Managing Short-Term vs. Long-Term Rentals

Aside from being a great way to invest in real estate, owning and operating rental properties is also a great way to make money. There are essentially two types of rental properties: short-term and long-term. Short-term rentals are typically rented monthly, weekly, or daily. Some examples of these include vacation rentals and houses for hackers. A long-term rental generally is a residential property rented to a tenant for a fixed annual rent. Usually, this type of lease is for 12 months.

About Long-Term Rentals

One of the most critical factors that a property owner should consider when investing in long-term rentals is the predictability of their income. Having a consistent income stream helps keep the costs of running the property low and allows the owner to plan for the future.

Long-term rentals also tend to have lower operating expenses compared to short-term rentals. Tenants also tend to take better care of the property, which means it’s less prone to wear and tear. The administrative tasks associated with leasing and marketing a property are also less when compared to long-term rentals. Many single-family homeowners find that they can find a suitable tenant that will stay for a long time.

However, one of the most significant disadvantages of having a long-term rental is the lack of flexibility in raising the rent. Usually, the rent price stays the same during the lease term. This prevents the property owner from generating a steady income.

Having a long-term rental property can be harder to maintain since it can take longer to repair and catch minor issues before they become significant and costly. This is also why it’s important to conduct inspections regularly.

Having an unqualified tenant is also a risk factor for leasing a long-term rental property. Even though a tenant screening process is in place, a landlord can still deal with a problematic tenant.

About Short-Term Rentals

While long-term rentals are more stable and predictable, there are some reasons to consider offering a short-term lease.

A short-term rental property can generate a higher gross income than a long-term rental due to its flexibility in adjusting its rent. It can also meet the current market rate depending on the local conditions.

A short-term rental property is also easier to maintain since it only has a limited number of occupants. This allows the property to be thoroughly cleaned and inspected each time a tenant leaves.

Nevertheless, the risk of not getting a steady income is also higher when renting a home for the short term, as there is no guarantee the house will always be occupied.

The operating expenses of a short-term rental property are also higher than those of a long-term rental. For instance, a property rented for the short term can be more maintenance-intensive due to needing to be cleaned between renters.

Another typical expense that a short-term rental tenant might expect to pay is the utility bill. This usually includes water, gas, and electricity. While these expenses can be added to the rent, they can end up being too much for some real estate investors.

There are various advantages and disadvantages to both long-term and short-term rental properties. For investors looking for a more stable and predictable income, a long-term rental is the best choice. On the other hand, investors who want a property they can be more involved with might prefer a short-term rental.