A U.S.News post describes real estate investment as an effective means of generating income, and this is true. However, many landlords or property owners are often faced with the dilemma of what rental strategy suits their real estate investment property. Whether to stick to a short-term rental service or lease out the property for a long time. This kind of situation can be complex. Nevertheless, this article is written to help you decide what option to choose: short-term rentals vs long-term rentals.
Before we consider what is right for you, let’s consider the differences between long and short-term rentals.
Difference between Short-term and Long-term Rentals
What is Short Term Rentals?
A short-term rental property refers to an adequately furnished living space available for a short time. This living space is available primarily for individuals on business trips, vacations, or other short-term visits, typically for a few days or weeks. Short-term rentals are considered an alternative to hotels because of their lesser price and homey nature.
In citing a property for a short-term rental purpose, it is essential to know the restriction in the areas where you intend to have your rental property. For instance, some cities, such as Denver, do not permit stays longer than 30 days. On the flip side, New York city requires renting an apartment for more than 30 days. In cities like Washington and San Francisco, staying in a short-term rental must not exceed 90 nights. Further, it is illegal to advertise a rental and must be registered as a business in some other cities. Click here for more restrictions rules in US cities and also check short-term vacation rental agreement to know how to protect your property.
Common examples of cities suitable for short-term rentals are; Greensboro, Irvine, Norfolk, North Las Vegas, Virginia Beach, and many more.
What is Long Term Rentals?
A long-term property refers to a property rented out for a long time, say 30 – 180 days or more, depending on the agreement between the landlord or property management firm and the tenant. This property is suitable for individuals on vacation, work relocation, or in-between homes. The rental property might also be adequately furnished or without furniture.
According to Forbes, average workers need long-term rentals, especially single-family homes and apartments. Thus, situating long-term rentals in less expensive areas is okay. Common examples of places to situate this are Cleveland and Jacksonville.
Long-term vs. Short-term Apartment rentals: Which is right for you?
- Location
Location of your property or where you intend to cite one plays a vital role in whether to embark on a short-term or long-term rental service. Long-term rental booking service is preferred if you have a property in a residential or family-oriented area, job, or educational environment. This is because most renters in such areas mostly look for long-term accommodation.
On the flip side, short-term rentals are ideal for tourist areas on business trip destinations as people will most likely stay for a short time.
You could also consider the features and type of rental service available in the area where your property is located.
- Availability
Property owners who do not consider hiring a property management company to manage their houses or cannot handle check-ins, maintenance, or routine visit and perhaps live in distant places would be better off as long-term rental property owners. However, house owners that can handle regular checks or hire an estate management company can run a short-term rental investment.
The Pros and Cons of short-term rentals vs long-term rentals will further guide you on which one is right for you.
Long-term vs. Short-term Rentals: Pros and Cons
Pros of Short Term Rentals
- Ease in Changing Tenants
If a property owner leases an apartment to an unqualified or bad tenant, since the apartment booking is for a short period, you can easily change the tenants.
- Suitable for Vacation Home
You can prepare before time to use your property for vacation. All you need to do is make your property unavailable around your vacation period. This is especially suitable for families that have an apartment in tourist areas.
- Minor repairs
Since tenants come and go, it gives you ample time to make minor repairs immediately after a tenant leaves and before the next, unlike long-term rentals with excessive wear and tear on appliances or furniture after a renter departs.
- Greater Income Potential
The leasing price is higher with nightly rates in areas where tourist areas and short-term rentals are available. Also, you can increase the price before a new tenant comes to book your apartment.
Cons of Short Term Rentals
- Property owners bear the cost of maintenance and repairs
- Patronage is seasonal
- Short-term rental properties require more attention from the landlord or manager for maintenance, coordinating check-ins, and many more.
Pros of Long Term Rentals
- Less Advertisement and Consistent Income
Unlike short-term rentals, where people stay for a short period or have more patronage during some particular season or time of the year, long-term rental requires less advertisement since the tenant most likely stays for a long time, like a year. Also, throughout the stay, there is consistent rental payment to the landlord or manager.
- Absence of Utility Bill Payment and Basic Maintenance of the Property
In short-term rentals, the landlord or manager mostly takes care of the utility bills and maintenance of the house or minor repairs. When tenants rock utilities in the apartment excessively or mess up the apartment, the landlord can bear the brunt. However, since a tenant stays in the property for a long term in a long term rental, the tenants are usually responsible for these bills.
Cons of Long Term Rentals
- Lower Profit margin compared to that of short term rentals
- You get stock for a long time if you lease your property to an unqualified/lousy tenant.
- You do not have access to the property, perhaps for vacation, till after the lease period, which will be for a long time.
- The property might require significant and expensive repairs after the tenant has left.
- For long-term rentals, property owners are to adhere to specific laws and regulations, such as the Landlord-Tenant Laws and Tourism law.
Conclusion
The location of your property is very pivotal in whether to make your property a short or long-term rental. Other points highlighted in this write-up should further influence your decision appropriately.
