Short-Term vs. Long-Term Rentals in Cleveland: A Profit Comparison

Cleveland Rentals: Short-Term or Long-Term?

One of the most frequent questions investors ask in Cleveland is whether short-term rentals (Airbnb, VRBO, etc.) or traditional long-term rentals generate higher returns. Both strategies have distinct advantages, unique risks, and varying degrees of profitability depending on your specific investment goals, property location, and management style.

Having personally built a portfolio of over 30 Cleveland rental properties—including a mix of both short-term and long-term rentals—I’ve gained firsthand insights into how each strategy truly stacks up. In this detailed, investor-focused guide, I'll clearly break down the pros and cons, share real-world Cleveland examples, analyze the numbers, and help you confidently determine which rental strategy is most profitable for your Cleveland investments.

Understanding the Basics: Short-Term vs. Long-Term Rentals

Short-term rentals are properties rented out for shorter durations (days or weeks), typically through platforms like Airbnb or VRBO. Guests are usually travelers, tourists, or temporary workers.

Long-term rentals involve traditional leases (usually 12-month terms) to stable tenants, providing consistent monthly income.

Advantages and Disadvantages

Short-Term Rental Pros:

1. Higher Income Potential: Higher nightly rates often generate significantly more monthly income.
2. Flexibility: Easier access to property (no long-term leases), allowing flexible use or quick sale.
3. Frequent Maintenance: Property is maintained regularly, ensuring consistent upkeep.

Short-Term Rental Cons:

1. Inconsistent Occupancy: Occupancy fluctuates seasonally, potentially leading to periods of vacancy.
2. Higher Operating Costs: Cleaning fees, utilities, frequent furnishing replacements, and management costs are higher.
3. Intense Management Requirements: Regular guest turnovers and bookings require active, hands-on management or hiring dedicated property managers.

Long-Term Rental Pros:

1. Stable, Predictable Income: Regular monthly rent provides consistent cash flow.
2. Lower Operating Costs: Tenants typically pay utilities, fewer turnovers mean lower maintenance costs.
3. Minimal Management: Less frequent tenant turnover reduces the amount of ongoing management required.

Long-Term Rental Cons:

1. Lower Income Potential: Monthly rents are often significantly lower than short-term rental income.
2. Less Flexibility: Long-term leases reduce flexibility for property use or resale.
3. Tenant Risk: Dependence on tenant quality; evictions or tenant issues can impact cash flow significantly.

Cleveland-Specific Considerations

Certain Cleveland neighborhoods are uniquely suitable for each strategy:

Short-Term Rentals:

Ideal areas typically have:

1. Tourist attractions or popular nightlife (Ohio City, Tremont, Downtown Cleveland)
2. Major hospitals/universities nearby (Cleveland Clinic, University Hospitals, Case Western Reserve University)
3. Convenient access to transportation hubs (Downtown, University Circle)

Long-Term Rentals:

Optimal neighborhoods typically offer:

1. Stable family-oriented communities (West Park, Parma, Old Brooklyn, Cleveland Heights)
2. Affordable housing markets with consistent tenant demand
3. Strong employment centers (healthcare, education, manufacturing sectors)

Real-Life Cleveland Example: Profitability Comparison

Let’s look clearly at a specific example—a renovated duplex in the popular Lakewood neighborhood:

Scenario A: Short-Term Rental (Airbnb)

1. Nightly Rate: $125/night
2. Occupancy Rate: 70% (255 days/year)
3. Annual Revenue: $31,875/year
4. Annual Operating Costs: Cleaning, utilities, furnishings, management: ~$11,500/year
5. Net Annual Profit: Approximately $20,375/year (~$1,697/month net cash flow)

Scenario B: Long-Term Rental

1. Monthly Rent: $1,300/unit ($2,600/month total)
2. Annual Revenue: $31,200/year
3. Annual Operating Costs: Taxes, insurance, maintenance, vacancy: ~$9,500/year
4. Net Annual Profit: Approximately $21,700/year (~$1,808/month net cash flow)

Profitability Analysis:
In this example, the short-term rental generates slightly less annual net profit after higher operating expenses—despite higher gross revenue. Long-term rentals offer lower gross revenue but slightly higher net profitability due to significantly lower expenses.

Factors Influencing Your Decision

Consider these factors carefully when deciding between short-term and long-term strategies:

1. Time Commitment and Management:
   Short-term rentals require significantly more active management (or hiring dedicated managers). Long-term rentals typically require minimal ongoing effort once tenants are in place.
2. Risk Tolerance and Income Stability:
   Short-term rentals carry higher income volatility and market sensitivity. Long-term rentals offer predictable, stable monthly income.
3. Property Location and Local Demand:
   Short-term rental success relies heavily on location. Long-term rentals can succeed in a broader range of neighborhoods, especially those not highly touristic.
4. Regulatory Environment:
   Be aware of local Cleveland short-term rental regulations (zoning, permits, taxes) that could impact profitability.

Common Mistakes Investors Make Choosing Rental Strategies

Avoid these common pitfalls to maximize your success:

1. Underestimating Short-Term Rental Costs:
   Short-term rentals involve significantly higher ongoing operating expenses—cleaning, utilities, furnishings, and management. Factor these clearly into your analysis.
2. Ignoring Management Requirements:
   Short-term rentals are management-intensive. Clearly assess your ability or willingness to handle this responsibility or budget realistically for professional management.
3. Incorrectly Estimating Occupancy Rates:
   Always estimate short-term occupancy conservatively—many Cleveland neighborhoods experience seasonal demand fluctuations, particularly during winter months.

Investor Action Checklist: Choosing Your Cleveland Rental Strategy

Use this actionable checklist to confidently choose between short-term and long-term rentals:

Clearly define your investment goals (maximizing income vs. consistent cash flow).

Analyze specific property locations and neighborhood demand carefully.

Accurately estimate operating expenses, occupancy rates, and profitability for both strategies.

Evaluate your personal ability or willingness to manage properties actively.

Check Cleveland-specific regulations (permits, taxes, zoning) for short-term rentals.

Partner with local professionals experienced in your chosen rental strategy.

Frequently Asked Questions (FAQs)

Q: Are short-term rentals allowed everywhere in Cleveland?
A: Not everywhere—always verify local zoning and regulatory rules. Short-term rentals are generally allowed but may require permits, licenses, or occupancy taxes.

Q: Is professional management worth it for short-term rentals?
A: Often yes—professional short-term rental management significantly reduces your workload but increases costs (typically 15–25% of gross revenue).

Q: Can I switch strategies if one doesn't work out?
A: Absolutely! Many Cleveland investors start short-term, then shift to long-term (or vice versa) if market conditions or personal preferences change.

Why Cleveland Is Ideal for Both Short-Term and Long-Term Rentals

Cleveland offers unique advantages making both strategies viable:

1. Diverse Neighborhood Options: From high-demand short-term rental locations (Downtown, Ohio City) to stable, long-term rental communities (West Park, Parma, Cleveland Heights), Cleveland provides excellent variety for both strategies.
2. Stable Economic Foundations: Strong healthcare, education, and manufacturing sectors support consistent tenant demand, bolstering long-term rental profitability.
3. Increasing Tourism and Temporary Workers: Cleveland’s tourism, entertainment, healthcare sectors, and educational institutions create reliable short-term rental demand in certain areas.

Conclusion: Choosing Your Ideal Rental Strategy in Cleveland

Ultimately, your choice between short-term and long-term rentals depends on your individual investment goals, risk tolerance, desired involvement, and property location. Short-term rentals often offer higher gross income but with greater volatility, higher expenses, and significant management demands. Long-term rentals provide stable, predictable cash flow with fewer management headaches and lower operational costs.

If you have additional questions about which rental strategy—short-term or long-term—fits best for your Cleveland investment goals, or if you want personalized guidance on analyzing specific properties, I’d be delighted to help. Leveraging my firsthand experience successfully managing both rental strategies in Cleveland, I can offer clear, actionable insights to maximize your profitability.

Feel free to call or text me directly at 216-789-6736 anytime. Let’s determine your ideal rental strategy and accelerate your path toward profitable real estate investing in Cleveland!

Warm regards,

Jack Krusinski

Cleveland Real Estate Agent & Investor

216-789-6736