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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  • 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.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    11Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    5y

    You should start off with a LTR and learn those ropes first.

    I buy LTR some times for under 10k. I've bought 3 this year for under 25k each. A Good vacation rental with a view or great location is going to cost much more to get into.

    7Reply
  • Gerald Pitts
    Lender · Asheville NC · Member since 2016 · 469 posts · 317 votes
    5y

    If you have the upfront costs, str cash flow is great in the right market. And easy to learn.

    2Reply
  • Jesus Sosa
    Rental Property Investor · Anderson, SC · Member since 2020 · 38 posts · 12 votes
    5y

    I believe STR is great, only for vocational homes at least, unless you're planning to househack. The reason is because you:

    1) Have your own get-away house

    2) Can write off your expenses

    3) Make extra Income

    Yes, it comes with more managing, but if you simply advertise for a cleaning crew (or person), on craigslist, Fb, etc. You can very well avoid the pain and headache when it comes to maintaining it. Of course, you've got to do a great job screening and hiring the right candidate for your maintenance work. PM could do the same, but they can eat up your cash flow. Just run your numbers in all scenarios. After completing that, all you have to worry about is advertising it on STR platforms (VRBO, Airbnb, Booking.com, etc).

    References: https://evolvevacationrental.c...

    4Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Nathan G.

    Really appreciate that input!

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

    @John Underwood

    Got it! Heavy rehab projects at that cost correct? You want to be local for those I would assume.

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

    @Gerald Pitts

    Right market would mean closer to a city or destination area correct? That’s what I would assume. High tourist areas.

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

    @Jesus Sosa

    Absolutely! Have to run the numbers in both situations!

    Also wondered if it's easier or harder to deal with STR or LTR tenants. I'm sure they both have their pros and cons.

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

    @John Underwood

    Got it! Heavy rehab projects at that cost correct? You want to be local for those I would assume.

     One was a total gut. The other 2 were not that bad. The 25k one I just touched up the paint.

    I prefer to do big rehabs where my contractor or handyman can work on them.

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

    @John Underwood

    Got it. Good to know! Thanks for that!

    0Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    5y

    STR just has too much regulatory risk for me. Many areas have worked hard to shut down the short term rental business. Not that regular rentals are getting any easier, but there is not a massive push to shut them down via regulations.

    1Reply
  • Mark DiPietro
    Rental Property Investor · Mooresville, NC · Member since 2018 · 117 posts · 32 votes
    5y

    @Russell Payne we have both, a short term in North Myrtle Beach, and a long term in our home town of Mooresville, NC.

    So far, the long term has been better.

    Our ROI is higher and the cash flow on the short term has been erratic.

    Is nice to have a place on the beach to go to, but investment wise, is not as consistent.

    Hope that helps. Reach out for any specifics or details.

    3Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Taylor L.

    Completely understand. I guess it depends on your market. I’m sure hotels are lobbying for it. Not that I truly know.

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

    @Mark DiPietro

    Thanks Mark. Why do you think the cash flow is erratic? Are rentals not consistent every month?

    Does it make sense due to it being a place to vacation to yourselves?

    0Reply
  • Mark DiPietro
    Rental Property Investor · Mooresville, NC · Member since 2018 · 117 posts · 32 votes
    5y

    @Russell Payne rents are not consistent off season for sure. COVID has hurt.

    We do use it, but not if we have a renter. We are keeping it for two more years (refinancing now), to see what a five year window brings before we pull the plug and stay local.

    I have not experienced the AirBnB phenomenon that I read about. Again, it’s break even but not a money maker yet.

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

    @Mark DiPietro

    Completely understand. You think changing interior design, pictures, layout, etc would change STR success? I know that off season in that area might be pretty difficult. Just trying to figure out all angles and hear everyone's advice.

    0Reply
  • Jesus Sosa
    Rental Property Investor · Anderson, SC · Member since 2020 · 38 posts · 12 votes
    5y

    @Russell Payne

    Short term rentals are definitely easier to handle in my opinion. You won’t have to keep getting calls after calls at 2AM about a complaint. Short term rentals simply go in, and go out. Unlike LTR they’ll constantly be asking to get something repaired/replaced/added/etc.

    Then again it all depends if you have the right systems in place. Otherwise you’ll be looking at a complete headache.

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

    @Jesus Sosa

    Got it. I hear your points. I’m trying to think about my experiences in short and long term as a renter.

    1Reply
  • Terry Johnson
    Investor · Mooresville, NC · Member since 2020 · 16 posts · 29 votes
    5y

    Hi Russell - I've read differing opinions on your thread and I guess one's feedback will be largely influenced by their experience. We've bought, sold and managed properties for nearly 20 years now. We have 1 STR in Banner Elk and nearly a dozen long term rentals here in the Lake Norman area. To me, there's no comparison when it comes to complexity and required involvement between the two. The STR provides a much better return than the average return of our LTR's, but it requires considerably more effort and oversight. We personally manage all of our properties except the STR and even with a FT Property Management company we still put more mindshare and effort there. I would say the cost of entry for a STR would normally be much higher than a typical LTR.

    Don't get me wrong, I'm grateful we have our STR and will eventually add one or two others, but my advice would be to start with a long term rental, get your feet wet and grow from there. Good luck to you!

    5Reply
  • Brandon Pace
    Investor · Centerville, UT · Member since 2020 · 61 posts · 47 votes
    5y

    @Russell Payne I am a newbie and my strategy is to do both to diversify. I just purchased 2 STRs and one long term. I suggest you run the numbers for both in the market(s) you are seeking. Pick the right properties in the right locations. Likely, you could have 100 people would share with you their own experience with financial success is best as it relates to their experience. I believe there are many factors that would indicate which one is better in your market of choice. Research the properties, market, and location, run the numbers and make a selection.

    2Reply
  • Russell Payne
    OP
    Rental Property Investor · Los Angeles, CA · Member since 2020 · 50 posts · 16 votes
    5y

    @Terry Johnson

    This is the best explanation I could have received! Thank you for that! It’s all long term for me. Learning, doing things right and growing around good people.

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

    @Brandon Pace

    Appreciate that insight. Which one do you find easier to manage?

    0Reply
  • Brandon Pace
    Investor · Centerville, UT · Member since 2020 · 61 posts · 47 votes
    5y

    It depends on situation but...


    For me personally...my situation is new but I am predicting that my long term is easier to self manage because my property is brand new. And it is in my town.


    My STR is new but I will be hiring a property manager. It will cost me profit but I would be overwhelmed tackling daily/weekly management AND it is out of town for me.

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

    @Brandon Pace

    That's good to know! I think STR's definitely harder to manage but out of town more difficult as well. Would love to know how it goes!

    0Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    @Russell Payne

    Our first investment properties we bought (5 years ago) were two vacation rentals in Branson. MO. One cabin cost 130k and the other was only 60k. They rented out well but there are a lot more moving parts with them. We pay a managing company to do everything, but it’s still more work compared to long term rentals like paying monthly electric, water and utility bills etc.

    Since then we've bought 9 SFRs near us and they are much easier to deal with. You throw the tenants the keys when they move in and hardly ever hear from them. Some only once a year when it's time to renew the lease. And our ROI is actually much better with SFRs.

    But it’s fun to vacation at our cabin for free a couple times a year! And be able to write off the trip :)

    1Reply
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