.
• Flexibility: Pricing and availability can easily adjust to market demands.
• Tax Advantages: Certain operational expenses may be tax-deductible, improving net returns.

Cons:

• High Management Demands: Significant effort is required for regular guest turnover, cleaning, maintenance, and booking management.
• Costly Outsourcing: Hiring property management services can cost between 15% to 25% of gross rental income.
• Platform Fees: Airbnb and similar platforms charge substantial commissions (typically 15-20%), reducing net profits.
• Volatile Occupancy: Seasonality and fluctuating demand can result in unpredictable vacancy periods.
• Review Sensitivity: Properties must maintain consistently high standards to secure strong reviews and continued bookings.

3. Regulatory Environment for Short-Term Lets

Increasing regulation significantly impacts the short-term rental market:

• 90-Day Rule (London): Short-term lets in London are capped at 90 nights per year without planning permission.
• National Short-Term Let Register: England is introducing a compulsory registration scheme, enforced by local authorities from late 2024/early 2025.
• Local Restrictions: Councils increasingly impose licensing requirements, planning approvals, and operational restrictions, creating potential risks for investors unaware of local rules.

4. Long-Term Lets (BTL): Overview & Market Context

Traditional BTL properties involve longer tenancies (usually 6 months or more) providing stable rental income. Popular across the UK, especially in family-friendly areas, high-employment regions, and university towns (PBSA). Long-term lets offer predictable returns, with typical yields strongest in northern and midland regions.

5. Long-Term Lets: Pros & Cons

Pros:

• Predictable, Stable Income: Reliable monthly rent payments over fixed terms.
• Lower Management Complexity: Less frequent turnover; management can be affordably outsourced (typically 8-12% of rent).
• Better Financing: Established buy-to-let mortgage market, typically cheaper and more accessible.

Cons:

• Lower Potential Returns: Gross yields typically lower than short-term lets, especially in high-value regions like the South East.
• Increased Regulatory Burdens: Renters’ Reform Bill, enhanced tenant rights, and mandatory EPC rating improvements add costs and complexity.
• Less Flexibility: Limited opportunities to adjust rent except at renewals, making it harder to respond rapidly to changing market conditions.

6. Impact of Renters’ Reform Bill on Long-Term Lets

The Renters’ Reform Bill introduces substantial changes aimed at improving tenant security, including:

• Removal of Section 21 ‘no-fault’ evictions, making it harder for landlords to regain possession of properties.
• Strengthened tenant rights around rent increases, with potential rent control measures or caps being considered.
• Open-ended tenancies, increasing tenant stability but reducing landlord flexibility.

These reforms further tighten regulations and could prompt some landlords to exit the market, potentially reducing supply and placing upward pressure on rents. Landlords will need to adopt more rigorous tenant screening processes, increasing barriers for prospective tenants and potentially reducing the available rental stock. For a detailed analysis, see our previous blogs on Renters’ Reform.

7. Financial Comparison: A Typical Property Case Study

Consider a 2-bedroom apartment in Manchester city centre:

Short-Term Let:

• Gross annual income: £28,000
• Management/cleaning fees (20%): £5,600
• Platform fees (Airbnb, 15%): £4,200
• Utilities & maintenance: £3,000
• Mortgage (£200k property, 5% rate): £10,000
• Net Annual Profit: ~£5,200

Long-Term Let:

• Gross annual income: £16,800 (£1,400/month)
• Management fees (10%): £1,680
• Utilities (typically paid by tenant): minimal
• Mortgage (£200k property, 5% rate): £10,000
• Net Annual Profit: ~£5,120

Financially, short-term lets can appear more profitable, but factoring in management intensity and risk, the gap significantly narrows.

8. Strategic Insights for Investors

Investment decisions should align closely with your individual goals:

• Cashflow Maximisation: Short-term lets may suit hands-on investors in tourist or city-centre hotspots willing to navigate high operational demands.
• Stability & Simplicity: Long-term lets offer reliable returns and straightforward management, ideal for passive investors or those new to property investment.
• Diversification: Combining short-term and long-term lets can balance risk and returns, creating resilient portfolios.

9. Conclusion & Recommendations

Choosing between short-term and long-term lets in 2025 requires careful consideration of returns, management effort, regulatory exposure, and risk tolerance.

For investors seeking simplicity and stable returns, traditional long-term lets remain compelling, despite increasing regulatory complexity. For those with greater appetite for risk and hands-on management (or the willingness to pay for it), short-term lets offer potentially higher rewards, albeit with considerable operational demands.

Stay informed, understand local regulations deeply, and always consider your strategic goals carefully.

Next Steps: For further insights, watch out for our comprehensive 2025 UK Property Investment Guide, launching soon—your essential companion to smarter investing decisions.