A question we are often asked here at Haustay is if a property is better suited as a short term or a long term rental. There are pros and cons of both setups and it typically doesn’t just come down to income when making your decision. Before we dive into the pros and cons let’s define what each setup entails.
Long Term Rentals
The most common form of residential income producing property is a long term rental. A suitable setup for most geographic areas whether you are coastal or inland. Setups are found in everything from single family homes to multi-unit apartment complexes. The unit or home is delivered to the tenant typically unfurnished. Tenants are found by advertising on Facebook, Craigslist, Zillow, Hotpads, etc. Once found the tenant brings in their furniture and personal items and usually occupies the unit for at least 12 months. During that time the property owner cannot access the property unless providing tenant ample notice as required under the law. In the event the tenant fails to pay rent, the tenant is protected under the law and the property owner must pursue an eviction process.
Short Term Rentals
The highest and best use for a residential income producing property in a desirable vacation rental destination is typically a short term vacation rental. With a short term vacation rental setup the property owner fully furnishes the unit or home. The home is then marketed online on vacation rental channels such as Airbnb, VRBO, Booking.com, etc. The property owner has to decide if they are going to self-manage to run the business, or if they are going to engage a short term vacation rental manager, such as Haustay.
Which is better a Short Term or a Long Term Rental Property?
When comparing the two it helps we compare the winners in each category
|Questions to determine the best use of your property
|Short Term Vacation Rental
|Long Term Vacation Rental
|Do you want to enjoy or use the property occasionally?
|Is the property coastal or in a desirable vacation area?
|Is the property in a less desirable area for travelers?
|Do you want the ability to increase rent at-will?
|Do you want the ability to access the property often for maintenance during vacancies?
The Truth About Short Term Vs. Long Term Rentals
A short-term rental use of a residential property gives the property owner more control. The property owner can increase rent at will vs. having to negotiate with a tenant at the end of a year. The property owner can enjoy the property when it is vacant, taking their family or significant others to enjoy the property. Depending on the location of the property, if it is located in a desirable area, the property will typically net more cash flow as a short-term vacation rental property as well.
A common misconception is that a short-term vacation rental property will have more wear and tear on it than a long term tenant. We typically find it is the exact opposite. In a short-term vacation rental property we can typically access the property weekly for property inspections. That gives us the ability to fix, repair, or replace any items in the furnished dwelling. With a long term rental, we cannot access the unit until the end of the lease, typically a year. By the time that tenant vacates the unit it is completely unknown what the condition of the unit will be when it is taken back over (and if their security deposit will cover any damages).