If you have an empty property and are wondering on how to make the most money out of it, then you’re in the right place. As a property owner, you want to get the maximum return on your investment.
People are often confused about whether they should follow the path of long term or short term rentals.
Here are some major differences in Short term and Long term rentals, to speed up your decision making.
1.Meaning-
Let’s start with a basic explanation of short and long term rentals.
Short term rentals are properties that are generally rented for less than 6 months. But, short term rentals now are also referred to as vacation rental property. Here the stay could be as short as a day or a week.
Long term rentals, on the other hand, are properties that follow the traditional method of renting the property for more than 6 months. Here the tenant signs a long term lease or agreement with the landlord.
2. Management of Property-
Another key difference between short term and long term rental is the management of rental property.
When it comes to short term rentals, management is much easier as the tenants stay for a couple of days. The property here is insured so you as a property owner will be safe from additional expenditure on fixtures.
In case of long term rentals managing the property is more difficult, as the tenant lives there for a long period of time and could cause wear and tear to the property. Usually, landlords spend a huge amount on renovation costs after a tenant has moved out.
3. Income Potential-
Every homeowner wishes to get maximum returns from their property.
Short term rentals have now become a great source of earning maximum returns. Turning your property into a vacation rental means attracting a number of guests and in turn generating higher profits.
On the other hand, long term rentals would give you a stable income, rather than higher income. Receiving monthly rent from tenants is all the return that you can generate in a month.
4. Predictability-
Short term rentals are less predictable as compared to long term rentals. In a long term rental, the landlord would receive monthly rent and knows that the tenant will be staying there for a certain period of time.
The income level cannot be predicted in a short term rental as it depends on the number of bookings that you get per month.
5. Flexibility-
Short term rentals are much more flexible as compared to long term rentals. The control is in the hands of the property owners when it comes to short term rentals. In case of long term rentals, the tenants would stay there till the contract expires and sometimes tenants can overstay their intended visit.
Whereas in short term rentals the property owner decides if they want to give the place to a tenant. This works to a major advantage if you want to use the property for personal use and rent it out in the remaining time.
To make your decision making even easier we’ve listed some pro’s of long term and short term benefits-
Advantages of Long term rentals:
- Stability in Income-
A huge advantage for long term rental property owners is that they enjoy a steady income. They know that they will receive a monthly rent till the lease expires. This provides a consistent income for the landlords.
- Fewer chances of turnover-
Renting long term also means that there are fewer turnover rates. If you find a good tenant the possibility of them finding another place to stay once the lease expires is much less. Which also means that you don’t have to find another tenant.
- Tenant pays the bills-
When renting long term, it is usually the tenant who pays the electricity or hydro bills. The electricity, phone, cable, etc can all add up to be a huge amount. By the tenants paying these, it takes some load off the landlord.
Advantages of Short term rentals:
- Earning Advantage-
Short term rentals have an advantage of earning higher profits as compared to a long term rental. Long term rental owners get a steady rent each month, whereas short term rental owners have the opportunity to earn per booking, this generates more income than a fixed monthly rent.
- Flexible-
Short term rentals are also the most flexible way to earn income from your property. The decision is up to you on who you want living on your property. You can also use the property for personal use and take bookings as and when convenient.
- Property Management and maintenance-
It is easier to maintain your property when it comes to short term rentals, as cleaning is done after every guest leaves. The property undergoes less wear and tear when the tenant is only living for a small period of time.
Another advantage is that the property is usually insured during the time of the guests stay. Thus, in case of damages, you won’t be spending money out of your pocket.
- Social Benefits-
Short term rentals are also a good way of socializing and meeting people. Many travelers prefer living in rentals rather than hotels.
This could be a great chance to meet people from all around the world and simultaneously get returns from the property.
- Less Commitment-
Short term rentals have the advantage of no commitment to long term tenants and the property maintenance after their stay. It is so much better to have short term tenants who are out of your hair quickly.
There you have it, some crucial information for short term and long term rentals. Which one do you prefer? Let us know in the comments below.If you are still hesitant about which way you should go speak to our partner property management company UrbanGuests to know more about how to maximize returns from your property.