Short-Term Rentals vs. Long-Term Rentals: Everything you need to know | Mortgage Chicks

If you’re looking to invest into a rental property, there are a few things you have to consider. Whether it’s for short-term rentals like AirBnb or long-term rentals like a year to year lease, there are several advantages and disadvantages to keep in mind. If you need help deciding which one is right for you, you’re on the right page. Let’s begin with the pros and cons of both types of rental strategies.

What is a short-term vacation rental?

A short-term rental is leasing out a furnished property on a short-term basis. Most short-term properties are rented by the month, week, or night. Many owners of short-term rentals rent their property for the majority of the year when they aren't using it themselves. Short-term rentals have become a popular alternative to hotels. They list their properties on websites like HomeAway, Airbnb, and VRBO.

Advantages of short-term rentals

1. Higher rental income

Rates fluctuate due to area as well as high and low seasons. You can also set a minimum length of stay for the most popular times of the year which can maximize your profits.

2. Better maintenance

Owners of short-term rentals have the property thoroughly cleaned between renters and the renters pay for this cleaning service. This makes the properties better maintained and constantly being checked for serious problems.

3. Personal use

This is the number one reason why most investors want short-term vacation rentals. It’s a great combination of an investment and somewhere for your family to go on vacation without paying for a hotel.

4. Automate property management

Technology such as smart apps or smart locks have made it easier to manage vacation rentals, especially if you don’t live nearby.

Disadvantages of short-term rentals

1. Constant upgrades

You’ll most likely need to update your rental amenities every so often to include all the essentials and more for a pleasant stay. This can come with a hefty price tag.

2. Not guaranteed income

Vacation renters can face frustration because their business comes seasonally. Majority of the time, high seasons are fully booked but during the slow times of the year. This can take a toll and you may not generate the same income. Rates can be adjusted due to season to bring in more renters but bookings aren’t guaranteed.

3. Competition from surrounding properties

Travelers love looking at more than one rental property when deciding where to stay. The vacation rental or short-term market sees many more homes listed than travelers searching. This can put some owners at a disadvantage. Know your area and scout the competition.

What is a long-term rental?

Long-term rentals typically refer to leased periods for months at a time. Renters pay the homeowner each month and typically take care of other expenses such as utility bills.

Advantages of long-term rentals

1. Consistent income

The advantage of long-term rentals is you can rely on monthly income. This also keeps you at ease because you will have someone on a long lease.

2. Easier to manage

Whether you choose to hire a property manager or manage it yourself, it requires less time than a short-term rental. You don’t have to try to find renters and worry about frequent rental turnover.

3. No need to furnish

Majority of long-term renters bring their own furniture. Not only will you have guaranteed money every month, but you also don’t have to worry about furniture.