Short-Term Rental vs. Long-Term Rental: The Pros and Cons

Short-term vs long-term rental, airbnb vs property management — if you’re looking to rent out your home, this is one of the first decisions you will need to make. Is it more profitable to rent it to a single person/family or can you optimize your rental income by listing it as a short-term vacation rental on platforms like Airbnb, VRBO and HomeAway?

Ultimately it will depend on your personal circumstances, including how much time, money and energy you have to invest in managing the home. To help you weigh up your options, we dive into the pros and cons of both short-term and long-term rental for your home. 

The pros and cons of short-term vacation rentals

On the surface, the economics of renting your home as a vacation rental look promising. With rates charged per-night and huge fluctuations during holiday seasons, in the right location a vacation rental can be lucrative. It also allows you to access the home whenever you want it, so if you use the home throughout the year, this is a great option (provided you don’t mind the wear-and-tear on your furniture).

On the flipside, the payday that can come from a popular vacation rental becomes a lot less attractive when you factor in the number of hours you’ll spend working as a frontline customer service agent for your own property — especially when many Airbnb hosts are reporting a big increase in vacancy rates. 

The pros of owning a short-term rental:

• Flexibility — you can rent out the home as little or as much as you like

• You won’t need to put your furniture in storage if you are leaving temporarily

• The per-night/per-week rates are higher than a flat monthly rental rate and can therefore be more profitable if the home is in a tourist hotspot and booked regularly 

• There are several online platforms that are simple to list and manage bookings yourself

• The property will be cleaned after every stay to help maintain the condition

• You may be able to claim some costs on tax — such as fees, maintenance and cleaning

The cons of owning a short-term rental:

• There is no guarantee of regular income as bookings will be inconsistent and you’ll be subject to last-minute cancellations

• Many Airbnb hosts are reporting an increase in vacancy rates and that the work involved is making the option less profitable/unprofitable

• You will need to handle all of your guest inquiries and demands — most likely on weekends, evenings and during holiday periods

• You are removing housing options from your neighborhood and contributing to the rental price squeeze that is impacting families that are priced out of home ownership

• The property will need to fully furnished and you will be responsible for the upkeep and replenishment of all amenities

• You will need to hire a professional cleaner or be prepared for a lot of hard work between guests, cleaning the home throughout and laundering all bed linen and towels

• You risk your home being destroyed during parties and a high turnover of guests (they’re technically banned, but there’s little you or Airbnb can do to stop them)

• If guests are unsatisfied with the home or service, you could be forced to give a full refund within 24 hours, in accordance with Airbnb policies

• There are ever-changing local regulations to comply with — some areas like LA have even outlawed short-term rentals for investment properties

• You may need to collect and pay additional taxes or fees to have a legal short-term rental under local ordinances, which are becoming increasingly common 

• You will have additional costs such as paying for all electricity, water, internet access etc

• Neighbors don’t like short-term rentals, so you risk souring any relationships if you intend to come back to the home (and you could be in violation of your HOA agreement)

• Management fees are high — if you don’t want to handle the workload yourself, you will pay up to 20-50% of total income generated for a company to manage a short-term rental
  
  
• Airbnb guest coverage doesn't provide the right insurance to protect your home, with short-term rental insurance costing between 10-70% more than a homeowners policy

The pros and cons of long-term rentals

With rising inflation and property values in recent years, more Americans are feeling locked out of home ownership so they are renting for longer. There has been a sharp increase in rental pricing as a result, meaning the average rental homeowner is receiving drastically more money in rent than previous years. 

This means it’s a great time to hold an investment property and if you don’t intend to use the home during the year, having a long-term lease agreement on your home may be more profitable than a short-term rental, even at a lower per-month rate. 

The pros of owning a long-term rental:

• Predictable income, with less vacancies and one person/family living in your home for 12-months or longer

• High demand and attractive rental rates locked in for the lease term

• Residents are vetted and screened, helping you to place responsible people in your home who will treat it as their own

• With the right management, income can be truly passive, with no need to play customer service representative for holiday-makers

• Provides a stable living environment for people who don’t want to, or can’t, buy their own home

• Favorable tax breaks and capital gains depreciation

• No need to furnish the home or worry about cleaning costs and replacing amenities

• No utility costs, as residents will typically pay for these unless it’s included in their rent

• Management fees are lower, usually around 8 - 10%

• Less local ordinance hoops to jump through

The cons of owning a long-term rental:

• You won’t have access to the home throughout the year as residents will be living there full-time

• Less flexibility on how you choose to use the home

• No ‘high season’, with rates locked in for the term of the lease

• Long-term rentals can also be hard work without good property management, you will need to choose carefully who you trust your home to if you want passive income

• Property managers may ‘nickel and dime’ you by hiding fees and charges for things you thought was included, such as assistance with evictions or marketing your home

Belong is an alternative to both Airbnb and traditional property management

Many homeowners are attracted to the short-term rental market because online platforms make everything so simple and tech-forward, with traditional property management becoming archaic. Which is why Belong has ditched the property management model to offer a better alternative to both — an option where you don’t need to manage everything on your own or put your home at the whim of travelers. 

Here are just a few of the extra ‘pros’ you’ll add to your list if you decide to list your home as a long-term rental with Belong:

• Guaranteed rent every month, regardless of if or when your residents pay

• Optimized rental pricing that uses technology and real-time demand to price your home with accuracy

• The Belong app that gives you and your residents access to everything you need

• Innovative financial products including the option to spread maintenance payments over the term of your lease agreement

• Access to dedicated landlords insurance to protect your asset (as well as coverage for your residents)

• Integration with the most popular rental platforms to get your home loved faster

• Instant access to an expansive vendor network of over 10,000 professionals that can handle everything from routine repairs to home upgrades

...and we're just getting started! Belong is simplifying the rental experience and helping more homeowners reach their financial goals through real estate. Visit our homeowner's page to find out more about how our services are helping people to ditch property management in Seattle, San Francisco, San Diego, Los Angeles, Tampa, Orlando, Jacksonville, Miami and many more.