Long Term vs. Short Term Rentals - The Best Choice For Your Vacation Rental Business
Have you recently purchased your first investment property and are looking to start a vacation rental business? You can list your property for either short-term and long-term rentals depending on your interests, the nature of your property, and similar other factors. Considering what will suit your business and home the best, we are here to guide you through the pros and cons of both the rental strategies and other insights which you should know before you start renting your property. Let's get started.
Advantages of a Short Term Vacation Rental
A short-term rental(also known as a vacation rental) is renting out a property on a short-term basis. Depending on the location, owner, and other factors, it can be either rented by the week or night. Many owners even rent out their property multiple times throughout the year, especially when not using it themselves. Here are some of the common benefits for owners looking to rent out their property on a short-term basis.
Higher Rental Income Potential
You can fluctuate the rates based on the area's popularity in certain seasons with short-term rental stays. You can also set the minimum length of the stay during the most popular times of the year to achieve maximum profits.
More flexibility
You can seamlessly block off time periods in your calendar if you want your property to be kept free for your personal use whenever you want, which is not easy with long-term rentals.
Lesser shifting of furniture
Some guests can transform your interiors during their stay, which can be quite a hassle if you are particular about it. Since the stays usually are around just a few days to weeks at maximum, there are fewer chances of guests redecorating or rearranging your furniture on the property.
Tax Deduction Benefits
Many short-term vacation rentals at different locations are entitled to certain tax breaks or deductible property expenses just because the property isn't rented out in the long term. Ensure to check for the local authority's rules and regulations about this for a better insight.
Challenges of short term vacation rentals
Even though the pros are pretty profitable, let's quickly go through the challenges of renting your property on a short-term basis.
More maintenance
Your reviews on different platforms make a significant impact on your rental income. You need to maintain your property and offer all the rental amenities more often for every guest, such as regular cleaning, paint fixes, drain unclogging, etc., for more positive reviews.
No guaranteed income consistency
The worst issue about short-term rentals is that you could be fully booked during the high season and end up with zero bookings during the offseason, affecting your income consistency.
Highly competitive
Unlike the housing market, the short-term rental industry is highly saturated and competitive. There are properties swamped across a specific area that requires your property to be updated and upgraded on every aspect to outshine the rest,
Overwhelming management
Irrespective of whether this is a hobby turned business or a full-time job. There are plenty of tasks to take care of for each guest, which can sometimes get really overwhelming. Starting from blocking the dates to keeping the cleaners, gardeners, and everybody in check before the visit. Short-term vacation rental businesses are all about hard work if you cannot delegate it to other people in the initial days.
How to Advertise your short-term vacation rental?
Your marketing and advertising strategies play a significant role in your income potential. The goal is to attract the right crowd at the right time. Here are some splendid tips that can help you get started with marketing your short-term vacation rental.
Be transparent in your listing description.
Many short-term vacation rental owners keep the house for their personal use and rent it out during the weekends. Ensure to state it clearly in your listing description, as this communicates to guests that your vacation rental is more suitable for short-term gateways.
Offer exclusive discount codes on your website.
The best way to build the traction around your new rental business is to entice your guests with exclusive discounts and coupons, especially during the high season time of the year. If they get a good deal, chances are they will choose your property over others.
Try Email Marketing
If you already have a few previous customers, you will have their credentials, such as email addresses, which can be leveraged to market your property. Send them promotion codes and offers via email, which can be used for their next booking. Email marketing is one of the most popular advertising strategies for rental owners as it guarantees an excellent ROI for the time and efforts spent on it.
Advantages of Long Term Rentals
Long-term rental accommodations refer to the properties leased for a period ranging from a month or longer. Renters pay the owner every month and even take care of the other expenses such as utility bills. Here are some advantages to renting out property for longer timelines.
Consistent income
A long-term rental business can be a reliable side hustle. Once you lease out the property to someone for a specific timeline, you will get monthly rent. This takes the pressure off your shoulders to find new guests often and generate profits. Some renters even pay for electricity, gas, water, internet, etc.
Easier to Manage
Whether you hire a property manager or manage the property yourself, it is way easier than a short-term rental property. You need not invest much in advertising strategies or tackle the frequent rental turnover to keep it ready for the next guest.
Less paperwork
Since you are renting for a long term, you need not worry much about the administrative tasks such as paperwork, key handover, etc., multiple times. Once your renter signs the agreement, you can sit back and relax while they enjoy their stay.
Lesser need to furnish
Many long-term guests come with their furniture in tow. This means you need not worry about leasing an unfurnished property. Not only do you get a consistent income every month, but you also save on the furniture.
Charge higher security deposits
Some long-term vacation rental owners charge a significant high-security deposit which will be later returned to the renter by the end of the tenancy unless there is property damage. This gives you peace of mind to freely rent your property without any worries.
Challenges of long term vacation rentals
Like short term rentals, here is the list of the common challenges faced by long term vacation rental owners:
Less earning potential
Unfortunately, long-term vacation rentals are usually discounted by 40% or more at prices. You will not be able to charge higher during the peak seasons like short-term rentals.
Less flexibility
As an owner, you have less flexibility with your property as you cannot spontaneously plan a trip and keep your property for personal use. Chances are you will always have a tenant during most parts of the year.
Less control over the property
Short-term vacation rental owners can inspect the property often after each guest, which is not the case with long-term vacation rental owners. You will likely have to drop a considerable notice at least 24 hours to one week prior before having routine maintenance and security check.
More restrictions in the neighborhood
Some locations have higher restrictions in terms of renting out a property for the long term. Check your local authority's rules and guidelines before listing your long-term vacation rental.
Finding the right tenant can be challenging
Since you have been renting your property for a long time, you need to ensure that they are a good fit. Consider checking their references and vetting before you sign the contract. This means the process can get lengthy and tiresome to find the right tenant for your property.
How to advertise your long-term vacation rental?
Since you focus only on long-term stays, your marketing strategies would be different here. With the rising popularity of long-term vacation rentals, here are the top strategies to bring you a steady source of income through your long-term vacation rental business.
Target the right groups
Your ideal traveler should be a digital nomad or a workcation! Ensure that your marketing focus is on the right set of audiences. Running targeted social media campaigns on Instagram and Facebook can be a great choice if you are looking to the market for property for potential guests.
Highlight the features of your property
Long-term renters have a different set of needs compared to short-term renters. This means you need to analyze what might be essential or necessary for an entire month's trip and offer the right amenities such as ample storage space, a workable kitchen, comfortable beds, etc. Ensure to highlight the amenities you provide to your long-term renters, as this will help in the effective marketing of your property.
Use referrals
The most reliable marketing tactic for long-term rental owners would be referrals from previous guests if they loved their stay. Rather than marketing everywhere, consider offering your existing guests a comfortable experience and encourage them to refer your property to their friends and families. Referral discounts or commissions are highly profitable for long-term renters as this gives them lucrative deals for their next stay just by referring to your property!
List on the Online Travel Agencies
Online Travel Agencies or OTAs like Airbnb, Vrbo, Booking. Com etc. is another important and profitable place to market your property. You have ample freedom and flexibility in these platforms as you hunt for good prospects. Ensure to check for any restrictions or guidelines for long-term listings before listing out your property on any OTA.
Long Term vs. Short Term Rentals - The Best Choice
There is no perfect answer here as it solely depends on your availability, location, and other factors, as we discussed above. The most distinguishing factor here is the earning potential which is 30% higher in short-term rentals compared to the other. Both short-term and long-term rentals have different deduction benefits. If you are concerned about property management and other aspects, you can automate the redundant tasks with additional software and tools for your convenience. Either way, there are plenty of benefits to both long and short-term renting. All you need is to analyze all the factors and kickstart marketing your rental property.