What is the difference between Holiday Rentals and Long-Term Rentals

Given the current situation of the real estate market and the growing demand for houses for holidays in the holiday rentals regime (short-term rental), as well as for long-term rental, the question arises as to which is the best option to make a property profitable, from a business perspective as a property owner. For this purpose, we have separated the differences between self-catering holiday and long-term rental, so that the advantages and disadvantages of each option become clearer and, as a property owner, it is easier to find the business form that best fits your reality.

What is Holiday Rentals and how does it work?

Holiday rentals is based on short-term rentals, which are rented out to tourists looking for a place to stay for a short period of time, between 5 and 30 days on average. This regime includes properties such as houses and/or flats. To practice short-term rental, you need a holiday rentals license and to know the rules of this activity which has its own legal regime. 

Tip: This option can be much more profitable in more touristic areas, especially in high seasons.

What are the advantages of short term rental?

Higher income and assured payment, since the stay only happens after you receive the booking fee.

The risk of property degradation is lower because you can visit the property between stays, which allows you to control the state of conservation. 

You can use the house whenever you want, since the short term rental allows you to evaluate availability between stays and flexibility.

Easy to advertise. You can advertise, manage prices and reservations through various online platforms. 

What are the disadvantages of the short term rental?

With a short term rental, there is no guarantee of 100% occupancy per month, which means that there will be no income if there are no reservations.

In the short-term rental regime is the owner who assumes all the costs of cleaning, maintenance and payment of fixed expenses, such as water, electricity, gas, TV, Internet.

Holiday Rentals Madeira Island

How does the long term lease work?

This is the most common and least risky way of renting a property. It presupposes the signature of a contract between landlord and tenant, following a specific legislation. Normally, the property is rented for a longer period of time, one year or more.

What are the advantages of long-term leases?

Stability. The monthly fee is fixed every month of the year, as it does not depend on occupancy rates, reservations and cancellations. 

There are no logistical problems. As the tenant is always the same, the landlord does not have to waste time with monthly tasks related to the lease. 

What are the disadvantages of long-term leases?

Difficulty in terminating contracts. The legislation in the long-term tenancy regime is very detailed and the regulations are very strict. 

You have no control over the state of preservation of the property and cannot visit it regularly unless this is stated in the contract.

If you have self catering holidays in place and want to practice the long-term rental model, you will be obliged to cease one in order to start the other.

As a rule, long-term rental generates more delays and defaults on payments, so you can expect difficulties in receiving your rent on time.

long term rentals madeira island

Managing holiday rentals in Madeira requires dedication and back-office work if the aim is to offer an excellent service. To achieve concrete goals, there is continuous work to be done, which presupposes a solid and experienced team with knowledge in the area of operations and logistics. Therefore, there are solutions such as resorting to the services of a company specialised in house management for holiday rentals.

If you are still in doubt and would like to look deeper into the issue of short-term rentals, consider the help of a holiday rentals management partner like An Island Apart. Get in touch with us!

Leave a Reply

Your email address will not be published. Required fields are marked *