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  • Writer's pictureOlaf Groenewegen

Short-term Vs Long-term rental

Updated: Nov 16, 2022

Should you invest in a long-term rental or a short-term rental property?

In this article, I wrote down the pros and cons of each asset class.

In residential Real Estate, rental property is often classified as being either a short-term or long-term rental.

Short-term rental: rented on a daily, weekly, or monthly basis. Examples of short-term rentals include holiday rental and mid-term room rental to young professionals or students.

Long-term rental: the contract is longer than six months.


Long-term rental

Pros:

- Fixed monthly income

- Stable investment

- Easier to finance

- Less tenant turnover

- Lower operating expenses

- Lower property management fees 7-10 %

Cons:

- Limitations to raising the rent

- Tenants can be late in payments

- Evicting tenants can be a long and costly process

Short-term rental:

Pros:

- Most profitable asset class

- Up to 30% more profitable than a long-term rental

- Increased flexibility

- Great deductions

Cons:

- Higher maintenance

- Local municipalities impose different restrictions

- High property management fee of 15-30 %

- Owner pays the utilities

- Less consistency of payments

- More risk involved


Conclusion:

Short-term rentals can kickstart your investing career as they generate more cashflow. Long-term rentals are less work and in general a safer investment. diversification helps with minimizing risks 'don't put all your eggs into basket'

The decision to make your investment property a short or long-term rental will depend on your current financial situation, regulations and your overall investment strategy.


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