Short Term Rental Vs. Long Term Rental

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Short Term Rental Vs. Long Term Rental

Russell Payne
Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes

When looking to purchase your first investment property, would you prefer a short term or long term rental plan?

Would love some pros and cons!

Thanks!

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y

Long term. Less upfront costs and easier to manage.

Most people see the nightly rates of STR and assume the net is higher, but that's not always the case. When you consider setup costs, utilities, landscaping, consumables, your time, marketing, and other expenses, the net may not be much higher than a long-term rental.

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  • Gururaj Iyer
    Edison, NJ · Member since 2017 · 116 posts · 34 votes
    5y

    @John Underwood: hello , if you don’t mind sharing ? Where do u look for LTR options and deals ? I have 3 STRs at the moment however I am thinking of diversifying to LTRs.. I was checking rootstock but is there any other geography or methodology you would suggest ?

    0Reply
  • Fred Cannon
    Rental Property Investor · St Augustine, FL · Member since 2019 · 265 posts · 279 votes
    5y

    @Russell Payne. Traveling nurses are a great market, and in a small way you are supporting the local community by providing housing to a critical need. The rent is never late and some will

    Pay all up front. I provide a nicely furnished condo, cable and WiFi. I am able to charge around $400-500 more than if it was long term unfurnished. I choose condo's for this market because it's no exterior upkeep and provides pool, gym, tennis etc. I usually get 3-4 request a week, booked up thru June 2021. Just need a cleaning lady and maintenance company on call. I manage them myself from 5 hours away. Fairly easy once everything is in place

    1Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Fred Cannon

    How did you reach the traveling nurse market? Just curious.

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  • Fred Cannon
    Rental Property Investor · St Augustine, FL · Member since 2019 · 265 posts · 279 votes
    5y

    @Russell Payne. There are a few websites dedicated to travelers. I use Furnished Finders. $99 a year to list. Check it out. I have been very pleased how this has worked for me. You don't have the headaches of ABNB renters and people trashing your place. It's mostly a crash pad as these workers and doing 12 hour shifts

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  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Fred Cannon

    That makes sense. How did you figure out proper rental pricing for this group of people?

    0Reply
  • Moses Moreno
    Rental Property Investor · San Diego, CA · Member since 2014 · 30 posts · 23 votes
    5y

    @Russell Payne

    Hi Russell, you’re getting a lot of solid advice from this forum! Keep plugging into BP to keep your mind going and be prepared to strike when the opportunity presents itself. Starting out in SoCal will definitely require solid planning and taking that calculated leap of faith since our real estate market is bananas! This is our side hustle, and my passion project and my wife and I still hold 9-5’s.

    I self managed my first SFH in Phoenix from San Diego for 10 years, so out of state management is doable but challenging. I now have a solid Property Manager and looking back, I can't believe I did all that for 10 years. We were fortunate and never had a day of vacancy, UNTIL my last tenant of 7 years fell off the map. First eviction, which is what led to my PM search. His screening criteria is much better than mine ever was.

    Second eviction was here in San Diego and it took 6months to get my unit back. SCREENING IS KEY! Definitely a stressful season but we came out of it stronger. Know the landlord/tenant laws in each state and have your Cash Reserves in place prior to. The eviction process took 6 months in CA, 30 days in Phoenix.

    We recently did a 1031 exchange for the AZ property into our first short term rental in Idyllwild, Ca and it’s been an awesome experience! The home was mostly turnkey, but we painted the interior and exterior (we always wanted a black home) and provided all new light fixtures and furniture. Creating something from scratch is fun and expensive at the same time. We are 4 months into it, so it’s still relatively new for us, but we both enjoy being hosts and the income has been solid. The bonus is that it’s only 2hrs away from home and we get to enjoy it with our friends and family!

    We still like the mix of long term and short term, but would be open to getting another short term rental close to San Diego. We have 2 LTR condos in Scottsdale and would be open to selling those next year and possibly parlaying that into another STR.

    Check out our AirBnb and message me if you have any questions. We also have friends that are in the STR market in Joshua Tree, Big Bear, Crestline, Lake Arrowhead and they all seem to be doing well. It all just depends on the numbers though.

    https://www.airbnb.com/h/idyllwildtreehaus

    1Reply
  • Fred Cannon
    Rental Property Investor · St Augustine, FL · Member since 2019 · 265 posts · 279 votes
    5y

    @Russell Payne. For instance if the local market for an unfurnished 1 bedroom is $1000 a month for 12 month lease, I know in my area I can provide utilities and cable/WiFi for @ 100 per month. I add 500 or so to the market price for unfurnished 1 bedroom condo's and Apartments. When a traveler makes a request on furnished finders they will let you know what their housing budget is so you can pick the ones that meet your criteria as far as length of stay and price. I charge a $200 cleaning fee and $100 admin fee, $300 refundable deposit plus rent at move in. If it's 3 or more months I will give a discount for prepayment of total rent $50 per month. It's a good deal for the traveler, and good rent for me. Plus like I said it's a win for the local community to have housing available for traveling medical professionals.

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  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Moses Moreno

    Sounds great. Really appreciate the advice and your experiences is. That’s why I’m on BP to connect, learn and grow with everyone here!

    0Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Fred Cannon

    That’s awesome info. Really appreciate that!!

    0Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    5y
    Originally posted by @Gururaj Iyer:

    @John Underwood: hello , if you don’t mind sharing ? Where do u look for LTR options and deals ? I have 3 STRs at the moment however I am thinking of diversifying to LTRs.. I was checking rootstock but is there any other geography or methodology you would suggest ?

     The best deals were via word of mouth.

    0Reply
  • Lisa Lincoln
    Rental Property Investor · Venice, CA · Member since 2016 · 42 posts · 32 votes
    5y

    I started with STR and purchased as a personal vacation rental. It came furnished so we really just put in our own personal touches. It was a good option for us to start since it was a 1/4 of what we would of paid close to where we liveded. We also got a small place in-case we didn't successfully rent it, we could cover the costs. 565 sq ft and no hot tub so we counted on weekend rentals. It rented well and the high season covered the slow seasons. It stayed clean and less run down since it was getting cleaned after every renter. I now have both, purchased with renters (renters have been great) but the 1 empty unit is going STR. It will make up for the renters that are not up to market value. The amount of tax write offs you get from STR area great and it has also been great to just relay on the monthly income. A vacation rental might require less of a down payment but cost the same in getting it ready for renters. An empty unit might be ideal and pick your own renters. An occupied unit might be nice to just have a check already coming in but then maybe they are paying below market value and rules are in place for covid or rent increase rules. Good luck it's nice having options!

    0Reply
  • Alexander Szikla
    Real Estate Agent · New York City · Member since 2020 · 820 posts · 641 votes
    5y

    Turnover and vacancy cost money! Long term tenants for the win!

    Plus, they have more of an "ownership" mentality and do not abuse your property. 

    1Reply
  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Alexander Szikla

    I would disagree with LTR tenets having more of an owners mentality than STR's. My experience is 90% of our guests have owners  mentality and in fact owner there own home and treat your home like they would theirs, really better probably. Plus the properties gets cleaned multiple times a week and we can maintain it at the highest level. We have hosted thousands of guests and have never come out of pocket for damages. Not saying we haven't have complicated guests or damage but we have stellar systems for managing that.

    2Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    @Russell Payne

    I ended up buying 9 SFRs all within a 30 min drive from my house in the DFW area. And kept one of my out of state vacation rentals in Branson.

    0Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @John Morgan

    Got it! Thanks!

    0Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Alexander Szikla

    I can absolutely see the mindset of tenants there! Turnover and vacancy is a lack of money. Amen to that.

    0Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Lisa Lincoln

    A lot of options indeed. Thank you for sharing your story as well. All good things to hear and know.

    0Reply
  • Maxim Kats
    Real Estate Agent · eXp Realty · Member since 2018 · 6 posts · 0 votes
    5y
    @leo watts WOW thank you for that perspective. Those numbers definitely took my mind off of STRs. I have personally noticed Airbnb policies became worse over the past year or two and managing long distance has way too many costs and headaches.
    0Reply
  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    5y

    I have one STR out of all my portfolio. I have a good time with it and the profit is ok, but long term is much easier. Unless the profits are significantly higher in the deal you land it seems like an easy decision in my book.

    0Reply
  • Geoff Husa
    Rental Property Investor · Tempe, AZ · Member since 2020 · 75 posts · 39 votes
    5y

    @Russell Payne when underwriting a deal asa short term rental I'd think you’d want to be sure it also works as a long term rental, as a backup.

    0Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Mark Cruse

    Thank you for your advice!

    1Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Geoff Husa

    I think that’s the most important thing. Multiple exit strategies.

    0Reply
  • Curtis Mears
    Property Manager · Raleigh, NC · Member since 2014 · 729 posts · 596 votes
    5y

    @Russell Payne

    Ltr - much less work and time. Less expenses than str, and no need to keep a furnished house. Don't pay utilities, no lawn maintanence. Can easily have a full time job and still own several ltr priperties. Only down side, less income.

    Str- upside is more income, but there is significantly more work. Cleaning, getting renters, managing security deposits etc. Also, more money outlay as you need to keep fully furnished property, silverware, etc.

    1Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Curtis Mears

    Thank you for the comparison Curtis! Means a lot!

    0Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    @Russell Payne

    Long term rental all day every day.

    In my opinion, STR is not as easy and lucrative. It's may also not be sustainable as compared to Long Term Rental.

    On the average: If you do a great job at Tenant screening, One Tenant can live you your property for 8 years. Imagine you only have 20-Years on the property.

    You do the math.

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