Vacation Rental Owners: Deciding Between Long or Short-term Rentals

Trying to decide between operating your vacation home as a short-term or a long-term rental? Here are our thoughts.

As a vacation rental owner, you have a lot of choices to make, all while keeping the main goal in mind of getting the best possible return on your investment. One of the most important decisions you have to make right off the bat is deciding between renting your vacation home out on a short-term or long-term basis.

While long- and short-term renting both fall under the umbrella of rental property investing, each presents its own benefits and its own unique challenges. In this article, we take a look at the pros and cons of each option to help you make the right decision for your vacation rental home.

Pros of short-term rental properties

Short-term vacation rentals have become hugely popular over the past 10 years, thanks in large part to the rapid growth of technology companies like Airbnb and VRBO. These homes are usually rented out by the night or by the week, rather than committing guests year or multi-year contracts.

There are several clear advantages to running your investment property as a short-term rental. Here are some of the most notable:

Higher Income Potential

The goal for any vacation rental owner is to maximize returns. Short-term rentals, especially those in popular vacation locations, can significantly increase your income by listing at higher nightly rates than you can charge with a long-term rental. This is a two-sided coin, however, as management expenses are usually higher for short-term rentals.

More flexibility

Owners who rent their vacation properties short-term give themselves much more flexibility, especially when it comes to personal use. If your vacation rental is in a desirable area, chances are you’ll want to enjoy the home yourself from time to time.

By renting short-term, you can easily block off dates for personal use without sacrificing a large portion of your yearly income.

Tax Deductions

Short-term vacation rentals enable you to claim various tax breaks or deductible expenses. Because these rules, like any tax rules, can get complicated, it’s recommended you speak with a professional to fully capitalize on the tax advantages of your vacation rental property.

Frequent (& sometimes free) maintenance

With tenants filtering in and out each week (or every couple of days), short-term vacation rentals are often better maintained than long-term rentals. By having your vacation rental cleaned after each renter (an expense that can be easily passed on to the guest, especially if you’re renting through Airbnb or VRBO), it’s easier to identify problems early on before they turn into more serious, more expensive issues.

Cons of short-term rental properties

Not allowed for all properties

Some of the most desirable vacation areas restrict homeowners in the area from renting their properties on a short-term basis. In Key West, Florida, for example, a license is required for anyone to rent a home for fewer than 30 days.

Be sure to check the regulations and associated costs before choosing to rent your vacation property short-term.

Income is non-guaranteed

One of the more frustrating aspects to short-term renting is the seasonality of bookings. While your home might be fully booked for months at a time during peak-season, off-peak bookings are often few and far between.

Looking for ways to make the most of your rental property during the offseason? Check out this article from Topkey.

Competition

With the popularity of short-term vacation rentals on the rise, travelers have more options than ever when it comes time to book a place to stay. This can be a disadvantage to some owners, forcing them to make expensive upgrades to their homes in order to secure bookings.

Pros of long-term rental properties

More consistent income

One of the most significant advantages to long-term property renting is the peace of mind in knowing that you have reliable monthly income from your rental. Longer leases mitigate, or eliminate altogether, seasonal variance that can be detrimental to short-term rental success.

Fewer expenses

A short-term vacation rental brings with it a myriad of expenses that long-term renting is able to forego. For example, rather than spending money on advertising on a rolling basis as you do in short-term renting, your only advertising expenses occur when your current tenant leaves.

Similarly, it’s most always expected that long-term renters will cover certain expenses such as utilities or general home maintenance.

Cheaper property management

With less turnover and decreased requirements for marketing and maintenance, hiring a property manager is both easier and cheaper for long-term rentals.

Generally speaking, the market rate for long-term property management tends to land between 8% – 12% as opposed to upwards of 25% for short-term vacation rental management.

Pros of long-term rental properties

Risk of getting a bad tenant

While there are ways to get out of rental contracts, the hassle of doing so makes getting a bad tenant much riskier for long-term rental owners. With short-term renting, your guests come and go on a regular basis, minimizing the risk of poor-tenant-induced headaches.

Less Flexibility

With short-term renting offering more flexibility, it’s no surprise that long-term renting brings the opposite. With tenants occupying your rental home every day for months or years at a time, you no longer have the option of enjoying the home yourself if you wanted to.

What’s the best choice for you?

There is no right answer that works for everyone deciding between short- and long-term renting of their vacation property.

However, with the ultimate goal of a rental property being to maximize return on investment, it’s worth noting that short-term rentals in desirable areas earn significantly higher income than long-term rentals.

Whatever you decide, do your homework to ensure you choose the option that makes the most sense for you and your property. If you do decide to go the short-term rental investment property route, check out Topkey to help with all your short-term rental onboarding needs. Topkey is the one stop shop to set up and onboard your Airbnb/VRBO listing. We'll help you obtain the appropriate short-term rental licenses and permits, guide you through how to take great photos, and we will write your Airbnb listing content that is fully optimized for SEO. All of this is included in our Airbnb starter pack.

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