Short-term vs long-term rentals

As the owner of an investment property, you have the option to to turn it into a short-term or long-term rental.

The exact time frame of short-term rentals varies, but in general, it is described as a furnished self-contained living space or property that can be rented for upwards of a day to as long as a few months.

Long-term rentals relate mostly to the unfurnished rental market where properties are leased for at least six months or on annual fixed term contracts.

Short-term rental success ultimately comes down to location paired with a strong guest satisfaction strategy, whilst long-term rental comes down to your area and tenants looking to rent.

Times have changed for Holiday Rentals.

In the past it used to be that short-term rentals were for people who own vacation homes and wanted to make a little bit of extra money from owning them.

Holiday makers have more choice these days. Websites like Airbnb, HomeAway, Booking.com etc. give them quick and convenient access to more than hotel rooms, motels and caravan parks.

Many holiday and business travellers prefer to stay in homes rather than rooms, and that means the economics of renting your properties for short-term stays rather than permanent rentals have changed because now, people can easily book your property on a whim at any time of the year.

Short Term vs. Long Term Holiday Rentals

The Pros & Cons
of each Rental Strategy.

Long-Term Rental - Pros

Stability

Security is the main reason why property investors opt for a longterm rental strategy. Long-term leases with a set date ensure that money is coming in at a constant rate and landlords don’t have to worry about off-season variances that could potentially make it difficult to rent out the property.

No Utility Payments and Furnishing Costs

In a long-term rental, the tenants are usually responsible for utility payments. Therefore, landlords face fewer costs especially since long-term rental properties don’t have to be furnished or advertised regularly.

Simpler Self-Management

When it comes to management, long-term rentals are much simpler as less steps are involved since landlords don’t have to worry about tedious tasks like helping guest’s check-in, check-out, etc. However, end-to-end short-term rental property management companies are making it easier for property owners to benefit from higher returns without having to lift a finger.

Ability to charge higher Security Deposit

For long-term rentals, you can usually charge quite a high security deposit, which will be returned to the tenant at the end of the tenancy unless in case of property damage. These deposits can give owners a lot of peace of mind when it comes to renting out their properties.

Long-Term Rental - Cons

Less Flexibility

Unfortunately, owners won't have the ability to visit whenever they'd like. If you have a tenant in your home, you can’t ask them to leave for a weekend here and there. This can be a huge turnoff for many owners who are renting out their property simply to gain some extra income in the months and weeks it’s not used.

Less Control over Outcome of Property

Short-term rental owners benefit from being able to inspect the property between each guest, for long-term rentals, however, it’s a bit more complicated. It’s likely you would have to give considerable notice (from 24 hours to one week) before dropping by for routine maintenance and security checks. The deterioration of the property may be accelerated with the wrong kind of long-term tenants, which in some cases may result in high levels of unforeseen damage to the property.

Finding the right Tenant

When someone is going to stay in your home for a long time, you want to make sure they’re a good fit. But when you consider the time, you’ll spend vetting and checking references before drawing up the contract, this can soon turn into a very long process. In contrast, for short-term renting it’s generally a much easier process – especially with tools like Instant Book.

Short-Term Rental - Pros

Higher Flexibility

Property owners utilising short-term rentals have the flexibility to use their investment property for their personal use and can block out availability for themselves, friends, and family. In addition, even with proper screening, renters can end up with delinquent tenants that don’t pay rent on time, but with short-term rentals, this can be avoided as you are not tied to the same tenant. It’s also possible to switch back to long-term fairly quickly if required and investors have the flexibility to sell their property without having to worry about being locked in a long-term contract.

Higher Rental

Generally, a well-managed short-term rental property in a good location generates more revenue due to higher nightly rates. The ability to adjust prices based on seasonality and special events is a key factor allowing to take advantage of demand peaking which is not possible on a long-term lease.

Less Wear and Tear

Generally short-term rental guests stay only a few days to a few weeks’ maximum. Properties are cleaned after every check-out, keeping them in a better condition for a prolonged period, and visually inspected for issues needing repair before they can snowball into more major problems.

Tax Breaks

Purchases made to furnish an investment property, as well as items such as appliances and whitegoods can be claimed as a tax deduction.

Contribute to the sharing Economy and cultural Diversity

There is now more evidence than ever about the sharing economy and its positive effects on wider society. By using sharing platforms to let your property you are proving you are a forward thinker, encouraging diversity, inclusion and this modern way of living and thinking.

Short-Term Rental - Cons

Expense of Furnishing the Property

You’ve got the extra expense of furnishing your property and it's not easy to furnish a property. You do need to furnish it well and can’t just put in “anything”, you’ve got to put in furniture that feels nice and looks good - you do need to have style and that comes at an expense first, but can be claimed as a tax deduction later.

No guaranteed Income

Seasonality is a genuine risk that will need mitigating in your overall pricing and booking strategy.

Competition from surrounding Properties

In some locations there may be more houses than travellers wishing to stay, this may put some owners at a disadvantage (again, depending on location and availability) because competition for vacation rentals could be rife in your area.

Too many Things to manage

There are plenty of tasks to keep you occupied throughout every guest’s stay. From ensuring calendar availability is correct to facilitating a smooth booking process, plus a simple and easy checkin and check-out, and not to mention cleaners, gardeners, and the rest – short term rentals can be hard work if you don’t have the right tools and support.

In summary long-term rentals are more reliable, with little to no flexibility, less control and generally less work, whilst short term rentals are more flexible, with higher potential rental rates through more work.

Whilst short-term rentals may be a new way to make a property positive cash flow, the first thing, however, when considering the money is whether or not you can actually make more money through short-term rentals than long.

If you can’t make more money, then it’s going to be a lot more hassle for less money and that doesn’t seem worth it.

Property Suitable for Holiday Rental Market_3

How do you know if your Property is suitable for the Holiday Rental Market?

Not all areas are desirable holiday destinations and not all homes are ideal for short-term rental. Here are some thoughts on what makes a successful holiday rental property:

Is the property in a recognised year-round holiday destination?
Is the climate reasonable for most of the year?
Is there an unmet demand for holiday accommodation?
Is there a sense of exclusivity about your location?
Are there lots of activities for singles, families, and groups nearby?
Is there a potential for short-term executive rentals?

Is it hard to operate a Holiday Rental Property?

The short answer is yes . . . no . . . maybe!

Successful holiday rental owners treat it as a separate business with all that entails:

Legal agreements with renters
Marketing expenses
Booking fees
Listing management and fees on travel websites
Property maintenance
Cleaning, provisioning of linen etc
Dealing with guests and their special needs and requirements.

Which should you choose?

Times have changed for Holiday Rentals.

Long-Term Rental - Pros

Long-Term Rental - Cons

Short-Term Rental - Pros

Short-Term Rental - Cons

How do you know if your Property is suitable for the Holiday Rental Market?

Is it hard to operate a Holiday Rental Property?

Find out if your property is suitable for the short-term holiday rental market!

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