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.
- Fixed monthly income
- Stable investment
- Easier to finance
- Less tenant turnover
- Lower operating expenses
- Lower property management fees 7-10 %
- Limitations to raising the rent
- Tenants can be late in payments
- Evicting tenants can be a long and costly process
- Most profitable asset class
- Up to 30% more profitable than a long-term rental
- Increased flexibility
- Great deductions
- 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
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.