Short Term Rental Vs. Long Term Rental

Short-Term & Vacation Rental Discussions
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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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  • Troy Copeland
    Property Manager · Frisco, TX · Member since 2014 · 24 posts · 20 votes
    5y

    @Russell Payne there are too many variables to give a flat answer. Typically STR are a ton more work but you will make more money. Some areas are typically better for Long term (I.e a college town) to give you a better answer there needs to be more data

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

    @Wale Lawal

    Definitely a possibility! Thank you

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

    @Troy Copeland

    Thanks for your input! Definitely understand it.

    0Reply
  • Toshia Moss
    Member since 2020 · 2 posts · 1 vote
    5y

    @Stephen E. Really solid advice!! Thanks for sharing for this newbie to read!

    1Reply
  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
    5y
    Originally posted by @Stephen E.:

    Just to underline this point, if something goes wrong, and you are unable to STR because of neighbors, changes in laws, etc. Will you be OK converting to a LTR? If the answer is no don't do it, if the answer is yes, you've probably found a pretty good deal.

    Good luck!

    I agree with this 100% and it's what I always make sure to tell people when they ask me. Great overall post too.  

    1Reply
  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
    5y

    We have 24 residential doors and 5 are short term rental listings. At the start of this year we had 8 but have converted three back to long term. 

    I am a youtube newbie and have made a number of videos about the pros and cons. Check em out if you'd like. Link: Signs of a good short-term rental

    The short answer though would be that I really like STR if the market is there for it and if I'm gonna be local (even if I'm not managing directly myself). Our operational efficiency has gone down tremendously ever since we moved away and were no longer local. Of course, to some degree that's been true for the LTRs too. One more caveat: all of my experience is in a pretty normal, urban market with pretty average properties. NOT luxury/resort type properties or in vacation areas. Anyway, good luck!

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

    @Maxwell Lee

    Great advice. Thank you very much!! I’ll check out your page.

    1Reply
  • Stephen E.
    Rental Property Investor · Member since 2020 · 172 posts · 110 votes
    5y

    Thanks @Maxwell Lee and @Toshia Moss !

    0Reply
  • Steven C.
    Member since 2018 · 8 posts · 0 votes
    5y

    @Gerald Pitts I am trying to learn about str. What are some great books on str ?

    0Reply
  • Gerald Pitts
    Lender · Asheville NC · Member since 2016 · 469 posts · 317 votes
    5y
    Originally posted by @Steven C.:

    @Gerald Pitts I am trying to learn about str. What are some great books on str ?

    I actually have only read 1, and can't say I recommend it.  I downloaded Optimize YOUR Bnb: The Definitive Guide to Ranking #1 in Airbnb Search after hearing good things, but haven't read it yet.  

    I have learned so much by reading these forums. I also recommend doing that. Set up key words to follow like "Airbnb" "Vacation Rental", "STR", STRP, etc.

    0Reply
  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
    5y

    @Stephen E. , if you are not prepared to run a business, stay away from STVRs.

    Because a STVR is a business your returns are exponentially higher, net income from a 5 bedroom yielding $2,500-$3,000 per month at 65% occupancy is doable. Look at traditional vacation areas where vacation rentals have existed for decades to avoid hostile STVR laws.

    0Reply
  • Stephen E.
    Rental Property Investor · Member since 2020 · 172 posts · 110 votes
    5y

    @Todd Goedeke I think you meant to respond to the different stephen

    0Reply
  • Karina Oliveira
    Member since 2019 · 13 posts · 7 votes
    5y

    @Melissa Wesling

    Hello, how are you?

    I saw your post about STR and this is an area I also want to invest. Which markets are you investing and where would you recommend for someone who is just beginning? I heard a lot about Gatlinburg TN, Destin FL and my brother in law just purchased a 6br/5ba in Orlando Fl for a STR.

    In your opinion as a STR investor where do you get the highest return, if you could provide some info.

    Thank you so much for your time!

    Karina

    1Reply
  • Melissa Wesling
    Investor · Chicago, IL · Member since 2020 · 148 posts · 97 votes
    5y

    @Karina Oliveira Thank you for reaching out!  

    This is a tough question to answer because there are many variables that come into play. The best markets for short-term vacation rentals are hard to pinpoint because it can depend on the time you buy, where you buy, and how much you spend. There are studies out there that analyze the best vacation rental markets and the answer somewhat varies based on what is being measured.

    I think there is an opportunity for high return in every market. It is often dependent on the home you select. You want to look in a market that has legal approval for short-term rental and draws visitors (are there reasons to visit such as attractions, nearby cities, outdoor life, lake, beach, mountains, etc?).

    Short-term vacation rentals are also a lifestyle investment, so if there is somewhere you enjoy visiting, I recommend starting there, it doesn’t have to be completely about the financials.

    Nevertheless, where you invest is also highly dependent on your budget. Destin can have very high returns, but you also need a higher budget to enter the market and have a successful vacation rental property. Gatlinburg is on fire because the properties can accommodate nearly any budget and it’s a great place to visit due to many reasons like the rural aspect. Rural or naturistic areas that are within 300 miles from a guest’s home/drivable are popular markets right now due to the pandemic (I don’t think this will change anytime soon). Orlando draws international, multigenerational families for the parks (it's good that your brother purchased a 6bed/5bath home, because 5+ bedrooms is highly sought after by guests there). 

    I personally invest in short-term rentals in southwest Michigan because I live in the Midwest, it is an area that I frequently visit, we find our returns are strong, and they have approval for short-term rentals .

    0Reply
  • Karina Oliveira
    Member since 2019 · 13 posts · 7 votes
    5y

    @Melissa Wesling

    Thank you Melissa for your insights about this topic. I really appreciate it. I was introduced to the short term shop real estate team in Gatlinburg and I might make a purchase there first.

    Destin is a very desirable area for me as well and I might invest there after purchasing my first property in Gatlinburg.

    I would love to connect

    Thanks

    0Reply
  • Melissa Wesling
    Investor · Chicago, IL · Member since 2020 · 148 posts · 97 votes
    5y

    @Karina Oliveira I highly recommend Avery and the Short Term Shop, she is amazing! It sounds like you have a great plan! 

    Happy house hunting! 

    0Reply
  • Alex F.
    Investor · Plymouth, MN · Member since 2020 · 157 posts · 102 votes
    2y

    Hi,

    We started with an LTR quadplex and then switched to just STR. The difference between the two is night and day. With an LTR you are in the property rental business. With an STR you are in the customer service business. With an LTR, even without a property manager, it is close to a passive investment. With an STR you do NOT have a passive investment - it is a side gig :-)

    Like others here mentioned, some areas are beginning to tighten down on STRs with new regulations.  Other areas with no regulation and the explosive growth are now seeing empty Airbnbs....not due to low demand, but to high supply.  This is a good article on this:
    https://adventuresinairbnb.substack.com/p/help-i-stopped-get...

    Two big plus of STRs is the higher cashflow and a fun place to go (if you are in a vacation area).  I'd never imagined traveling as much as we do now.....

    0Reply
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