Long-Term or Short-Term Rentals, How Do You Choose?

9 Replies

Hi Everyone! 

I've made up my mind, I'm going to invest in my first property! However, I'm unsure if it's smarter to choose a property meant for long-term renting or short-term renting. To clarify, by a "long-term" rental, I mean some type of single family house or townhouse in the city I live in (Raleigh, NC) that a tenant could potentially live in for years. By a "short-term" rental, I mean something like a condo at the beach a family would rent for a week at a time. 

One clear downside to the short-term option is likely difficulty filling the unit in the off season. Can you guys help me with other pros and cons? 

Thanks!

Melissa S. 

Long term! 

Short term just means more turnover, which just means more expenses and more costs every time that someone moves out of your property. You want the least amount of turnover as possible.

Thanks for the responses, guys! 

Originally posted by @Steve K. :

@Account Closed 's comment above.

However, there's a whole subset of these BP forums devoted to short term/vacation rentals.

https://www.biggerpockets.com/forums/530-short-ter...

Many on BP are excited about an uplift in their monthly net income on STR vs long term. Read/search elsewhere in these forums on the "Airbnb" advertising strategy for STR.

 Lol. It's hard to leave that long term mindset and think short term.

@Account Closed , with short-term, you make more money but more work is required. Vacation rentals bring in a ton of cash (we were making $3K profit a month on one bedrooms in Denver), but it wasn't free money. There was a lot of cleaning and guest management required. That said, these days you could hire that out to someone that will manage it for 10-20% of the profit (so you could factor that in with the numbers.) Regarding the off season, you could see if AirDNA has a report for your city. If they do, it will include numbers you can pull in for the off season (Airbnb will also provide some of this if you go in and start the process of a listing.) Some other things to consider before going the short-term route are what your city laws are and if they are monitoring Airbnb/actively pursuing them and if you rent a condo, if there are any HOA limitations. Anyway, good luck! The money is great if you can do it.

@Account Closed , in our market (college town in Texas) AirBnB has been awesome. We make more than 2x as much as we would on a traditional rental. It is true that it is a lot more work, though. If it is close to you and your only rental, it may be easy for you to do the cleaning and stuff yourself. Someone mentioned a property management company taking 10-20%, but on AirBnB properties, I think that number would be MUCH higher, as they could potentially be cleaning it every single day. If you're not doing the cleaning, it may be best to find a person you trust to do it for you, rather than hiring a property management company. For us, AirBnB is definitely the way to go right now.

If you absolutely can't afford the property without hitting a certain amount of revenue, or require stability/want to know the exact amount you'll make each month, AirBnB may be too stressful for you. Also, if you are unable to manage the property yourself, your expenses may be too high. When making comparisons, realize that you will have to pay for furniture, utilities, and cable/internet. You'll have to determine if your profit is high enough to warrant the extra work/time. You can get on the AirBnB website/app and send an inquiry to any host on there. I would ask questions about their occupancy rates, average utility bills, and nightly rental rate. AirBnB is a great community (like BP!) and usually hosts are really friendly and willing to help.

Best of luck in your decision!

Hi @Account Closed and figure out what the laws and regulations are in the city to figure out if it is even legal.  I can tell you from experience here in Denver that location is key is most markets.  Lean towards smaller units closer to downtown or hip areas vs. larger units further out.  Operationally from an Airbnb standpoint the small 1-2 bedrooms are the easiest to run, cost the least to maintain, and have the highest occupancy rates.  AirDNA provides great data but take it with a grain of salt since it includes all cleaning fees.  Hope this helps!  

Airbnb/STR pros:

Your property will always be in top shape

More money (Most important right)

You get to meet some pretty cool people (I've met more RE contacts from doing it)

Airbnb/STR Cons:

Turnovers (work for you unless you hire out)

-Cleaning

-Washing linens

-Restocking supplies

Messaging back and forth with guests (work for you unless you hire out)

Those are just a few off the top of my head. If you want to skip all of this and just make Airbnb money with no work then furnish your unit and do corporate rentals. That's what I do with condos. These people usually stay 3 - 12 months at a time depending on their contracts.

Thank you all for responding! 

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