Long Term Rentals vs AirBnB Investing

99 Replies

@Rob Hakes

Thanks Rob. Some people make it sound so easy with booking platforms, good cleaners, and a local handyman.

But I get why you’d say that because I can’t imagine it’s really that easy to manage it all remotely.

Maybe it is and just takes time to build that team?

Thank you for starting this thread @Alex Wise ! There looks to be a lot of pros in both LTRs and STRs pending where you’re looking to invest and what your goal is with the investments.

Myself, I’m leaning towards the STRs. It seems like you have to put some work in to get the systems up and running, but once you have, the cash flow seems like the best way to get a real estate portfolio built up sooner than later. I’ve also noted, many diversify and use the cash from STRs to invest in other LT buy and hold properties.

As a fellow newbie, it seems like there are many possible roads and it is just picking the one right for you. Good luck with your future endeavors!

Very true.  Ohio, Pennsylvania, NJ, NY and many more.  If the home state has tight restrictions then they gravitate here to vacation where its much more relaxed. I have high school buddies in Lyndhurst and Columbus so I sort of have an Ohio connection.  I'd be happy to talk to you about it any time.

Folks...lots of bad info in this thread. Mostly from folks who have never actually done an STR and have an obvious fear-based mindset.

Yes, diversify.  Yes, STRs are *slightly* more work, but building systems make them nearly seamless.  I never see my guests, never clean houses, never do repairs.  I do occasionally message a guest on the app that has some odd question that my automated messaging system can't figure out.

No, you don't need to be in a vacation market to succeed in STRs. Anyone with more than 2 kids or any number of toddler age kids knows that hotels SUCK for traveling young families. ALL of my 7 STRs have been in non-vacation markets and so far all exceed 30% CoC. @Paul Sandhu ...help me out with your small Kansas town stories...

Medium-sized cities (>10K pop) that have a refinery, military base, hospital, university, etc will have STR demand. Basically, if there are a few Hilton Garden Inns or Marriott Townplace Suites or w/e...there is STR demand. In other words, @Alex Wise , even Ohio. :)

@Alex S.

I'm on board with Alex S.. I think a little different than most people here. I don't look at vacation destinations to start a STR. I'm not saying vacation destination rentals are bad but just hear me out. I live in a small town that a majority of people wouldn't put on their vacation bucket list. It all started a few years back with a vacant unit in our 4-plex and my wife watching too much HGTV. She had a blast decorating the unit and put it up on Airbnb. Between you and me I thought she was crazy. Nobody is going to rent this. I was wrong, I can't say we have one certain clientele, we have all walks of life and different reasons. We ramped up to 4 STR then COVID-19 hit, our bookings dried up. We even turned one back into LTR, mistake. The downturn lasted just a few months and has come back strong.

So now you know my story around STR here are my thoughts. I dont want the STR to be the destination. You know, big house with the hot tub. Everyone knows this destination people are partying. Uncle Bob drinks to much and throws up in hot tub, cousin Sara spills the red wine on the carpet, nephew Jimmy breaks the lamp playing ball in the house, no thank you. People that stay at my STR basically want a place to sleep and are out and about during the day. A majority of the time the only thing people use in the kitchen is the coffee maker. Low impact on rental, cleaned on a regular basis, what more could you ask for. The key is having a good cleaner, ours is awesome, she has access to calendar and handles it without any input from us. Airbnb is a great platform to use. My wife handles all the questions, bookings and check ins and outs. Let's face it, we are all on our phones so answering a few questions, cut and paste info for the people, no big deal. Smart locks for easy check in.

Make sure you have a cushion, make sure it will work for LTR if you have to transition. Well that’s my two cents,

@Alex Wise meals as in a bed and breakfast model,

cleaning as in daily maid services. Normal turns do not count as substantial services. Most all VRs can be claimed on Schedule E. Search for Brandon Hall and short term on YouTube and you will find some great info. Good luck!

@Alex Wise

I have 3 rentals. 2 are long term leases (1 year in length) and the 1 is a air bnb. I self manage all of them

The long term rentals are much much more passive. I usually go over and cut the grass during the summers, and assist in changing HVAC filters every 3 months. Takes me maybe 1 hour a month to manage these. I collect $250/mo from each house.

My air bnb is extremely time intensive. My air bnb is on my street so I still clean it myself between turnovers because I have a pretty flexible schedule. I do have a cleaner for when I’m not available but having a full time cleaner cuts into profits quite a bit. You have people coming and going every 2-3 days most of the time. The house needs a full cleaning in between each. Sheets and comforters can get stained. You have to stay on top of taking out trash. Managing keeping inventory of supplies like toiletries. People messaging you all the time and sometimes complaining about things. Then they give you a score out of 5 after every stay. Also, it’s very difficult to make repairs because the windows are tight.

For example, I need a plumber to come look at a slow draining washer drain and a appliance repair guy coming to look at a non spinning dryer. My turnovers consist of the client checking out at 11 AM and the next client checks in at 3 PM. In June I only had 2 nights vacant - same thing in July - and next month in august I have 1 nights vacant. So it’s nearly impossible to get a contractor in for repairs unless the client doesn’t mind you intruding on their stay away from home.

BUT, this home would rent for $1100/mo as a long term lease. On air bnb I’m pulling $2200-2500/mo. So gotta weigh the pros and cons. It’s a job you are creating or much more income or you can sit back and relax and collect a smaller paycheck from long term rentals

Hey there! I own 55 doors, 8 of which are STR's. The STR's are more work than the LTR's, but I certainly wouldn't call them an "active job." Most everything can be automated. I don't recommend buying in metro markets. All of mine are in regional, drivable, vacation rental markets. To give some context, my 7 active STRs (one is being renovated), grossed over $100k in July alone. So if you want to generate the most cash flow as quickly as possible, so that you can scale your portfolio more quickly, STR is the way to go.

Originally posted by @Alex Wise :

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.

Long-term rentals are true real estate investing.

Short-Term Rentals ("STR", a.k.a "AirBnB" or "VRBO") are the Hospitality Industry. Greatly more management intensive, especially if you try to DIY.

My $0.02 ... 

@Myka Artis

Just had someone try and lease a long term property for rental arbitrage. They weren’t upfront about it at all until they sent over the addendum.

What’s a standard deal you’ve agreed to with landlords? If you can get a regular lease from someone great but I was thinking the landlord should be getting cut in? 10%-30% of net profits+rent?

I do both. I have eight properties here on Maui, two vacation rentals. The long-term rentals are more hands off. Airbnb requires more attention, constant linen replacement and sometimes dealing with wacky guests. But it does typically pay more unless you find a killer deal on a house. I self-manage and live within 30 minutes of both STR.

@Cole Smalley I usually pay market rent to the landlords that I do rental arbitrage with. I let them know about my company, what we do, and show them our portfolio of short-term rentals. I don't usually do profit shares but those are quite common. The biggest upside that landlords have when working with me is that their properties are well maintained and their costs when we move out are extremely low. If you request a profit share that might work. I'd verify how experienced this person is as well. What do they do for insurance? How do they protect your property? etc?

@Alex Wise

question for you Alex, how involved do you plan to be in your property? I've dont both long term and vacation rentals and I prefer short term for a few simple reasons; constant access to the property, bad apples don't last long, flexibility in schedule, multiple exits.

Long term rentals offer more stability but less flexibility.

I do both and for different reasons. I have one property in neighborhood that, while safe enough, might not be so attractive to the STR crowd so I keep a great LT tenant instead. I have another property in solid family neighborhood. It seems to be popular as a STR with traveling/visiting families. I'm happy with my current set up

@Johnny Horner

I appreciate that, Johnny. You’re right in that *most* people just want a place to stay and I, personally, and more prone to renting AirBnBs before a hotel, which there are lots around me. So I’d think it would be an over-saturated market but to @Alex S. ‘s point, I guess they wouldn’t constantly be building new hotels if that were the case.

I do know I’d get more for my money here so comparatively speaking maybe margins would be comparable for the money I’m investing in the home off the bat.

Question: where do people find these amazing make-or-break cleaners?? That’s come up time and time again.

@Steven May

I hear you. And along the lines of other topics in here, it sounds like your STR is booked almost solid and you're in Kansas City, MO? Are you close to downtown or out in the burbs? Popular area?

Any thought converting the other LTRs into STRs or content managing just the one for now? I think I know the answer die now based on your message :)

@Loren Clive

And if you have an option to do another LTR or STR next, which would you do?

Lots here say both is good to differentiate but when you have both I wonder what you'd gravitate to more. Sounds like it would have to be more in a certain vicinity and make financial sense for another STR.

I do like the idea of hands off LTR.

@Mel Hayes

That's something for me to think about. A pro for me is that I work remotely so I can manage homes from a distance but if I get a STR out of state, I'd likely have to relocate(possibility) or manage it all remotely (more costly but could be worth the investment).

I'm seeing good points here about LTRs and incorporating them into my portfolio. I don't mind putting in the work (or extra money) to manage a STR while I'm still able-bodied(debatable :)) I could see myself being more hands off with LTR as my portfolio matures? Hmm

Originally posted by @Steven May :

@Alex Wise

I have 3 rentals. 2 are long term leases (1 year in length) and the 1 is a air bnb. I self manage all of them

The long term rentals are much much more passive. I usually go over and cut the grass during the summers, and assist in changing HVAC filters every 3 months. Takes me maybe 1 hour a month to manage these. I collect $250/mo from each house.

My air bnb is extremely time intensive. My air bnb is on my street so I still clean it myself between turnovers because I have a pretty flexible schedule. I do have a cleaner for when I’m not available but having a full time cleaner cuts into profits quite a bit. You have people coming and going every 2-3 days most of the time. The house needs a full cleaning in between each. Sheets and comforters can get stained. You have to stay on top of taking out trash. Managing keeping inventory of supplies like toiletries. People messaging you all the time and sometimes complaining about things. Then they give you a score out of 5 after every stay. Also, it’s very difficult to make repairs because the windows are tight.

For example, I need a plumber to come look at a slow draining washer drain and a appliance repair guy coming to look at a non spinning dryer. My turnovers consist of the client checking out at 11 AM and the next client checks in at 3 PM. In June I only had 2 nights vacant - same thing in July - and next month in august I have 1 nights vacant. So it’s nearly impossible to get a contractor in for repairs unless the client doesn’t mind you intruding on their stay away from home.

BUT, this home would rent for $1100/mo as a long term lease. On air bnb I’m pulling $2200-2500/mo. So gotta weigh the pros and cons. It’s a job you are creating or much more income or you can sit back and relax and collect a smaller paycheck from long term rentals

 Is the $2200 gross or net?

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