Short vs. Long-Term Rentals
This article will give you clarity to determine which type of rental property is right for you and your home.
What is the difference between short and long-term rental properties?
Basically, a short-term rental is typically a furnished residence that provides accommodation for people looking to stay for a few days to one month, on average. This type of rental property is also referred to as a vacation rental since it primarily appeals to travelers.
Long term rentals are properties that cater to tenants looking to stay for an extended time, usually longer than six months.
While long-term rentals offer consistent income and are generally easier to manage, there are also several advantages to having a short-term rental.
PROS of Short-Term Rentals
1. Your Earning Potential
A short-term rental property can be very lucrative, especially if your property is in a popular location. Not only can you continuously change your rates depending on your area’s high and low seasons, but you can also set a minimum length of stay during the most popular times of year to ensure you maximum your profits.
When you rent out your property for the long term, the rent price you set must remain fixed for the period specified in the lease agreement. Unfortunately this means you forego the ability to increase your rate until the lease agreement expires. As a result, you won’t be able to adjust your monthly rent to cover a sudden spike in your operating costs. Nor can you increase it to capitalize on a surge in demand for rental spaces in your location.
2. You Can Use the Property Whenever You Want
Since your guests will only be staying for a brief period, you will have the convenience and flexibility to set aside time to use the property for yourself.
3. Less Overall Risks
Two issues frequently arise in long-term rentals: tenants who fail to pay their rent and tenants who cause severe damage to the unit. However, these unpleasant scenarios are more avoidable if you own a short-term rental property.
The risk of travelers failing to pay you is low, as they’ve likely already paid, at least a deposit, before staying. Plus, their commitment isn’t ongoing. And since your guests will occupy your rental unit only for a brief period, there’s less chance of them damaging it significantly.
Depending on the types of long-term tenants you have living at your property, they have the potential to create endless headaches and sleepless nights for you. Problem tenants can:
cause severe damage to your property
neglect their cleaning responsibilities
engage in petty quarrels with neighbors
routinely miss rent payment deadlines
4. Less Potential for Legal Issues
Long-term tenants have more rights when they occupy your property than if they lived in a short-term rental. For example, you can’t simply show up unannounced to conduct an inspection – you must provide them with written notice.
Further issues can arise if you need to evict a tenant. Each province has specific laws and procedures you must observe for an eviction. The entire process can be cumbersome and drawn-out and cost you a considerable sum in legal fees, court fees, etc.
PROS of Long-Term Rentals
1. Less Responsibility
Whether you choose to hire a property manager or manage the property yourself, it will require less time than a short-term rental. You don’t have to promote the rental property as much, tackle frequent rental turnover or make sure it’s ready to rent.
You won’t need to constantly market your property, monitor your listings on rental websites, perform tenant credit and background checks, draft lease agreements, perform inspections, etc. At most, you may need to perform these tasks only once per year, should your tenant choose not to renew their lease.
Also, with short-term rentals, you must repeatedly check your appliances, sinks, and toilets to ensure they function perfectly. No one will want to rent a home with a broken refrigerator or plumbing issues. You’ll have little choice but to conduct such inspections to avoid negative reviews.
2. Consistent Income
The primary benefit of a long-term rental is predictable and reliable income, usually for at least a year. As a result, you can better ensure your property’s financial security. This can help take the pressure off new homeowners who have a lot of other expenses to worry about. Additionally, long-term renters are generally responsible for paying monthly and quarterly utility bills for electricity, gas, water and even the internet..
Also, with short-term rentals, your rental income may vary widely. At times, you’ll be booked for months in advance, but there’s also the possibility that your unit will remain vacant for parts of the year.
3. Less Monthly Costs
With less turnover rate than a short-term rental, you will spend less money to keep your rental unit tidy and presentable. Every time a tenant moves out, you’ll need to get your hands dirty and thoroughly clean your rental. The resulting expenses can easily hurt your bottom line, even if you outsource the work to a cleaning company.
There are also hefty dues to pay when you list your short-term property on a reputable website like AirBnB or VRBO.
There’s no easy answer when choosing between a short-term and long-term rental. Both types offer their share of advantages and disadvantages.
Before arriving at your decision, you should consider your budget, your profit targets, and the amount of time and effort you’re willing to dedicate to maintenance, repairs, and tenant interactions.
At Owl Key PM we're experienced in managing both short and long-term property rentals. We've achieved success for our clients in both rental options and can offer our expert advice in making this important decision. Click on the contact link below to send us a message today.