SHORT TERM RENTALS vs. LONG TERM RENTALS by Dave Sweyer
Just like other types of investments, real estate investments come in many shapes and sizes.
In the world of residential real estate investments, things tend to boil down somewhat simply into two categories: short-term rentals and long-term rentals. For the purposes of this article, we will define short-term rentals as properties rented for 90 days or less and long-term rentals as those that typically have a tenant with a lease of six months or more.
Like almost any form of investment, short-term rental and long-term rental have their pros and cons. Deciding which type of residential real estate to have as part of your overall portfolio depends on your comfort level and expectations.
The decision to invest in residential real estate for the short or long term will vary from person to person, much like a decision to invest in mutual funds – generally considered safer and more secure investments. slower growth – compared to individual stocks which may have a higher ratio. risk/reward balance.
Advantages of long-term rental
While it is up to each investor to decide whether to have short or long term rentals, long term rentals have some distinct advantages.
Here are some advantages of investing in long-term rentals over short-term rentals.
Long-term rentals require less attention, so managing the property takes less time and effort, whether you self-manage or hire a property management company. Plus, less frequent resident turnover means lower fees associated with management, less advertising to keep the unit occupied, and less labor associated with ownership.
Longer leases, usually yearly, on long-term rentals mean less chance of your property sitting vacant and not generating income. Additionally, seasonality and market conditions have much less of an effect on keeping your property vacant.
Usually with long term rentals some of the regular upkeep of the property will be the responsibility of the tenant. Things like regular cleaning, replacing light bulbs, pest control, and maybe even lawn maintenance are the responsibility of the tenant.
Reduced management fees
Tenant turnover, maintenance, and advertising cost money, so long-term rentals almost always incur much lower property management fees than short-term rentals.
Advantages of short-term rental
None of the above is to say that short term rentals don’t have their benefits, especially here in the Cape Fear area with the lure of our warm weather, beautiful waterways, vibrant and unique dining scene. and our world famous beaches.
Here are some advantages of short-term rental.
With more frequent tenant turnover, short-term rentals benefit from regular, professional maintenance much more consistently than long-term rentals. Properties are cleaned and minor repairs are carried out almost immediately after a tenant leaves and the next tenant moves in.
The oldest law of economics applies more to short-term rentals than to long-term rentals – supply and demand. For example, if your short-term rental is in a coastal area, demand increases during the hottest times of the year, allowing you to charge much more than when the weather is less favorable to enjoy the beach. .
Higher earning potential
Pure and simple, short-term rentals can create substantial income compared to the costs of owning the property (mortgage, insurance, association fees, taxes, etc.). A home that can fetch $2,000 a month as a long-term rental can cost double that as a short-term property. In popular vacation areas, this number gets even higher.
Use by owner
Having a short-term rental property in a popular vacation area allows owners to use the property themselves as they wish. You can decide to rent your holiday property for all but two weeks of the high season when you and your loved ones can enjoy the property yourself.
As with many investment decisions, there is no right or wrong answer as to whether long-term or short-term rental is the best decision for you. It all depends on how you feel about the risk/reward of higher income potential versus lower risk, more stable income, and how much time, effort and money you put in. maintenance and occupation of the property.
As a leading property management company in the Cape Fear area, Sweyer Property Management certainly recommends that property owners strongly consider working with a trusted and experienced property management company. We want to make sure owners and investors understand the relationship they are entering into when they choose to work with a property management company.
If you own investment property and are not using a professional management company, we hope you will consider doing so. The experts at Sweyer Property Management will be happy to provide you you with a free rental analysis or, if you prefer, call us at 910-256-3031.
Sweyer Property Management is a professional, full-service property management company specializing in all aspects of rental management. If you are a real estate investor or owner who would like to learn more about our services and what a professional property manager can do for you, contact us today at 910.256.3031 or through our website. Sweyer Property Management has shown continued growth in the Wilmington, Leland and Hampstead areas while maintaining excellent Google+ note for customer service.