As a property owner, you know that you can lease your property short-term (STR) or long-term (LTR) today. The explosion of platforms like Airbnb has brought attention to the short-term rental market, and many property owners choose this option.
However, whether to choose a short-term or long-term rental strategy depends on several major factors. At first glance, short-term rentals appear more lucrative. Often, they are. But many extras go into it, and both have advantages and disadvantages. Naturally, the dilemma is whether you should rent your property as a short-term vs long-term.
STRs, often referred to as vacation rentals, are furnished properties generally rented to travelers or people traveling for work. Typically, they’re rented for one night to one month. The maximum number of nights allowed depends on the restrictions some cities and/or countries have imposed, limiting the minimum number of nights spent without a permit. Hosts with a permit can rent short stays like 1,2,5 nights. Hosts without a permit can only accept stays over 28,30,90, sometimes even over 160 nights.
People are attracted to short-term rentals as an alternative to hotels. For many, staying at a short-term rental is an experience. STRs offer increased freedom and flexibility. Guests enjoy the space and conveniences such as kitchens, washers and dryers. Many also enjoy the experience of living more like a local.
Short-term rentals are popular because they offer many advantages. Here are five of the most significant benefits of choosing the short-term rental model:
STRs allow more freedom, flexibility, and control over your properties. Since guests will only stay at your properties for short periods, you can create blocks of time for your own use. This contrasts long-term leases, where properties are often rented out for 12 months or more at a time, and using it can be nearly impossible.
A prime example is how property owners use their vacation properties in the summer and lease it for the rest of the year.
Since guests stay for very little time, there will be less wear and tear. STRs are generally rented to travelers who will only spend a little time in the property.
Unlike long-term rentals, where occupiers use the property as their home, STRs incur less damage over time. This results in less maintenance and fewer repairs, saving time, money, and effort.
With the success of the short-term rental market, it’s become easier than ever to run an STR property. There are now many ways to make the job more seamless.
For example, you can use smart locks instead of keys, so you don’t need to be there when guests arrive. Smart thermosets can automatically set the property temperature, saving you money in the long run.
Then, there are professional short-term rental management companies like Keybee. They offer complete STR management, including cleaning, 24/7 guest service, maintenance and repairs, setting optimal rates, and even marketing.
Depending on the market location, vacation rental owners may be eligible for tax deductions and expense write-offs.
Some areas STR property owners can enjoy tax reductions include:
Vacation rentals can be lucrative. The potential for high-profit margins is the main reason most property owners choose short-term rentals.
With a STR, you can align your nightly rates with demand. Property owners can capitalize on seasonality, weather, events, and more and increase their prices as demand peaks. Unlike long-term rentals, where the price is capped for long periods, short-term rental prices can be engineered to maximize profits.
A professional short-term rental management company can automatically set your best rates. Their experts know precisely when to increase your nightly rates and by how much, ensuring that you always receive the greatest possible earnings.
While vacation rentals offer many advantages, they also present some challenges. Before investing in the STR property market, consider the following:
Short-term rentals come with more maintenance and upkeep. This is because more people go in and out regularly, which entails continuous cleaning and upkeep. Towels and linen have to be replaced, and cleaning always has to be done in preparation for the next guest.
This is another area where a host finds a short-term rental management company most helpful. A professional rental company can take care of your maintenance and upkeep. Whether providing fresh linen or doing deep cleaning between stays, a professional STR company will make your life much easier.
Countries are still adapting to the relatively new short-term rental (STR) market. STRs' effect on local housing markets is changing how local jurisdictions allow hosts to run them. The regulations can be challenging to keep up with depending on where you live.
Your vacation rental bookings will hinge on seasonality, location, and many other factors. While you can adjust your rates to fit the time of year, a steady rental income isn’t guaranteed. To keep getting bookings and to always bank the best profits requires consistent research and effort.
This is another area where a professional vacation rental management company can help. A reputable short-term rental management company's experts can align your properties with demand. They’ll work to keep bookings flowing and get you the best prices possible.
Think of long-term rentals as traditional lease. Although, due to varying laws, the exact definition of a long-term rental depends on where it’s operated.
For example, in the US, some states define a long-term lease as being at least 30 days long; in others, it’s 180 days or longer. Generally, a one-year lease is the most common for LTRs.
Instead of catering to guests staying a short while, LTRs are desired by local professionals, couples, families, and tenants who need a place to call home. Long-term rentals are fixed-term leases that guarantee income for a more extended period of time. There’s less flexibility but less fluctuation, which means more stability.
Long-term rentals have particular advantages over short-term rentals. Here are three of the most significant advantages:
The long-term rental strategy provides hosts with a slow and steady cash flow. With an LTR, your contract states how much you’ll earn and how long it will take. This consistent income is one of the best benefits of LTRs.
Another major benefit to LTRs is that there’s less management involved. Your tenants make your property their home and take responsibility for cleaning and upkeep. Furthermore, they will usually pay their bills, leaving less for you to manage.
With LTRs, landlords require a security deposit before the tenants move in. This provides security and money for repairs.
There are also disadvantages to long-term rentals. If you’re considering this model, here are some main challenges:
The main disadvantage of LTRs is that the income potential bar is lower- in some cases, a lot lower. Locked into a contract, you can’t capitalize on seasonality, increase your nightly rates, or maximize your property's earning potential.
Every landlord wants the flexibility to stay on one’s own property. With LTRs, however, they get much less of it. You can’t block out periods throughout the year for personal use with a long-term rental.
While there is less maintenance and upkeep, the risk of property damage is higher.
Since long-term renters live and spend more time in your property, there’s a higher chance of wear and tear and outright damage. Some of this can’t be helped, but tenants will spend a lot more time on your property than they would if they were guests at a STR, which means things will wear out faster and things will get broken.
The debate between short-term and long-term lets will continue. Both strategies have ardent fans and varying pros and cons.
Depending on your circumstances, preferences, and goals, you should carefully consider the benefits and challenges we have outlined. Now you’re more equipped to make the right decision.
As experts in short-term rental management, we know the vastness of the subject and how much property owners must consider. We’ve written this short-term rental property management guide for a more complete insight, helping you gain a deeper understanding.
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