Short-term vs. long-term rentals
As a property owner, you know that you can lease your property short-term (STR) or long-term (LTR) today. The explosion of platforms like Airbnb has brought attention to the short-term rental market, and many property owners choose this option.
However, whether to choose a short-term or long-term rental strategy depends on several major factors. At first glance, short-term rentals appear more lucrative. Often, they are. But many extras go into it, and both have advantages and disadvantages. Naturally, the dilemma is whether you should rent your property as a short-term vs long-term.
What is a short-term rental?
STRs, often referred to as vacation rentals, are furnished properties generally rented to travelers or people traveling for work. Typically, they’re rented for one night to one month. The maximum number of nights allowed depends on the restrictions some cities and/or countries have imposed, limiting the minimum number of nights spent without a permit. Hosts with a permit can rent short stays like 1,2,5 nights. Hosts without a permit can only accept stays over 28,30,90, sometimes even over 160 nights.
People are attracted to short-term rentals as an alternative to hotels. For many, staying at a short-term rental is an experience. STRs offer increased freedom and flexibility. Guests enjoy the space and conveniences such as kitchens, washers and dryers. Many also enjoy the experience of living more like a local.
What are the advantages of short-term rentals?
Short-term rentals are popular because they offer many advantages. Here are five of the most significant benefits of choosing the short-term rental model:
1. Increased freedom and flexibility
STRs allow more freedom, flexibility, and control over your properties. Since guests will only stay at your properties for short periods, you can create blocks of time for your own use. This contrasts long-term leases, where properties are often rented out for 12 months or more at a time, and using it can be nearly impossible.
A prime example is how property owners use their vacation properties in the summer and lease it for the rest of the year.
2. Less maintenance and fewer repairs
Since guests stay for very little time, there will be less wear and tear. STRs are generally rented to travelers who will only spend a little time in the property.
Unlike long-term rentals, where occupiers use the property as their home, STRs incur less damage over time. This results in less maintenance and fewer repairs, saving time, money, and effort.
3. Hands-off ownership
With the success of the short-term rental market, it’s become easier than ever to run an STR property. There are now many ways to make the job more seamless.
For example, you can use smart locks instead of keys, so you don’t need to be there when guests arrive. Smart thermosets can automatically set the property temperature, saving you money in the long run.
Then, there are professional short-term rental management companies like Keybee. They offer complete STR management, including cleaning, 24/7 guest service, maintenance and repairs, setting optimal rates, and even marketing.
4. Deductions and tax breaks
Depending on the market location, vacation rental owners may be eligible for tax deductions and expense write-offs.
Some areas STR property owners can enjoy tax reductions include:
- Fees
- Cleaning
- Maintenance and repairs
- Utilities
- Marketing
5. Great profit potential
Vacation rentals can be lucrative. The potential for high-profit margins is the main reason most property owners choose short-term rentals.
With a STR, you can align your nightly rates with demand. Property owners can capitalize on seasonality, weather, events, and more and increase their prices as demand peaks. Unlike long-term rentals, where the price is capped for long periods, short-term rental prices can be engineered to maximize profits.
A professional short-term rental management company can automatically set your best rates. Their experts know precisely when to increase your nightly rates and by how much, ensuring that you always receive the greatest possible earnings.
What are the disadvantages of short-term rentals?
While vacation rentals offer many advantages, they also present some challenges. Before investing in the STR property market, consider the following:
1. More maintenance and upkeep
Short-term rentals come with more maintenance and upkeep. This is because more people go in and out regularly, which entails continuous cleaning and upkeep. Towels and linen have to be replaced, and cleaning always has to be done in preparation for the next guest.
This is another area where a host finds a short-term rental management company most helpful. A professional rental company can take care of your maintenance and upkeep. Whether providing fresh linen or doing deep cleaning between stays, a professional STR company will make your life much easier.
2. Complex regulations
Countries are still adapting to the relatively new short-term rental (STR) market. STRs’ effect on local housing markets is changing how local jurisdictions allow hosts to run them. The regulations can be challenging to keep up with depending on where you live.
3. Fluctuating income
Your vacation rental bookings will hinge on seasonality, location, and many other factors. While you can adjust your rates to fit the time of year, a steady rental income isn’t guaranteed. To keep getting bookings and to always bank the best profits requires consistent research and effort.
This is another area where a professional vacation rental management company can help. A reputable short-term rental management company’s experts can align your properties with demand. They’ll work to keep bookings flowing and get you the best prices possible.
What is a long-term rental?
Think of long-term rentals as traditional lease. Although, due to varying laws, the exact definition of a long-term rental depends on where it’s operated.
For example, in the US, some states define a long-term lease as being at least 30 days long; in others, it’s 180 days or longer. Generally, a one-year lease is the most common for LTRs.
Instead of catering to guests staying a short while, LTRs are desired by local professionals, couples, families, and tenants who need a place to call home. Long-term rentals are fixed-term leases that guarantee income for a more extended period of time. There’s less flexibility but less fluctuation, which means more stability.
What are the advantages of long-term rentals?
Long-term rentals have particular advantages over short-term rentals. Here are three of the most significant advantages:
1. Steady income
The long-term rental strategy provides hosts with a slow and steady cash flow. With an LTR, your contract states how much you’ll earn and how long it will take. This consistent income is one of the best benefits of LTRs.
2. Less management.
Another major benefit to LTRs is that there’s less management involved. Your tenants make your property their home and take responsibility for cleaning and upkeep. Furthermore, they will usually pay their bills, leaving less for you to manage.
3. Security deposits
With LTRs, landlords require a security deposit before the tenants move in. This provides security and money for repairs.
What are the disadvantages of long-term rentals?
There are also disadvantages to long-term rentals. If you’re considering this model, here are some main challenges:
1. Lower income potential
The main disadvantage of LTRs is that the income potential bar is lower- in some cases, a lot lower. Locked into a contract, you can’t capitalize on seasonality, increase your nightly rates, or maximize your property’s earning potential.
2. No personal use
Every landlord wants the flexibility to stay on one’s own property. With LTRs, however, they get much less of it. You can’t block out periods throughout the year for personal use with a long-term rental.
3. High risk of property damage
While there is less maintenance and upkeep, the risk of property damage is higher.
Since long-term renters live and spend more time in your property, there’s a higher chance of wear and tear and outright damage. Some of this can’t be helped, but tenants will spend a lot more time on your property than they would if they were guests at a STR, which means things will wear out faster and things will get broken.
Conclusion
The debate between short-term and long-term lets will continue. Both strategies have ardent fans and varying pros and cons.
Depending on your circumstances, preferences, and goals, you should carefully consider the benefits and challenges we have outlined. Now you’re more equipped to make the right decision.
As experts in short-term rental management, we know the vastness of the subject and how much property owners must consider. We’ve written this short-term rental property management guide for a more complete insight, helping you gain a deeper understanding.
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Frequently Asked Questions
No more late-night calls and emergencies. We handle all guest communication for you. From before your guest’s arrival to during their stay and after their departure, Keybee manages communications, 24/7/365-including those late-night surprise messages. You don’t need to check and reply to any of your messages. We check and respond to all messages for you.
- Proactive guest communication before, during and after their stay, with real people who understand the real problems that can arise who always provide guests with an outstanding communications experience.
- Answering guests’ phone calls around the clock and responding to guest messages the fastest in the industry.
At Keybee, we’ve developed a pricing tool that ensures you don’t leave money on the table. Our income-maximizing pricing algorithm uses supply/demand, events, and seasonality, among other critical measures, to get you the best rates. As a result, your rates will fluctuate daily and will differ on weekdays and weekends. The algorithm is also highly customizable. For example, we can enforce minimum nightly rates and specific prices for particular dates.
Using the power of data analytics, we’ve studied millions of Airbnb transactions and know what features, discounts, and other pricing options bring your listing to the top of the search results. A high ranking means increased visibility, more bookings, and higher earnings.
Full income transparency
Keybee provides full income transparency. Monitor what you’ve earned and when you would be paid using our dashboard. Payouts are released by each platform fast and direct into your bank account within 48 hours of bookings. No more middlemen!
Your listing is your passport to a higher income! We create a listing for you that stands out from the competition and publish it across all major hosting platforms. The listing(s) and account(s) are yours to keep.
The listing will include a description of your property’s space, neighborhood, getting around, house rules, and more. Our specialized copywriters know what keywords to use to rank your property higher in search results.
All listings are optimized for each platform’s algorithm for the best rankings and performance possible. Ranking optimization gets your vacation rental properties consistently viewed and booked, earning you more. Keybee achieves this through knowledge of what matters for the best performance on each platform.
Retain complete ownership
While we manage and optimize your listings, you retain all ownership. Photos, reviews, and descriptions stay on the platforms even if you decide to manage the listing without Keybee. And you can see all your earnings in real-time, any time inside the app.
Keybee uses its intelligent channel manager for all your short-term vacation rental properties. It seamlessly synchronizes property characteristics, pricing, and calendars in one unified system. As a result, cross-channel issues are minimized, and reservations are maximized.
- View all your property availability dates and reservations in Keybee’s unified calendar.
- Quick cross-platform updates, so everything stays up-to-date.
- Optimal pricing across all platforms.
- Increase your property’s outreach and occupancy rate by listing it on all major platforms for you.
We know how important a thorough guest screening is. Therefore, Keybee runs comprehensive automated checks coupled with human screening whenever necessary. Due to human screening, you can rest assured that your properties are in good hands!
Our systems detect if potential guests have previous reviews and validated government IDs on each platform.
- If government ID has not been provided in the platform, potential guests are automatically notified to provide it in time for their stay.
- Real people, not machines, detect red flags, such as large crowds and party risks.
- Avoid and reduce costs from damages and fraud.
- Feel safe and relaxed knowing experts handle your properties.
No need to worry about the safety of your keys and no need to worry your guests will need last-minute help locating your property – we take care of it all for you. We make it simple and secure for your guests to obtain the keys via an easy-to-access lockbox near your property.
As a result, your guests are left satisfied, which results in better reviews.
We offer and arrange additional services, such as maintenance, repairs, and deep cleaning (charged separately). So pick and choose the service of your choice, and we’ll handle the rest.