Short-Term vs. Long-Term Rentals: Pros & Cons to Decide Which Is Best for You
If you have a house, condo, or townhome you plan to convert into a rental property soon, you likely have one pressing question on your mind — is a short-term rental or long-term rental the better choice?
The truth is — only you can decide which rental is better. Each type of property has pros and cons, so researching the facts as a property owner is essential to make the right decision for your investment property.
What Is a Short-Term Rental?
Short-term rentals, more commonly known as vacation rentals, are furnished residences designed for travelers looking to spend anywhere from one night to one month in a short-term rental.
Guests stay anywhere from 5–6 nights in a vacation rental property and prefer vacation rentals over hotels because of the extra space, privacy, and convenient amenities — like a full-sized kitchen and washing machine.
Benefits of Short-Term Rentals
These are some of the most common reasons why property owners choose the short-term rental market:
1. High earning potential and flexible pricing
Short-term rentals can be lucrative if you charge the right rates at the right time. With a vacation property, it is possible to change nightly rates to match rental market demand for special events (like concerts and festivals), high season, and weather events between reservations.
2. Second home away from home
Is your property located in a popular vacation destination? If so, turning it into a short-term rental will allow you to take a personal vacation whenever you would like and stay in your rental by blocking out times on the rental calendar. With a short-term rental property — you can decide when to rent and when to stay.
3. Less wear and tear
Guests don’t spend much time in short-term rentals on vacation — they are usually only there to sleep and relax. Because of this, short-term vacation rentals tend to suffer much less wear and tear than long-term rentals. Plus, “bad” renters are only there for a few days — not locked into a lease for months or years.
4. Greater tax breaks
Vacation rental owners can write off several short-term rental expenses, including management fees, utilities, cleaning, maintenance, repairs, marketing fees, and more. This can significantly reduce the tax responsibilities of property owners.
5. Hands-off ownership
Short-term rental owners can easily hire a full-service property management company to handle the tedious parts of owning a vacation rental — from cleaning and maintenance to marketing and guest experience.
Disadvantages of Short-Term Rentals
As you can see, vacation rentals have several advantages. However, before converting your property into a short-term rental, keep the following “cons” in mind:
1. Competitive real estate markets
Short-term rentals are often located in competitive markets to maximize profits. However, in popular vacation destinations, you will compete with other short-term rentals and hotels to keep your property booked. Vacation rental homes must have unique features that set them apart from the competition.
2. More maintenance and repairs
Short-term rentals fall under a lot more scrutiny than long-term rentals. Guests want to stay in a vacation rental that is clean, comfortable, and in working condition. It is imperative to perform regular maintenance and repairs to keep your vacation home in tip-top shape to ensure excellent reviews and consistent bookings.
3. Seasonality and market conditions
Short-term rental income is not guaranteed and will likely fluctuate depending on the local market demand and seasonality. For example, a vacation rental in Austin or San Antonio will have fewer renters during the hot and humid summer than during the beautiful spring or fall months.
4. Short-term rental regulations
You will find different local laws and property management regulations for short-term residential rentals in each city, county, and municipality. Some cities will limit the number of nights you can rent out your home, and some ban short-term rentals completely — so do your research before you commit to residential real estate investments for short-term rentals.
What Is a Long-Term Rental?
The definition of a long-term rental property varies from state to state. In some places, a long-term rental describes a long-term vacation rental (a lease term of at least 30 days), but most commonly, it refers to stays of 180 days or longer — think long-term renters who plan to live in one place for a while.
Benefits of Long-Term Rentals
Long-term rental properties may be the right investment strategy for you if you value the following things:
1. Reliable income
Since long-term rental homeowners are committed to paying the rent price outlined in their long-term lease agreement, you can always count on consistent income. You will never have to worry about having a vacant home — which is a huge concern in most vacation rental strategies.
2. Less management
Long-term rental properties do not require constant maintenance and upkeep like a vacation home. Once you find a renter, you no longer have to worry about marketing, cleaning, or maintenance — just a few repairs here and there.
3. Less turnover
Long-term rental landlords have much less to manage than landlords of short-term rental properties. Most residential leases for long-term rentals are at least a year, so you won’t have to worry about welcoming new tenants every week.
4. Utility bills paid
Long-term tenants pay for their utilities, such as water, gas, electricity, and internet. Short-term rentals promise more gross rental income, but the property owner is responsible for the utilities and amenities. Handing over these expenses to the renter can create significant cost savings!
Disadvantages of Long-Term Rentals
Before investing in a long-term rental, keep the following in mind:
1. Less income potential
Long-term rental income is consistent, but it offers lower profit margins than short-term rentals. Short-term rental homeowners earn two to three times the amount of monthly rent compared to long-term rentals.
2. No personal use
When a renter is locked in a lease, you cannot use your property as a vacation spot. This may not be a concern if your home is in the city suburbs — but you may want to rethink turning your mountain cabin or beachfront condo into a long-term rental if you want to spend some time there during the summers.
3. Higher risk of damage
Since long-term renters are living in your home and on the property for an extended period of time, chances are, there will be more wear and tear and damage to the home. It is also difficult to catch more minor problems before they become costly issues since you will be at the property less often.
4. Landlord regulations
There are several local landlord regulations you must follow as the property owner of a long-term rental regarding applications, leases, and eviction. Some states even require you to provide the renter a certain amount of time of advance notice before you can perform property inspections or meet maintenance requests — even if they might be urgent.
Furnish Short-Term or Long-Term Vacation Rentals in Texas or Florida with THE STAGING COMPANY
Both short-term rentals and long-term rentals have unique pros and cons. When it comes to which is better, there is no right or wrong answer — you have to decide what is best for your lifestyle and financial goals.
If you need some help furnishing your short-term or long-term vacation rentals in Texas or Florida before putting them on the market, our team at THE STAGING COMPANY would be happy to help. We furnish vacation rentals that are stylish, comfortable, and inviting to help you secure more bookings and generate more income! Contact us today to get started.