Short Let Term (SLT) vs Assured Short Hold Tenancy (AST)

Short Let Term (SLT) is often a type of tenancy offered to tenants/guests for a period of 30 days or less, in a case of an extended stay, it is not offered beyond six months. The regular tenancy which ranges between six months and a year is marketed as medium-term, also known as Assured Short hold Tenancy (AST).  Both SLT and AST attract different types of tenants, income potential and property related risks. It is important for potential players (investors, landlords, estate agents, facility managers, and property managers) to understand these factors. 

One may be tempted to argue that one letting option is better than the other, however, that argument would always swing in the direction of the individual’s preferences, risk appetite, investment plan, available resources and location. 

First, what do SLT and AST have in common?

This is simple and straight forward. The goal of every property investor is to generate or improve rental income and profit, whether it is short, mid or long term rental.

They both operate by the law of supply and demand. The law of demand and supply dictates the equilibrium price of a rental property. A low supply or housing inventory may drive prices up, the same goes for rental properties whether AST or SLT.

Closely related to the law of demand and supply, is the role of location. Location is a key driver for providing consistent demand for SLT & AST & properties, which in turn influences rental income and profitability.

Real estate is probably one of the most common appreciating assets that many have used to build wealth. Capital appreciation is the increase in the asset’s value over what you originally paid for it. Just as the value of the property rises with inflation, the amount tenants pay in rent can also increase over time. This allows owners of rental properties to keep up with the rise in prices across the economy. Bottom line, high rates of inflation and appreciation are beneficial to both classes of tenancy – SLT & AST.

What are some of the differences?

1. In terms of flexibility, SLT offers owners higher degree of fluidity compared to those who own AST properties. They have the option of using their properties for personal use and can block out availability for themselves, friends and families. They also have the flexibility of tweaking rental fees based on the market dynamics, while AST property owners have their rental fees locked in for an extended period, and in most cases, are faced with reluctance on the part of their tenants when they desire to increase the rental fees. On the part of SLT guests/tenants, it offers travelers and some classes of tenants the flexibility to pay on use basis only.

• AST property owners are assured of guaranteed income (except in the case of defaulters), whereas, SLT returns which are based on occupancy rates are not guaranteed for SLT property owners. In most cases, the occupancy rate of SLT properties is a combination of multiple factors such as location, season, marketing efforts, fixtures and features of the properties. For balanced perspective, it is imperative to note that, even with medium to high percentage of occupancy rate, some SLT properties generate more revenue and profit than properties with fixed-period annuity.

• Being successful as a property owner and managing real estate means strategically planning and budgeting for planned and unplanned expenses alike. Unlike AST, where most of the maintenance & replacement costs such as electricity, waste management, landscaping, water treatment etc. are directly transferred to the tenant, most of the maintenance and replacement costs are borne by SLT property owners. As properties age they become costlier to maintain, in most cases, owners of SLT properties must continually consider whether to improve quality and incur higher maintenance costs or increase short-term profitability by reducing maintenance activities, thereby lowering quality and marketability – attractiveness to potential customers, which is a major consideration for customers.  

• One of the dilemmas that owners of AST properties face is default in rent payment by some tenants. With SLT, such risks are minimal. However, there other risks associated with SLT properties. For example, SLT operators are more concerned with theft and damages in fittings and fixtures by some guests/tenants. Though, not widely reported, some risks associated with illegal acts such as drug abuse, gambling, violence and even cases of murder are becoming worrisome for some SLT operators.

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