When it comes to renting out property, property owners have a few options: Short-term, and long-term (medium-term will be discussed later). But what is the difference? Which is more profitable? Even though profit is important, other factors such as return on investment and peace of mind should be considered as well. Let's take a look at the pros and cons of each rental type to help you make an informed decision about how to rent your property based on goals and priorities.
Pros of Short-term rentals/Vacation rentals (28-day stay or less) 1. Flexibility - Property owners can block off days and visit the property whenever they'd like. This allows property owners to inspect the premises regularly and allow for more frequent maintenance which can be scheduled without disturbing guests.
2. Higher cash flow - Properties listed on apps like Airbnb, Vrbo etc. can provide substantially higher cash flow compared to long-term renting, especially in tourist destinations. Short-term rentals can generate 2-3x more than a traditional long-term rental with proper management.
3. In charge of pricing - Property owners or managers can change the nightly rate as they see fit. They can raise the rates during peak seasons and holidays to increase revenue.
4. Not stuck with the same tenant - Even with proper screening, you can get stuck with a renter who ends up not being a good fit for you and your property. This can be avoided with short-term rentals.
5. Rent by the room - You can list rooms, suites and additional dwelling units on your property on Short-term rental platforms (Airbnb, Vrbo). You can potentially have multiple streams of income off of one property.
6. Unique stays - Let your imagination run wild! These listings are one-of-a-kind with all the amenities, such as: Geodesic domes, treehouses, tents, yurts, houseboats and much more! The more unique a stay, the more the nightly rate, the more income for you!
Cons of Short-term Rentals (1-28 day stays)
1. Consistent income is not guaranteed - While short-term rentals have the potential to make 2-3x more than long-term rentals, there's always a risk that the property can sit vacant for an extended period of time. This is not usually the case with long-term rentals.
2. Competitive Markets - Short-term rentals are often operating in competitive markets to minimize vacancies and maximize profits. Property owners and managers must be aware of changing market trends and competition in the area.
3. A lot of responsibilities - Owning and managing a short-term/vacation rental can require a lot of work; listing, marketing, cleaning, guest communication etc. It can quickly become overwhelming.
4. Higher operating expenses - Short-term rentals can be more maintenance intensive. Short-term rentals need to be fully furnished, well maintained and will need to be consistently stocked and ready for guests.
5. Maintenance and repairs - Renting out your property to new guests each week could result in increased wear and tear. A short-term rental may need more maintenance to keep the property clean and in tip-top shape.
Pros of Long-term rentals (12 month stays)
1. Consistent income - Long-term rentals are typically annual leases, which means there is a less chance that the property will be vacant for a long period of time. Seasonality and market conditions have less of an impact on your rental.
2. Less to manage - Once a tenant has signed a lease agreement, the owner doesn't have to worry about marketing the property, cleanings, stocking supplies and landscaping maintenance.
3. Utility bills paid for - Tenants occupying your rental oftentimes are in charge of utility bills. This can help the property owner save significantly in certain seasons like, hot summers and cold winters.
4. Don't need to furnish the rental - tenants in long-term rentals come with their own furniture, small appliances and supplies. This is one less cost for property owners.
5. Damage deposit - It is common for property owners to require a damage deposit before tenants move in. This can ease any worries about any damage to the property. Tenants generally get their full damage deposit back if the property is in the same condition as when they moved in.
Cons of Long-term Rentals (12-month stays)
1. Lower profit margins - Long-term rentals have a fixed monthly rent fee. So they may not generate the same income as a short-term rental in a popular vacation destination.
2. Limits on rent increase - Lease agreements normally call for the price to remain the same through the term of the lease. Governments limit the price increase, and how often you can increase rent. Check with your local government for more details.
3. Landlord regulations - A property owner has certain laws and regulations that must be followed when renting out a property.
4. No Personal Use - With long-term rentals you can no longer use your property as your personal vacation spot. Once you take on a new tenant, that property is off limits, except for repairs and maintenance 5. Higher risk of wear and tear - Long-term renters generally live in your property full-time and could cause more damage and wear and tear over time than guests only staying for a few days.
These are just a few of the pros and cons of short-term and long-term rentals. You as the property owner need to choose what is right for you!
Schedules and circumstances change, you can try both of these strategies. If you need help managing your short-term rental, want to set up your own short-term rental, or have any questions please contact us and we will set you up for success.
Wishing you all the best!
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