Long Term Rentals vs AirBnB Investing

99 Replies

In 2022, I’d like to choose a route to start my investment portfolio. I don’t own any property yet and based on lots of content and people sharing their many years of experience, I see the value in investing in long term rentals.

However, more recently there’s been an influx of content about people cash flowing a lot of money per month as AirBnB/VRBO investors. In a good market, popular rentals can make thousands per month and with new platforms being created to make booking, cleaning and managing AirBnB rentals easier, it has some strong appeal.

Has this been a popular discussion topic lately for others too? Has anyone tried both of these avenues or can speak from their own experience navigating new investments between these two worlds?

Feel free to share any resources I can check out that might give me some clarity and direction.

I only do short-term rental/Airbnb investing. It's a great way to get started. The arbitrage market is starting to get saturated but still doable. I personally would educate myself on using creative strategies to get into the short-term rental space such as owner finance deals, BRRRR deals, etc. The best way to get your foot in the door is to start so picking up an arbitrage deal from an owner and learning the short-term rental game is a great way to get started.

@Myka Artis

That makes sense. So arbitrage as a way of getting my feet wet rather than dropping a majority of capital I have or getting a mortgage on one property when I’m not really sure what the outcome will be.

That sounds like a happy medium.

AirBNB is more time intensive and only works well with certain types of properties (and more particularly certain areas). But the cash flow can be much better. Indeed, certain properties can ONLY cash flow with AirBNB. I should note there's also more regulatory risk with AirBNB and it's more subject to the economic winds (short term rentals got hammered at the start of Covid). Both models work, or a hybrid, so I wouldn't say it's a competition between the two. Just whichever one (or both) work best for an individual investor.

I am currently in the same boat. I have a house, and I need to decide pretty quickly which direction to take it. I've sort of landed here: Try STR with minimal changes to the house and hand-me-down/thrifted furnishings (but make it cute, I see lots of paint in my future). See if my local sphere needs month-to-month rentals as much as advertising on platforms for nightly rentals. Maybe that's the hybrid model @Andrew Syrios mentioned? I plan to give it about a year, thinking end of next summer will be a good time to pick up a long term renter ahead of the school season. If it doesn't work, I can sell the furnishings, maybe to a fellow local AirBnBer even, and pivot into a long term rental. Or maybe I'll be too busy rolling around in all this money the STR-fellowship is hollering about. I really hope so. 

If your goal is cash flow, STR wins in a landslide. Here are some general tips for you:

You can determine the revenue potential of a property with tools like Airdna and Rabbu, but make sure to research sites like Airbnb as well.

Find a reliable cleaning crew and handyman, they are the lifeblood of your business.

Also look into pricing tools like Beyond Pricing and Wheelhouse (you’re leaving money on the table if you try to do it on your own).

Last but not least, research your competitors in the space. Make sure to offer amenities guests will expect, and amenities that separate you from the competition.

Good luck and feel free to DM me with any other questions!

@Alex Wise Some good advice here but I would try to learn from history. Go back in time and consider what investors were buying in 2010-2015. Did the successful investors in your MARKET buy STR or LTR? How much time and money do you want to leverage? The answer should be low.

I'll go a limb here and say LTR>Flipping>STR>everything else. This is the order of least stressful to stressful investments. It's hard to find cash-flow and balance this but it's not impossible.

In my opinion the surge of STR in the majority of tourist markets is a last ditch effort to find cash-flow. It's management intensive unless you live nearby or hire it out and pay for it. That type of investment is risky if something happens to the economy. Family vacations, big events, and travel go bye bye. Find a deal that makes the most sense in your market, has some value add, and drive it home. Don't over leverage to make it happen. Don't force the numbers to look good on a spreadsheet.

This is a tough. @Andrew Syrios is making perfect sense and I have to think about the fact that I’m in Columbus, Ohio. I think that could be a moment where @Jaron Walling makes complete sense for LTR and possibly flips (out of my comfort zone to start).

Like @Alex Jenkins , I feel like if I stay local with an investment, it will be an LTR. More house for my money in Columbus.

Another caveat is that I work fully remotely and would be open to traveling to my destinations for new purchases or spending time exploring STRs in a more favorable destination or vacation market(not Columbus haha). Maybe something southern that can be used more during the year. Nashville, Charleston. I've hear murmurings of more regulations and barriers doe STR in parts of those cities though. I'll have to do more research on the resources @jimmy said.

This is awesome. I appreciate you all responding and giving me good food for thought!

@Alex Wise I think there's a lot of wisdom in these posts, and the reality is that short term rentals will be much more management intensive than long term rentals, but will offer higher returns. The question you need to ask yourself is do you want to buy yourself a passive investment or an active job? Once you factor management costs in for STR you'll wind up with returns that are only slightly higher than LTR but riskier, however if you'll manage it yourself you can see returns that are much higher because you're getting compensated for your time. Similar to flipping, the more work you do yourself the more money you'll save/make (generally speaking).

I'd recommend exploring one of 3 options: 

1) Looking into a house hack that could be used as a short term rental to dip your toes into the industry, but only buy something that will cashflow or at least break even if it doesn't work out or you don't like the active management piece of it.

2) Look into furnished rentals to traveling professionals (travel nurses on furnished finder). Monthly rents are higher than renting out long term, and as long as you account for higher vacancy you should still be able to see solid returns. 

3) Invest in a long term rental first to provide stable cashflow and learn what it takes to manage, and then revisit short term rentals in a year or so as a means of diversification. 

I'm currently going through the process of converting my primary residence house hack from a travel nurse/furnished rental to an Airbnb, and I'm expecting much higher returns but I know there will be additional management required. I'm able to outsource most of it, but I figure it's a relatively low risk way to start investing in the STR space myself. Always happy to chat further about it if you want to connect, just shoot me a message.

Best of luck!

Originally posted by @Alex Wise :

This is a tough. @Andrew Syrios is making perfect sense and I have to think about the fact that I’m in Columbus, Ohio. I think that could be a moment where @Jaron Walling makes complete sense for LTR and possibly flips (out of my comfort zone to start).

Like @Alex Jenkins, I feel like if I stay local with an investment, it will be an LTR. More house for my money in Columbus.

Another caveat is that I work fully remotely and would be open to traveling to my destinations for new purchases or spending time exploring STRs in a more favorable destination or vacation market(not Columbus haha). Maybe something southern that can be used more during the year. Nashville, Charleston. I've hear murmurings of more regulations and barriers doe STR in parts of those cities though. I'll have to do more research on the resources @jimmy said.

This is awesome. I appreciate you all responding and giving me good food for thought!

 I think the important thing to remember is it's not an either/or question. That being said, I think LTR should make up the bulk of your portfolio

Originally posted by @Alex Jenkins :

I am currently in the same boat. I have a house, and I need to decide pretty quickly which direction to take it. I've sort of landed here: Try STR with minimal changes to the house and hand-me-down/thrifted furnishings (but make it cute, I see lots of paint in my future). See if my local sphere needs month-to-month rentals as much as advertising on platforms for nightly rentals. Maybe that's the hybrid model @Andrew Syrios mentioned? I plan to give it about a year, thinking end of next summer will be a good time to pick up a long term renter ahead of the school season. If it doesn't work, I can sell the furnishings, maybe to a fellow local AirBnBer even, and pivot into a long term rental. Or maybe I'll be too busy rolling around in all this money the STR-fellowship is hollering about. I really hope so. 

As far as each property goes, I think you need to make a decision to either go LTR or STR (with some exceptions, say for your personal residence if you leave town for a month or a fourplex where you STR one unit). But you can add both types to your portfolio, although I think LTR should make up the bulk of it.

Very useful insights in these forums for STRs, my 2 cents- LTR is always an option at any point of time. One thing the pandemic has irrefutably changed is the way a lot of people are traveling and vacationing .there is always a demand for people to go to drive down to places which are a couple of hours away , If I were you - I would run numbers on existing listings in the area you seek to invest, see how far their calendars are booked.. run a few reports out of mash visor or airdna.. ROI on LTRs are no where even close to LTRs , there are regulations to convert LTRs-STRs however I have never heard the other way round :) - so might as well give it a try . Have 5 STRs so far & all are managed remotely, 100% true - they are a hassle on days but it is expected when I have new tenants every 4 days.

As many have said, Airbnb is a great way to cash flow but does not work in every neighborhood and will be more capital intensive to start. There are pros and cons to both but it comes down to your specific goals starting out. Most importantly I would make sure you have a good team in place so that you can be successful from the start, the only difference will be a regular PM or a STR PM. @Alex Wise

Originally posted by @Tony Clark :

@Alex Wise I think there's a lot of wisdom in these posts, and the reality is that short term rentals will be much more management intensive than long term rentals, but will offer higher returns. The question you need to ask yourself is do you want to buy yourself a passive investment or an active job? Once you factor management costs in for STR you'll wind up with returns that are only slightly higher than LTR but riskier, however if you'll manage it yourself you can see returns that are much higher because you're getting compensated for your time. Similar to flipping, the more work you do yourself the more money you'll save/make (generally speaking).

I'd recommend exploring one of 3 options: 

1) Looking into a house hack that could be used as a short term rental to dip your toes into the industry, but only buy something that will cashflow or at least break even if it doesn't work out or you don't like the active management piece of it.

2) Look into furnished rentals to traveling professionals (travel nurses on furnished finder). Monthly rents are higher than renting out long term, and as long as you account for higher vacancy you should still be able to see solid returns. 

3) Invest in a long term rental first to provide stable cashflow and learn what it takes to manage, and then revisit short term rentals in a year or so as a means of diversification. 

I'm currently going through the process of converting my primary residence house hack from a travel nurse/furnished rental to an Airbnb, and I'm expecting much higher returns but I know there will be additional management required. I'm able to outsource most of it, but I figure it's a relatively low risk way to start investing in the STR space myself. Always happy to chat further about it if you want to connect, just shoot me a message.

Best of luck!

+1 for house hack into a duplex, 3 or 4 unit!

STRs are reliant on location. LTRs can (theoretically) work in any area. Depends what your specific goals are....Mine, as a business owner, have always been to make money. A well-located STR will beat LTRs like a drum...you win x 2, the monthly income is 3-5x greater, and you get a nicer property (because you bought a house in a better area) that will appreciate more as time goes by.

And the clincher: you can always turn a STR into a LTR, but you cannot turn all LTRs into STRs.

There is little reason to even have this conversation....find a nice house in a nice neighborhood in a desirable vacation city/area. Fix it up so it stands out, add amenities, and voila!

I have both. Both are great for different reasons. I have a long term rental that requires basically zero work and I cashflow $400 per month. My short term rentals are cashflowing much more but require much more work. I will do more STRs in the near term to increase cashflow and over time I will take the cashflow and invest in additional LTRs. Do both!

@Tony Clark I appreciate your reply and appreciate you breaking it town. I like the three choice approach.

Otherwise when I’m looking to get started it’s almost “paralysis by analysis”. I’m sure there’s a million ways for people to make money move. I like your perspective.

all spread out along north east  .. finding a good local set of crew ( prop manager ) is the key.  Even with the additional overhead of having a PM , the location of these STRs( beach, lake-fronts & mountains ) make the cashflow robust. 
Originally posted by @Alex Wise :

@Gururaj Iyer

Are all of yours in the same city or are they spread out?

@Jonathan Pavkov

Looks like you’re in Columbus so where are you hiding the duplexes, tris and quads??!

I’ve kept my eye on those for years and haven’t felt like there’s much around that isn’t a wreck or isn’t entirely out of my price point. Grandview and German Village is too pricey. Downtown spots aren’t a great area. Maybe I need to explore other parts of the city.

If you know where the deals are, let me know. :)

@Bruce Woodruff as a business owner, do you find it hard to manage STR or have you outsourced some of those aspects?

You make a lot of sense. Could always turn the STR into and LTR. So just jump right in and voila? Haha

@Gururaj Iyer

I mean the numbers I'm hearing are insane on some of these STR. Theres a guy I've followed for awhile on Social Media who has four modest homes around TN and is bringing in more than $40k/month between them.

Happy to pay management costs. I can’t imagine he’d be at a loss unless he tried.

Originally posted by @Alex Wise :

@Bruce Woodruff as a business owner, do you find it hard to manage STR or have you outsourced some of those aspects?

You make a lot of sense. Could always turn the STR into and LTR. So just jump right in and voila? Haha

My wife and I do the Mgmt and cleaning. Not a big deal. Easiest money I ever made..... :-)

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