Short term or long term rentals?

Question

Hi, I'm getting started in a new property management company. If any one has any tips or tricks that would be greatly appreciated. Also short term or long term rentals what the preference on that? We are currently doing long term, but if short term is a better option we would consider changing our direction.

Sheldon Zimmerman · Answer

Hey Kiana,

I'd love to give you some great tips if you are starting a new PM business but that might be a conversation over the phone.

As far as the Long term or Short term, here are my quick thoughts. Full Disclosure, I do not have any short-term rentals. My parents do have a short-term one, so I'll be looking at it from through my eyes.

Long term...

Sounds like you already have one. I personally like this and think this is a great way to be hands-off to some extend. But to have a steady income. It's not exciting but it's the turtle(Tortoise and the Hare).

Short term...

I think this can be an excellent way to make extra income with a rental. Especially if you have a unique property in which people would want to stay at. Whether that be the property itself is unique or you live in an area that has a high touristy area. The one thing with a short term is it involves more of your time. To approve, clean, handle issues or even fix the tv remote. If you are up to that. Then you can make more money but it will involve more work too. If there is a third party that can handle those issues for you then it might be worth it but that will come at a cost too.

So in the end it comes down to how much time do you have? And how much time can you give to the short term rentals.

Bonnie Griffin Kaake · Answer

@Kiana Wood There are additional things to consider STR versus LTR. @Sheldon Zimmerman gave you a great perspective as well. The IRS requires a 39 year depreciation on STRs. On LTRs as you likely know, they get depreciated over 27.5 years. Either way, you can increase your cash-flow up-front by doing a cost segregation study and maximizing your tax benefits. Too many investors are leaving money on the table simply because their tax professionals are not aware...rarely, are they tax strategists and it is so much easier for them to do straight-line depreciation. I would be happy to talk to you more if this concept is new to you. No cost, just information. I hate to see any investor pay more in taxes than they need to pay!