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  • Writer's picturePhillip Costa

Short Term Rentals vs. Long Term Rentals: The Pros and Cons of Investing in Them

When it comes to rental properties, there are two main types: STRs (short-term rentals) and LTRs (long-term rentals). Both have pros and cons, making it difficult to decide which is the right investment for you. In this article, we’ll look at the pros and cons of these two types of rentals, so you can decide which is best for you.

Short-Term Rentals

Short-term rentals are properties that are rented out for periods of less than 30 days. They can be a great investment for those looking for a high return on investment, as they typically charge higher rates than long-term rentals. Additionally, short-term rentals can provide a steady stream of passive income, which can help offset some of the costs associated with owning a rental property.

Pros of Short-Term Rentals

Higher Gross Income Potential

Short-term rentals typically charge higher rates than long-term rentals, so you have the potential to earn a higher gross income from them.

Increased Flexibility

You might have to move suddenly or want to sell your property as an investor. With a short-term rental, you can more easily do this since there is no lease to break.

More Control over Who Rents Your Property

Unlike long-term rentals, you can screen guests more carefully when renting out your property on a short-term basis.

Cons of Short-Term Rentals

Consistent Income Is Not Guaranteed

While short-term rentals can provide a steady income stream, it is not guaranteed. You might have periods where the rental is vacant, which can impact your bottom line.

Not as Passive

If you decide to self-manage your Airbnb property, it is not as passive as a long term rental would be. Aside from the initial set up of the property, the typical weekly or daily tasks include guest screening and communications, coordinating cleaning and maintenance, conducting inventory counts, marketing, bookkeeping, updating prices, and so much more.

Long-Term Rentals

Properties that are rented out for 30 days or more are considered long-term rentals. Even though they typically charge lower rates, they also provide less of a return on investment. With long-term rentals, you’ll have more stability and much easier to self-manage.

Pros of Long-Term Rentals

Less Tenant Turnover

Of course, there will always be some turnover with long-term rentals, but it will be less frequent than short-term rentals. This can save you money on cleaning and preparation costs.

More Predictable Income

Since tenants rent for longer, you can more easily predict your rental income. This can make budgeting and planning for repairs and maintenance easier.

Potential for Lower Costs

Long-term renters are typically more interested in taking care of the property since they plan on living there for a longer period, leading to lower repair and maintenance costs over the life of the rental.

Cons of Long-Term Rentals

Limitations to Raising the Rent

You are bound to the terms of the lease when it comes to long-term rentals, which means you might not be able to raise the rent as often as you’d like.

Long-Term Commitment

With a long-term rental, you are committed to the property for a longer period of time. This can make it harder to sell or move if you need to do so unexpectedly.

Risk of an Unqualified Tenant

As with any rental, there is always the risk of getting an unqualified tenant. However, since you are committed to the property for a longer period of time with a long-term rental, this can be a bigger problem.

The Bottom Line: Which Type of Rental Should You Invest In?

The type of rental you invest in will ultimately depend on your goals and preferences. If you’re looking for a higher return on investment, a short-term rental might be the way to go. However, a long-term rental might be a better option if you’re looking for stability and predictable income.

Often, investors are busy people and cannot commit the time to be a landlord for a short-term rental. In this case, hiring an Airbnb management company would be better to take care of the day-to-day operations. This would allow you to still receive the benefits of owning a short-term rental without having to deal with the hassle.

Ultimately, it’s up to you to weigh the pros and cons of each type of rental and decide which is the best fit for your goals. Whichever type of rental you choose, be sure to do your research and understand the risks involved before making any decisions.

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If you are a homeowner or investor tired of operating your Airbnb or simply not getting enough bookings, feel free to reach out to the BEST Airbnb Management company in the Poconos! We will be happy to help.

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