Short-Term VS Long-Term Vacation Rental: Main Pros and Cons & What is Better to Choose in 2024

The topic of short-term vs long-term rental is on the top of discussions among property owners. Short-term rentals used to be an activity only for hotels. Over time they expanded and now we can find them everywhere, in almost any type of property, even a castle. Platforms like Airbnb and VRBO have made it incredibly easy for this to happen.

Why has this become so popular? What is the difference between a short rental and a long rental? If you own a rental unit, what is more convenient for you? 

What exactly is a short-term rental?

Usually, s short-term rental is a rental of less than 6 months. But in most cases, these rentals last for around a few days or weeks. A short-term rental agreement can be entered into directly with a landlord or through a platform like Airbnb.

This type of rental can be a problem in many cities, especially those with high tourist activity. They want to level the playing field and allow the local hotel industry to survive, but short-term rentals disrupt housing markets in several ways.

• Short-term rentals can lead to a decrease in available long-term rental housing stock as landlords may find it more profitable to offer properties on a short-term basis to tourists rather than residents. It can drive up rental prices and limit housing options for locals.
• Short-term rentals can sometimes cause disruptions in residential neighborhoods, as tourists may behave differently than long-term residents, leading to noise, increased traffic, and decreased sense of community.
• Local hotels and traditional hospitality businesses may suffer from unfair competition, as short-term rentals can often offer lower prices and more flexible accommodation options. This can negatively impact the local hotel industry and result in job losses in the hospitality sector.
• Many cities have struggled to effectively regulate short-term rentals, leading to challenges in ensuring compliance with local laws, such as safety regulations, zoning restrictions, and taxes. This can create a lack of accountability and potential safety risks for guests.

To address these issues, many cities have implemented or considered various regulations to level the playing field between short-term rentals and the hotel industry. Some common approaches include:

• Requiring hosts to obtain permits to operate short-term rentals and imposing restrictions on the days a property can be rented out.
• Designating areas where short-term rentals are allowed and prohibiting them in residential zones.
• Imposing local taxes on short-term rentals to generate revenue for the city and support the local hotel industry.
• Collaborating with short-term rental platforms to share data on hosts and their listings to facilitate enforcement and compliance with local regulations.
• Holding hosts accountable for the behavior of their guests and imposing penalties for violations.

These regulations often aim to balance supporting the tourism industry and preserving the availability and affordability of long-term housing for residents. Finding the right balance can be challenging, and the approach can vary from city to city depending on their unique circumstances and needs.

What is a long-term rental?

A long-term rental is anything longer than six months and generally extends from six to twelve months. These agreements are usually made directly between the tenant and the landlord. The owner sets specific conditions and the tenant must comply with them. The tenant can leave the property at the end of the tenancy or extend it.

Key features of long-term rentals

Aspect	Description
Definition	A long-term rental refers to the leasing or renting a property or asset for an extended period, typically 6 months to several years.
Duration	Typically, long-term rentals last 6 months or more, with some agreements extending to one year or multiple years.
Property type	Long-term rentals include residential properties (apartments, houses), commercial spaces, vehicles, and equipment.
Payment	Rent is usually paid monthly, and in some cases, tenants may be required to provide a security deposit upfront.
Flexibility	Long-term rentals provide stable housing or use of an asset over an extended period, offering less flexibility to move or change equipment.
Tenant rights	Tenants in long-term rentals usually have rights outlined in a lease agreement, including property usage and maintenance responsibilities.
Landlord role	Landlords are responsible for property maintenance, repairs, and ensuring compliance with rental agreements.
Advantages	Stability, consistent housing or asset access, potential for lower monthly rates, and the ability to personalize space.
Disadvantages	Limited flexibility, commitment to a specific location, potential rental increases during the lease, and difficulty breaking the contract early.

Short-term vs long-term rental: advantages & disadvantages

Short-term rentals offer several advantages over traditional long-term rentals, making them a more convenient option for certain situations. Here are some reasons why short-term rentals can be more favorable.

Advantages of short-term rentals

• Wide selection. The properties on Airbnb can be incredibly varied. They can range from a room, a set of rooms and apartments, to entire houses, yachts, and even a castle.
• Free listings. You should pay absolutely nothing to list your property. The platform allows you to include a description, photos, and a user profile where guests can learn about the hosts.
• Hosts can set their own price. It’s up to each host to decide how much to charge per night, per week, or per month.
• Guest and host protections. As a protection for guests, Airbnb holds a guest payment for 24 hours after check-in before releasing funds to the host.
• For hosts, Airbnb’s Host Guarantee program “protects up to $1,000,000 in covered property damage in the rare event of damage to guests, in eligible countries.”
• High incomes. Unlike the standard annual yield of 6% on the value of a property offered by traditional rentals, in temporary rentals, you can obtain double the yield (12%), always taking into account the location of the property, the characteristics, the market and if it is attractive enough for the user.
• Promotion support. Temporary rental platforms are highly effective in attracting tenants. It is because their business is based solely on providing this online service in the best possible way. This means you can forget about the advertising and promotional aspect, which can be exhausting and expensive.
• Flexibility. With a temporary rental, you can use it or sell it in the short term, unlike traditional rentals, where you must wait for the lease to end.

Suppose you want to consult on short-term rentals, particularly those related to Airbnb, VRBO, and Booking.com. In that case, you can contact the team of professionals from CHM, who have over 10 years of experience in this field, and get working advice and recommendations for your vacation rental business.

Disadvantages of short-term rentals

Absolutely, short-term rentals do come with certain challenges and risks that property owners and hosts need to be aware of. Here are some of the key challenges and risks associated with short-term rentals:

• Administrative costs. Although the profitability is higher when a short-term rental is made, the commission prices are a little higher when the platforms for temporary rentals are used.
• Maintenance cost. Constant use and different tenants cause the furniture to wear out faster; keeping the property well-decorated and updated furniture will increase the rental price and the occupancy rate.
• More time invested. If you decide to manage the property yourself, you must fine-tune every detail, from cleaning to maintenance. However, there is the option of hiring someone to manage your properties; in this way, you would gain peace of mind but it will increase your costs a bit.

While short-term rentals offer several benefits, their success depends on various factors, including location, property quality, pricing strategy, and effective management. Property owners must assess their circumstances, financial goals, and risk tolerance before deciding to invest in short-term rentals.

The advantages of long-term rentals

Long-term rentals have many advantages for landlords, and you should consider these when deciding which path to take.

• Stability is a primary benefit. You should be able to determine if you have a prospective excellent or bad renter in front of you if you exercise due diligence and carry out any background checks permissible under the law.
• Managing long-term rentals is also significantly simpler. You must handle the rent payments and some upkeep after you have a renter. Your renter is unlikely to become destructive if you suddenly choose them wisely. As a result, anticipating your charges will be much simpler.
• Not to add that, unless otherwise mentioned in the rental circumstances, utilities must be paid for by the renter.

The disadvantages of long-term rentals

Long-term rentals aren’t perfect. Since you’ll be stuck with the tenant, you need to think about the possibility of them rebelling. This may be due to changes in their personal or professional life.

• Even though it’s uncommon for an ideal renter to be problematic, evicting a tenant may be exceedingly challenging while the leasing agreement is still in effect.
• You cannot benefit from local pricing changes, which is another issue. If you reside in a very touristic region, modifying the pricing in a short-term rental would be simple to increase revenue. You should thus give that some thought.
• Be aware that dealing with long-term renters will subject you to greater legal duties as a landlord. You are in charge of finding them a decent location to live. This will be their permanent residence rather than simply a temporary place.
• You presumably already know that short-term rentals generate significantly larger rental income. Short-term rentals often generate 30% more rental revenue than long-term rentals.
• Most landlords report more significant yearly revenue with short-term rentals or a combination of short-term and long-term rentals than with long-term rentals.

If you want to join the short- or long-term rental business, the CHM Inc. team is ready to help you with it! We specialize in property management and do everything from A to Z. We will ensure you start making your profit in a month!

Short-term vs long-term rental: what is the best option?

Well, it depends on what you are looking for. To know the best duration, you should first look at your area.

• Seasonal rentals are not particularly practical in areas that are not highly popular with tourists.
• The state of your property is a further factor that must be considered. Airbnb users have particular standards for quality. So if you fall short of those standards or don’t know what they are, you can be dissatisfied with the feedback you receive.
• Short-term rentals are much more profitable than long-term ones. Sometimes the profit can be two or even three times more!
• Vacation rentals become a no-brainer if your house is in good shape and you live in a tourist-friendly city or region.
• To develop your reputation, you need to be knowledgeable in your field and take into account working with experts.

Short-term and long-term rentals should be considered by landlords who want to get the most money from their investments. They can be mixed and more effective for some properties than others. So consider your choices and decide which is best for you.

Conclusion

In the end, there are a variety of advantages to renting a holiday home, and this list is by no means complete. However, let’s assume you have the appropriate administration software for your seasonal rental before we discuss short-term vs long-term rentals. In such a situation, short-term renting is a smart move to increase income and flexibility while participating in the sharing economy, meeting visitors worldwide, and benefiting from tax breaks and other advantages.

Frequently asked questions about
short-term vs long-term rental

Updated on: 2024-09-30. Author: Karina

Tags: Airbnb management Property Management