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Short-Term vs. Long-Term Rentals, what is best?

Short-Term vs. Long-Term Rentals, what is best?

Investors in the real estate business have always had a plethora of different options when it comes to the type of property they are going to purchase. Short-Term or Long-Term Rentals? For some, this decision is an easy one while for others, it can be confusing.

Gone are the days when investors only look at long-term rentals for investment. Because of the introduction of technology in the real estate industry, short-term rentals are picking momentum, and investors are considering them a safe option to invest in.

What Are the characteristics of these Rentals?

Generally speaking, the two types of rentals are short-term rentals and long-term rentals. A property leased to a tenant for six months or longer is known to be a long-term rental. On the other hand, property handed to tenants for a day or a month or even up to six months is defined as short-term rental.

Properties in tourist areas are known to perform well as short-term rentals, whereas homes that are based in residential areas are used as long-term rentals. Often investors use a mix of both by renting out a room from their property.

The Comparison

Before investing, it is essential that you compare the pros and cons of each investment type. Here are some guidelines that can help you decide better.

1.     Shot-Term Rentals

As discussed, short-term rentals can be given to a tenant for a night or up to six months. These rentals are for holiday or business purpose. It is a proven fact that the returns of such a rental are higher. However, these rentals come with more risks and ask for a higher commitment level. Moreover, with more tenants coming and leaving, the maintenance costs are usually higher.

Pros:

  • Flexibility
  • Much higher returns
  • No need for checking credit scores
  • Landlord can use the property from time to time if needed
  • Possibility to have an higher income through the sale of additional services to tenants

Cons:

  • Higher maintenance costs
  • More host commitment
  • Low occupancy risks

2.     Long-Term Rentals

The returns on the long-term rentals are lower, but they always guarantee continuous cash flow. These rentals are more secure as the tenants are bound by contract, and the maintenance is usually low as the tenants treat the property as their own.

Pros:

  • Stability
  • Continuous Cash-flow
  • Relationship with tenants
  • Peace of mind

Cons:

  • Low returns
  • Tenants who refuse payment can cause a considerable loss
  • Eviction related issues
  • Bad credit tenants are tough to handle

Last Words

If you are already operating a rental property and possess experience, then you can move ahead with choosing one on your discretion. The latest trends shows that short term rentals are the way to go; beside ensuring a higher return, they also offer the flexibility not permitted with long-tern tenants. You might need to sale your property in the near future, doing so if it’s rented out for a long period can represent a big hurdle to overcome.

However, if you are new to this, then it is advised that you hire a property management company to work with you in managing the property. Holiplanet is a leading operator in the short term rental market.

Holiplanet offers a boutique, personalised experience for landlords. As set out in our company vision, we have a small, dedicated team managing all aspects of our rental properties. Our focus is to maximise your return on investment, actively report on your property condition, advise on maintenance areas, manage repairs/improvements cost-effectively and eliminate the overheads for the landlord. We are not just managing our client’s properties, but we also help protect their asset by giving them the best opportunity to maximise returns and minimise vacancies and most importantly by caring for the property by way of maintenance.

Purchasing rental real estate is the best way to start your real estate investing business. However, you need to be rational while making a decision and always ask for professional advice. You can choose which type of rental you want by comparing the pros and cons.

 

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Marc Partiti

Experienced Property and Revenue Manager, with strong background in Business Administration. Born in the UK, I spent over 20 years in Italy. In 2007 I moved to Thailand where I’m currently living.

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