Should You Go Short Or Long Term With Your Rental?
In today's real estate market, landlords have various options on how they can invest in real estate. Over the past several years, short term rentals have become a very popular option, even to the point of over saturation in many markets. It seems like everyone has flocked to sites like Airbnb and VRBO, turning their properties into a short term rental, vacation homes.
It’s important to weigh your options when considering short versus long term rental. Short term rentals can have high income potential depending on the location and time of the year. Long term rentals have a proven, steady wealth building track record. In this article, we will discuss the advantages of long term versus short term rentals.
Long term rental, refers to renting a property for an extended period of time, usually at least six months or more. This type of rental is popular for individuals or families who are looking for a more permanent living situation. Long term rentals may be furnished or unfurnished and typically require the tenant to pay for utilities and other expenses.
There are several benefits for landlords who choose to invest in and offer long term rentals. Some of the advantages of long term rentals include:
Steady Income: Long term rentals provide landlords with a steady and reliable source of income. Tenants are typically required to sign a lease for a minimum period of six months or more, which ensures that the rental income will continue for an extended period of time. Long term rentals provide a stable source of income for landlords as well as stable housing for tenants.
Reduced Vacancy Rates: Long term rentals are less likely to experience vacancy rates, as tenants tend to stay in the property for an extended period of time. A lower vacancy rate reduces the need for landlords to frequently search and screen for new tenants.
Lower Turnover Costs: Long term rentals can help reduce turnover costs due to having a lower vacancy rate. Expenses such as cleaning and repairs are reduced, as tenants tend to take better care of the property when they know they will be living in it for an extended period of time.
Lower Management Costs: Long term rentals typically require less management and maintenance than short term rentals. Tenants are usually responsible for their own utility bills and are more likely to take care of minor maintenance issues. There is less wear and tear on long term rentals compared to short term rentals.
Stable and Predictable Cash Flow: Long term rentals provide landlords with a stable and predictable cash flow. A stable source of income allows landlords to plan and budget for their expenses and investments more effectively. Long term rentals give landlords the ability to foresee and predict their asset for the long term which provides stability.
Owner Involvement: Long term rentals require less owner involvement. Landlords only need to find new tenants every 1-2 years. With long term rentals, landlords don’t have to worry about furnishing costs for a rental property, as most long term rentals are non furnished. Overall, with long term rentals, there is less wear and tear on the property, so maintenance expenses are usually lower on long term rentals.
Short term rental refers to renting a property for a relatively brief period of time, usually less than six months. This type of rental is popular for vacations, business trips, or other temporary stays. Short term rentals may be furnished or unfurnished and often come with amenities such as cleaning services and utilities included.
There are several benefits for landlords who choose to invest in short term rentals. Some benefits include:
Potentially Higher Rental Income: Short term rentals have a higher income potential than long term rentals. However, there are a lot of factors that need to be considered such as whether the location of the home is in a tourist market like Orlando or a utility market, such as Indianapolis. Another big factor is the season or time of the year. There are certain times of the year where a property will perform better than other times. You must account for seasonality with short term rentals.
Flexibility: Short term rentals provide landlords with flexibility as they can choose to rent out their property for specific periods of time and can adjust their rental rates based on demand. Landlords can choose to rent out the property for a day or for even months. Short term rentals also gives landlords the option to house-hack where they can rent out a portion of the property.
Greater Control: Due to not having a long term lease, landlords of short term rentals have greater control over their property. Landlords can regularly check on their property and make any necessary repairs or updates between guest stays. Landlords can choose when they host their property and if they want to rent out the whole property or even just a room.
Opportunity to Meet New Guests: Short term rentals provide landlords with the opportunity to meet and interact with a wide range of guests. Landlords can cohost and rent out a portion of their property to guests that are from different places and backgrounds, which can be an enjoyable and rewarding experience.
Tax Benefits: Both long term and short term properties have great tax benefits such as property tax and mortgage interest deduction. Short term rentals can have additional tax benefits that are not available for long term rentals. Regarding tax advice, Always consult with a tax professional.
Both short term and long term rentals have their advantages and disadvantages. Short term rentals offer flexibility and convenience, but can be more expensive and much more involved than long term rentals. Long term rentals offer stability, affordability, and long term appreciation. Ultimately, the choice between short term and long term rental depends on the individual's needs and preferences as well as the market.