Whether you have a property you are looking at converting to a rental or you want to purchase a new property for rent, deciding what type of rental will be one of the first decisions. Short term rentals have many exciting pros but you still have to be aware of the cons. The same goes for long term rentals. Knowing this information will help you decide whether a short term rental or long term rental is right for you! Let’s start with the pros and cons of short term rentals and then we’ll look at the long term considerations.
Short Term Rental Pros
· Short term rentals tend to have a higher income potential. A rental property can easily double its monthly income with vacation rentals in the peak months, especially if it is in a resort area. It can offset increased management costs.
· You can adjust pricing more regularly on vacation rentals. If the property is in high demand or if you had recent maintenance costs, you can raise the nightly fee for a period of time and then lower it back down if/when you decide. Being able to have regular fluctuations allows you to maximize your income and availability.
· You can spend less on large maintenance of short term rentals because you can check on the property more often and spot problems before they become larger.
· Self-managing has never been easier with platforms like Airbnb and VRBO. While it used to be time-consuming and costly to get word out to the right market, it is now quick and mostly painless getting word out to a wide audience about your available vacation rental property.
· One thing that many vacation rental property owners love is the ability to vacation in their own property. You can block out dates on availability whenever you want to book your own break.
Short Term Rental Cons
· Certain regions that are common vacation destinations have legislation requiring a permit for a vacation rental. This legislation has a variety of reasons, including keeping the resort hotels competitive as well as ensuring homes available for year-round residents. For example, Hawaii passed legislation in 2018 requiring Short Term Rental listings to get a permit, and limiting their locations to near the resort hotels.
· Short Term Rentals require regular supervision, whether by the owner or a management company. With short term rentals, tenants do not typically supply their own toilet paper or wash their own linens. Because these small tasks must be done between every tenant and tenants rotate so often, there is simply more work to be done regularly.
· Property management companies charge more for short term rentals because they are more time consuming to run than long term rentals. From cleaning costs to making sure the next renters are on the way, these types of rentals cannot easily be put on auto-pilot. Rental management companies must cover their time with this increased workload.
· Because the next renter is not guaranteed, income is not guaranteed past the current renter. Monthly income can fluctuate from a few hundred to a several thousand but over time, a well-managed vacation rental property can generate reliable income. Short Term Rental Profitability can be maintained with solid management.
Long Term Rental Pros
· Income is more consistent with a Long Term Rental. Having a tenant commit to a year-long lease can ease stress for the owner.
· Tenants pay utilities in long term rentals. While these bills are not a huge expense, they do eat into profits. Having the tenant cover these costs gets rid of one more monthly task as well as reducing maintenance costs for owners.
· Property management companies charge less for long term rental properties. With less turnover and less regular maintenance, there is less work to be done and less to charge the owner for.
· You may have fewer maintenance costs because long term tenants tend to take care of small problems like replacing light bulbs and regular cleaning.
Long Term Rental Cons
· Many municipalities require advance notice by landlords anytime they are going to enter the rental property. This reduces the owner’s ability to check on the property for various reasons, including to ensure the tenant is not damaging the property.
· Repair needs may not be found early, or at all during the rental period. This can cause problems to get bigger and more expensive for the rental property owner.
A Hybrid of Short Term and Long Term Renting
You can alleviate some of the cons and maximize the pros by using your property for a combination of long term rentals and short term rentals. Some owners choose to do a 6-month lease in the off-season and then offer 1-day to 30-day rentals in the high season. By guaranteeing the house is occupied in the off season, you are no longer getting a headache trying to find vacationers when not many people are trying to vacation and lowering your rates in the quest. During the peak season, you can maximize income with short-term rentals at higher rates and stay booked more steadily.
Vacation Rental vs Long Term Rental Decision Time
Now that you have read through the pros and cons, it’s time to decide which is right for you and your situation. Whatever that may be, Brass financial has both short term rental loans as well as long term rental loans to get your new rental property up and running.