Short-Term Rental Or Long-Term Rental Investment: Which Is Right For You?

You’ve taken the plunge and invested in rental property, and now the question is whether to lease it on a short-term or long-term basis. 

Both short-term and long-term rentals have their pros and cons. 

Listing your property on a short-term rental site like VRBO or Airbnb has the potential to produce more income even with the fees they charge, but because you’re the front desk, housekeeping and concierge, they’re also a lot more work.

If you own a single-family home in a popular destination where average monthly rents are $2,000, you can probably charge about $275 per night. You’d only need to rent the property out for 87 days to receive the same income you would if you leased it to tenants who signed on for a year.

The occupancy rate for the average vacation rental is 48%, according to Airbnb. If your property is booked 48% of the year, you’d earn $48,180 — double what you’d make leasing it to a single tenant for the entire year. 

But even though you can earn more money with a vacation rental than a long-term leased property, the income may not be consistent — especially if you’re in a location where tourism fluctuates with the seasons. 

The regulations in the town where your property is located may affect your decisions. Many resort communities are struggling to house the employees that make them desirable tourist destinations and are putting caps on the number of short-term rentals they allow. Others are mandating that properties can only be rented on a short-term basis if they are the owner’s primary residence. 

While there is a cap on the income the property can generate, long-term rentals provide steady income through monthly rent and are less work because you’re not constantly getting ready for the next guest. Still, there are drawbacks to renting your property to a tenant for longer periods of time, including signing and enforcing lease agreements and incurring damage to the property resulting from everyday wear and tear.

It’s also crucial to make sure your lease agreement protects you and your property, so it’s a good idea to work with an attorney — and pay the fees — to create a document that’s right for you. 

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And if your property is in a vacation destination, leasing it out for the long term will prevent you from enjoying it whenever you want. 

Related: Arrived Homes Launches its First Batch of Fractional Vacation Rental Properties With a Minimum Investment of $100. Read more…

Image by Mark Winfrey on Shutterstock