If you have a property that is sitting vacant, you may be considering your options: you can sell the home, turn it into a rental home, or use it as a short-term, vacation rental. If you are assessing the differences between short-term and long-term rentals, there are a few things you should consider.
Vacancies
When you rent out your home to one tenant who has signed a lease, you typically do not have to worry about vacancies until the lease has ended. The time between tenants at a long-term rental can vary, depending on a number of factors such as whether or not the property is utilizing a property management company, how competitive their local rental market is, how high the rental payments are compared to similar local rentals, and more. Keeping the vacancy rate low will make the property as profitable as possible, and help to reduce times where there are no rental payments being made.
A short-term rental may have many vacancies. This is especially common in areas that are highly popular during certain seasons, and less popular during off-seasons. If there isn’t something bringing guests into the area, there may be more vacancy time. It is important to consider the area and the availability of other short-term rentals or hotels in the same price-range nearby.
Utilities
When leasing out a long-term rental property, it is standard for the tenant to pay for certain utilities. These expenses can vary depending on the individual, and can get pricey. Because of this, the utility payments are the responsibility of the tenant who will be using them.
When it comes to a short-term rental, it is the expectation that the property owner will pay for electricity, water, garbage, internet, and more. These payments can add up and should be considered when assessing the income the property could generate.
Time Investment
Short-term rentals are notoriously time consuming. Even if there is a low vacancy rate, the property will need to be cleaned and prepped before the next guest arrives. The average short-term rental stay is 4.6 days, meaning that with no vacancies, you would need to visit the property a minimum of six times per month. Time spent cleaning, restocking, doing laundry and replacing broken items when needed can add up.
In some cases, a short-term rental owner may choose to hire someone to manage these tasks. However, this can get pricey with the frequency, inconsistent schedule, and time-sensitive nature of the job.
Long-term rentals are still a time investment, but the turnover is once per year if the tenants do not resign their lease, rather than six times per month. Damages are also less likely to occur when the tenant is living in the home rather than staying for a few days.
Vetting Process
We employ a thorough vetting process prior when leasing a property. It is important to ensure that approved tenants meet the basic criteria, and pass a background check. The screening process may include checking references, and reviewing a rental history.
Short-term rentals do not provide the same protections when it comes to selecting guests. In some cases, various booking programs for short-term rentals may allow the owner to reject a guest based off of low or poor reviews. However, this does not account for individuals who have created new accounts, do not have a history through the program, or may be dishonest about the number of guests or the presence of a pet.
Cancellations
With similar repercussions as having a higher vacancy rate, cancellations are not uncommon when it comes to short-term rentals. While there may be a cancellation fee, numerous cancellations in a short time-frame could be detrimental to a property owner relying on the income. With short-term rentals, there is no way to ensure that things will go smoothly with scheduling.
When it comes to short-term rentals, we recommend assessing the income the property could generate, while keeping in mind all of the expenses. Short-term rentals can be time consuming, require a lot of repairs, and open up your property to individuals who may not treat it with respect.
Long-term rentals come with their own unique set of challenges, while still providing consistency, typically producing fewer maintenance issues, and allow for the owner to screen tenants before they enter the home.
If you want to learn more about the benefits of renting out your home, reach out to speak with a member of our team today! You can visit our contact page and fill out a form, here.
