Are Short-Term Rentals a smarter choice over Long-Term Rentals?
Member since 2023 · 78 posts · 37 votes
Are Short-Term Rentals a smarter choice over Long-Term Rentals?
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Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
2yUnfortunately, if this were a true yes/no question, everyone would do one or the other. One personal suggestion I have is that if you're going the STR route and you're investing in an urban market rather than a true vacation market (i.e Houston, TX vs. Outer Banks), you are going to want to ensure that you're property can cashflow, or at the very least make ends meet as a long-term rental. This way, in the event of regulations, you are covering yourself from potential large losses/the property no longer being sustainable.
31 Replies
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
they're just two different strategies.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes2y
As mentioned they're almost two different strategies altogether. I have both and my LTRs have performed light years ahead of my STR in terms of profitability. But it's not apples to apples because they're 2 different markets, and most of my LTRs were purchased years ago whereas my STR is a much more recent purchase, at a higher price than I would have purchased the equivalent at the time I was buying my LTRs.
If I was forced to pick one strategy it would be LTR. STR depends far too highly on hospitality (a subjective opinion) and booking strategies largely out of my control (AirBnb, VRBO). With my LTRs my only real competition is myself - people who are just parking their heads for a few nights somewhere are willing to make a lot more trade offs (cheaper price, worse area) than someone who plans on living full time in a property. As long as my amenities make sense for the market, within reason I can set my own prices and control most of the transaction.
Skyline Properties - 2yKristi KandelPro MemberDeveloper · Fort Myers Beach, FL · Member since 2018 · 383 posts · 195 votes
Quote from @Calvin Baughman:
This must be a commonly asked question here, but I'm seeking updated opinions, from People who are daily operating in those markets. Could the profitability of Short-Term Rentals outweigh the stability offered by Long-Term Rentals in today's dynamic real estate landscape? What key factors contribute to the financial advantage or stability between these two rental models, and how do market fluctuations impact their respective profitability over the long term?
It completely depends on your team, time, and strategy. STRs are a business where LTRs are much more passive and require much less time and effort.
- Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes2y
Unfortunately, if this were a true yes/no question, everyone would do one or the other. One personal suggestion I have is that if you're going the STR route and you're investing in an urban market rather than a true vacation market (i.e Houston, TX vs. Outer Banks), you are going to want to ensure that you're property can cashflow, or at the very least make ends meet as a long-term rental. This way, in the event of regulations, you are covering yourself from potential large losses/the property no longer being sustainable.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes2y
To become successful in the short term rental space, you must have an extremely unique property with features that stand out above and beyond your competition.
In Austin Texas, I believe there are more active short term rentals than listings. Homeowners were brainwashed into purchasing property that will only cash flow with nightly stays. They are quickly realizing that their occupancy is decreasing month over month and are going to have to sell.
- 2yTravis TimmonsPro MemberRental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
Short answer - it depends on your situation and the individual investments you are comparing.
Real life answer - if you own short terms, you'll think it's a pain in the a$$ and want to buy long term rentals.
If you own long terms, you'll complain that they don't cash flow enough and be convinced that you should get into short term rentals.
That assumes that you don't have a time machine to go back to a STR market that was an IQ test. If you had a brain and a calculator a few years ago, short term rentals were the answer to this question. Now that the secret is out and margins are compressed, it's situational and a judgment call.
- 2yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Calvin Baughman, I think you have the idea. It is all going to depend. I don't agree with everything folks said, but for the most part you have to decide.
I don't think you always need to have a super unique place to succeed. It is all going to depend on the area. A nice lake front, beach front, mountain view etc place will usually do well without a lot of gimmicks.
If you are in a place like Austin where every STR is pretty much the same, then you need to do more to stand out. There are a ton of STRs there.
LTRs are a way to make a decent profit while building up equity. STRs can and should do better than a LTR but it more risky. Regulations, pandemics, weather etc all play a role in success.
- 2yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 4k+ posts · 3k+ votes
It depends on the property, and you/your life situation. Some advantages of both:
LTR Advantages
- Typically more stable income
- Less maintenance
- Easier to self manage, or cheaper to hire a manager
LTR Disadvantages
- Typically less cashflow
- Potential for costly evictions
- Typically lower asset class/lower appreciation
STR Advantages
- Typically good STR's are in a higher asset class than LTR's
- People typically think the wear and tear in a STR is more, which can be true, but having staff inside with a checklist can catch small problems before they turn into larger more expenses- More flexibility if you want to sell you do not need to try to sell pre-loaded, can sell furnished whenever you want etc
- Potential for owner use
- Higher cash flow, typically.
STR Disadvantages
- Management intensive, more expensive management
- Income instability
- Subject to seasonality
I have both but prefer STR's. Not every person is right for either, not every property is good for either. Finances also play a crucial roll as well. Do what feels right!
Vacation Rentals of Florida53 Reviews - Member since 2022 · 1k+ posts · 1k+ votes2y
Agree with @Andrew Steffens above, it ultimately comes down to the property, your goals and what kind of work you can put into it. Lots of properties work great as an LTR but not as an STR and vice versa. There is no better overall, only what's better for the situation.
- 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Calvin Baughman 80% of my local market has turned into STR over the past 3 years. I have as many tenants as I could hope for for my LTRs.
I owned B&Bs for 24 years. I no longer have a desire to deal with bookings, reviews, overnight stays, vacations, cleaning and making beds, etc. My area has about 2 options to choose from for cleaners for STRs you have to hire someone new otherwise and it’s just a big hassle.
Basically it's a personal preference for two totally different types of strategies. LTR that should require very little work year round unless you get a bad tenant, or STR which are much more hands on unless you pay a larger percentage of you profits to a management company to handle it for you.
- Investor · Fort Worth, TX · Member since 2021 · 68 posts · 57 votes2y
@Calvin Baughman one isn't necessarily better than the other at face value. There are a handful of factors to take into consideration for each deal you analyze, like market conditions, local STR regulations, interest rates, etc. There isn't one golden strategy to lead anyone to the light, per say. Determine the market that you want to invest in long term and from there, see which strategy will be most beneficial.
- Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes2y
I know some folks with a dozen or more short-term rentals and they are making a boat load doing it. But I don't like the seasonality and ebb and flow of those, so I only have a few mixed in with my long-term rentals. I definitely think they belong in any portfolio though, as they make so much money. I just wouldn't put all your eggs in that basket.
- Member since 2023 · 78 posts · 37 votes2y
@Andrew Steffens
Thanks, Andrew. That's a very detailed and helpful answer. I already have an STR, but my wife and I are thinking of buying one more property, and we were discussing about making it LTR or another STR. Those topics are very clear examples of pros and cons! - Member since 2023 · 78 posts · 37 votes2y
Yeah, I have an STR already, but I'm considering buying another property, and I'm still evaluating the pros and cons of making it STR as well. I mean, it's fine if it does not make tons of money every month, this is not my primary income source. But I wonder if it's not best to grow a business in the same area since then if I want to make this my main job some day... I guess I have to redefine my goals in order to make this decision.
- Member since 2023 · 78 posts · 37 votes2y
Quote from @Alecia Loveless:
I owned B&Bs for 24 years. I no longer have a desire to deal with bookings, reviews, overnight stays, vacations, cleaning and making beds, etc. My area has about 2 options to choose from for cleaners for STRs you have to hire someone new otherwise and it’s just a big hassle.
Oh, I hear you! Cleanings are a sensitive topic of STRs. Guests are very demanding about it and anything that doesn't meet their expectations can result in a bad review. You need to find a reliable, dedicated and experienced cleaner to look after your property, and this can be a difficult endeavor. But today it's easier to organize and pay for vacation property cleaning, there are several apps that make this job easier. I particularly use Turno. It schedules the cleaning of my property automatically according to my Airbnb calendar and the cleaner receives payment as soon as a project is completed, without me having to do anything. Also, all cleaners go through a background check process, so that made my life very easier when finding the perfect fit for my property. Probably I just enjoy the craft of running STRs hehe.
- Member since 2022 · 272 posts · 253 votes2y
In the crudest of ways, I almost equate STRs to stocks and LTRs to bonds.
One has more potential, but also more risk, and is more of a discretionary spend for customers vs necessity.
that said, it’s more nuanced. Personal use, time, using a PM vs not, market, time horizon.STRs are certainly going through a bit of a shakeup, and are more beholden to zoning laws
- 2yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 4k+ posts · 3k+ votes
Quote from @Calvin Baughman:
@Andrew Steffens
Thanks, Andrew. That's a very detailed and helpful answer. I already have an STR, but my wife and I are thinking of buying one more property, and we were discussing about making it LTR or another STR. Those topics are very clear examples of pros and cons!My pleasure! I think the numbers of the property should guide you well whether it should be an STR or LTR and whether or not you have the time to set up and manage another STR (if you are self managing)
Vacation Rentals of Florida53 Reviews Best of both worlds for me has been to lease to people that do STR. I get a stable LTR tenant. Sometimes a single tenant that rents a full (4-10 unit but one does more) building. Per lease they handle small work requests on their own.
And they get enough units to run at scale. They get units without having to buy a building. If their business grows, and they want another 10, 20, 100 units, we can give them to them. If I charge them $1000/month/unit and they make $10,000 a month per unit -- hey, good for them. We try to do the DD on the groups to make sure they're responsible enough to sock away some of that $ for the months when they might make $500 after expenses and still owe that $1000 rent.
So... Find an STR operator. Rent them the unit. See how they do.- Realtor · St Augustine, FL · Member since 2023 · 111 posts · 87 votes2y
Hi Calvin, So you already have one and you know what it is like to run a hospitality business. It is a lot of work! You really have to love dealing with guests. Even with a management company you have a lot of work to do. Regarding costs and profitability, the STR costs are much higher. I'd also look at your market and where the demand is. Supply and demand is changing. If you live in a tourist hot spot like me, then it may make sense, however we are seeing a lot more STRs listed for sale or entering the LTR market. This is causing rents to go down with the greater rental supply. If the demand is not there in your market for STRs but there is a need for LTR or MTR, then maybe that makes more sense. If you want something that frees up your time and still pencils out from all the reasons we love real estate (build equity, tax write offs, depreciation, cash flow) then I probably would lean towards LTR with a management company to handle the tenants. I am constantly running around for my STRs. But again it is a personal thing about what you like to do. Mindy
- 2ySarah KensingerPro MemberReal Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
This all depends on the person, what they want to manage, and the ROI they are looking for. As all ready stated, there is no right or wrong answer no matter what anybody says. It's completely up to the investor and what their goals are.
- Property Manager · Orlando, FL · Member since 2023 · 109 posts · 64 votes2y
Quote from @Calvin Baughman:
This must be a commonly asked question here, but I'm seeking updated opinions, from People who are daily operating in those markets. Could the profitability of Short-Term Rentals outweigh the stability offered by Long-Term Rentals in today's dynamic real estate landscape? What key factors contribute to the financial advantage or stability between these two rental models, and how do market fluctuations impact their respective profitability over the long term?
There have been a lot of good replies above, and I would echo their sentiment - the answer is "It depends"
I know quite a few people with own LTR or STR, some with both. In our market (Orlando) STR CAN be quite lucrative, but most of the people I know with STR here are not seeing the ROI that people boast when they say STR is more profitable. My lender friend owns 8 rentals, 6 LTR and 2 STR (house in Kissimmee and a condo in Miami), and only recently started doing STR after his LTR portfolio could support the STRs. His occupancy is around 65-70%, which is above national average, but the ROI has not been all that is hyped up to be. He said he is likely to sell the Kissimmee house early next year because it has not been more profitable than his LTRs and he has no personal use for it like he does with his Miami condo.
My friend who has the best success with STR self-manages and is VERY active with it. It takes up a lot of her time, but she reaps the rewards. Her occupancy is usually 90% and has strong nightly averages. She also does most of the repairs herself, which cuts down on her costs.
Professionally, I have received 10 sales calls in the last 8 business days from clients wanting to transition their STR to LTR because they are not performing well enough to barely cover the expenses. With that said, after talking to them many did not do sufficient and adequate research before buying. They drank the "STR is the best investment" Kool-aid and bought a decent property, but not one that stood out from the other 20,000+ STRs in the area and did not want to invest money to theme it.
Like others have said, I think it comes down to your goals. Are you more concerned about appreciation or cash flow? Do you want a passive investment or one that may require more work? Are you hiring a manager or self-managing? What is your overall financial situation and what kind of reserves will you have for the property? One mistake I've seen with some STR owners is not saving enough money when the property is performing well, and then when the seasonality kicks in and things slow down, they do not have enough money to cover the expenses, which puts them in a bind.
Personally, I like LTR because you can largely "set it and forget." Spend the work up front to prepare the house to show well, find good tenants, and then sit back and collect rent. I pay for preventative maintenance plans and rarely have maintenance calls. I like the passive nature of LTRs.
- 2yBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
Short-term rentals should be generating more revenue than a LTR.
However, there is more work involved.
Is the extra work worth the extra money?
Basit Siddiqi CPA4.880 Reviews - 2yNate MeekerBusiness MemberReal Estate CPA | California · Member since 2020 · 544 posts · 251 votes
I always look at it as what is your return on time? Can you make more elsewhere from the time it takes to do STR?
The CPA Realtor 572 Reviews - Orlando · Member since 2023 · 61 posts · 13 votes2y
Quote from @Chris Rich:
Quote from @Calvin Baughman:
This must be a commonly asked question here, but I'm seeking updated opinions, from People who are daily operating in those markets. Could the profitability of Short-Term Rentals outweigh the stability offered by Long-Term Rentals in today's dynamic real estate landscape? What key factors contribute to the financial advantage or stability between these two rental models, and how do market fluctuations impact their respective profitability over the long term?
There have been a lot of good replies above, and I would echo their sentiment - the answer is "It depends"
I know quite a few people with own LTR or STR, some with both. In our market (Orlando) STR CAN be quite lucrative, but most of the people I know with STR here are not seeing the ROI that people boast when they say STR is more profitable. My lender friend owns 8 rentals, 6 LTR and 2 STR (house in Kissimmee and a condo in Miami), and only recently started doing STR after his LTR portfolio could support the STRs. His occupancy is around 65-70%, which is above national average, but the ROI has not been all that is hyped up to be. He said he is likely to sell the Kissimmee house early next year because it has not been more profitable than his LTRs and he has no personal use for it like he does with his Miami condo.
My friend who has the best success with STR self-manages and is VERY active with it. It takes up a lot of her time, but she reaps the rewards. Her occupancy is usually 90% and has strong nightly averages. She also does most of the repairs herself, which cuts down on her costs.
Professionally, I have received 10 sales calls in the last 8 business days from clients wanting to transition their STR to LTR because they are not performing well enough to barely cover the expenses. With that said, after talking to them many did not do sufficient and adequate research before buying. They drank the "STR is the best investment" Kool-aid and bought a decent property, but not one that stood out from the other 20,000+ STRs in the area and did not want to invest money to theme it.
Like others have said, I think it comes down to your goals. Are you more concerned about appreciation or cash flow? Do you want a passive investment or one that may require more work? Are you hiring a manager or self-managing? What is your overall financial situation and what kind of reserves will you have for the property? One mistake I've seen with some STR owners is not saving enough money when the property is performing well, and then when the seasonality kicks in and things slow down, they do not have enough money to cover the expenses, which puts them in a bind.
Personally, I like LTR because you can largely "set it and forget." Spend the work up front to prepare the house to show well, find good tenants, and then sit back and collect rent. I pay for preventative maintenance plans and rarely have maintenance calls. I like the passive nature of LTRs.
Have you talked to anyone who tried to purchase in Orange county, not realizing you cannot short term rent, and then ran into problems and had to switch to long term?
- Property Manager · Orlando, FL · Member since 2023 · 109 posts · 64 votes2yI have not. They've all been properties in areas where they are allowed to STR.
Quote from @John Landskroener:
Quote from @Chris Rich:
Quote from @Calvin Baughman:
This must be a commonly asked question here, but I'm seeking updated opinions, from People who are daily operating in those markets. Could the profitability of Short-Term Rentals outweigh the stability offered by Long-Term Rentals in today's dynamic real estate landscape? What key factors contribute to the financial advantage or stability between these two rental models, and how do market fluctuations impact their respective profitability over the long term?
There have been a lot of good replies above, and I would echo their sentiment - the answer is "It depends"
I know quite a few people with own LTR or STR, some with both. In our market (Orlando) STR CAN be quite lucrative, but most of the people I know with STR here are not seeing the ROI that people boast when they say STR is more profitable. My lender friend owns 8 rentals, 6 LTR and 2 STR (house in Kissimmee and a condo in Miami), and only recently started doing STR after his LTR portfolio could support the STRs. His occupancy is around 65-70%, which is above national average, but the ROI has not been all that is hyped up to be. He said he is likely to sell the Kissimmee house early next year because it has not been more profitable than his LTRs and he has no personal use for it like he does with his Miami condo.
My friend who has the best success with STR self-manages and is VERY active with it. It takes up a lot of her time, but she reaps the rewards. Her occupancy is usually 90% and has strong nightly averages. She also does most of the repairs herself, which cuts down on her costs.
Professionally, I have received 10 sales calls in the last 8 business days from clients wanting to transition their STR to LTR because they are not performing well enough to barely cover the expenses. With that said, after talking to them many did not do sufficient and adequate research before buying. They drank the "STR is the best investment" Kool-aid and bought a decent property, but not one that stood out from the other 20,000+ STRs in the area and did not want to invest money to theme it.
Like others have said, I think it comes down to your goals. Are you more concerned about appreciation or cash flow? Do you want a passive investment or one that may require more work? Are you hiring a manager or self-managing? What is your overall financial situation and what kind of reserves will you have for the property? One mistake I've seen with some STR owners is not saving enough money when the property is performing well, and then when the seasonality kicks in and things slow down, they do not have enough money to cover the expenses, which puts them in a bind.
Personally, I like LTR because you can largely "set it and forget." Spend the work up front to prepare the house to show well, find good tenants, and then sit back and collect rent. I pay for preventative maintenance plans and rarely have maintenance calls. I like the passive nature of LTRs.
Have you talked to anyone who tried to purchase in Orange county, not realizing you cannot short term rent, and then ran into problems and had to switch to long term?
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