Short-Term vs. Long-Term Rentals: Which is Better to Earn More? - Optinest

11/12/20190

Want to make the most out of your investment property and earn a healthy passive income?

If you are new to the world of renting and being a landlord, there quite a lot of things you need to decide on and consider as well. Previously, long-term rentals were the standard. But with modern options, such as Airbnb, short-term rentals have become extremely popular.

Many people believe that renting out your property on a short-term basis is a foolish decision. Often assuming that you’ll be unnecessarily busy, have low occupancy rates, and overall a lower rental income.

However, this is not true. Both short and long-term have their pros and cons. And in a lot of situations, you can actually earn more through short-term rent periods.

But it is important to inform yourself before making any kind of decision. So first, let’s make sure you completely understand short-term rentals.

What exactly is a short-term rental?

Put simply, anything that is rented from a few days up to a month is considered short-term. Anything more than a month is seen as long-term.

In recent years, short-term rental has become synonymous with Airbnb. This platform allows property owners to list their properties online. Potential guests can then browse by location, price, features, and more. Through Airbnb, hosts are able to safely receive money from the guests. Both parties receive the benefits of having Airbnb as the medium between the two.

Benefits of short term rental

Let’s see some of the advantages of the short-term before focusing on how much money it can bring you:

  • Frequent tenant traffic – This is good if you come across a rather lousy tenant, this means they won’t stay for long!
  • Less big repairs – You will be encouraged to clean and maintain the property after every tenant. Due to this regular maintenance, there will be less wear and tear.
  • Personal use – if you decide on short-term rental it means that the property won’t be completely booked in most cases. So if you decide to stay in it for whatever reason, you’re able to do so easily. This is especially useful if your investment property is in a holiday location.
  • Higher-income potential – Short-term rentals usually mean higher rent. This is because long-term tenants are locked into a longer contract and this is made up for by decreasing rent. However, if you retain high occupancy rates while also maintaining the higher rent from short-term rentals, you’ll have a higher total rental income.

How you can earn more with short-term rentals

People who are looking for a place to stay short-term see this opportunity as a one-time expense. For example, they could be booking a place for a holiday, a business trip, and a whole variety of reasons. Because of this, you can increase the price of your property without worry.

While this increase in price is beneficial to you, the guests also receive the benefits of a short-term stay with no long-term commitment — without paying hundreds of dollars a night for a hotel.

Additionally, short-term rental allows you to adjust the price. If you own a property on a beach, during the summer you can increase your rent to match the growing demand. While you’re earning more, the property owners who rented out long-term will be stuck with their predetermined low rate. And during the off-season, you can lower your rent to boost occupancy rates.

You can also do this for weeknights vs. weekends. Offer a lower price during the week and increase it for weekends. This is especially the case for locations where weekend nightlife is popular.

Drawbacks of short-term rentals

Unlike long-term tenants who pay their utility bills, as a short-term tenant who is only staying for a few nights, it would be unreasonable for them to pay this. Because of this, you will be expected to pay all utility bills, including all repairs and cleaning.

Additionally, you will have little time to research a tenant, so if you’re not comfortable with opening up your property to complete strangers that short-term might not be for you.

Who is long-term rental for?

Everyone is different. Everyone seeks different things when they want to invest in property. If you are seeking more security by having an occupied property at all times, maybe long-term is the right choice for you.

Firstly, you will be protected by the lease and by a set security deposit. Most of the time, you won’t have to worry about furnishing the place, since tenants will usually bring their own furniture.

Some will say that this kind of rental provides a more regular income than the short-term. This is namely because your tenants will pay you every month for the period they are staying, which means consistent cash flow.

It needs to be emphasized that since you get the money regularly, the prices will have to be lower than those of short-term rentals.

Short-term rentals require more advertising, and with long-term, you don’t have to do that as much, since in most cases you will always have someone staying in your property. You won’t have to worry about constant tenant turnover and constantly reviewing potential tenants.

Ultimately, the main drawback to short-term rentals and why long-term rentals appear to be better would be because you’re less tied to managing or maintaining your property and that there are higher occupancy rates.

The solution to short-term rental problems

But with all this said, there is a way to overcome the struggles of short-term rental properties and still earn more than a long-term rental can.

Airbnb property managers can maintain your property for you, including the cleaning and servicing between tenants. They can also style it, manage your listing, provide customer service, and help maximise your occupancy rates.

With all these problems solved, you would have removed the majority of the problems with short-term rentals — while still earning a higher rental income.

Want to start earning more from your investment property?

Discover how you can earn greater passive income through short-term rentals with OptiNest, Australia’s leading Airbnb property management provider.

Click here to get in touch with us today.

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