SHORT-TERM VS LONG-TERM RENTALS: PROS AND CONS
Orlando, Florida has one of the preeminent rental-property investment markets in the country. And in Orlando, the Authentic Real Estate Team are the preeminent specialists in this market. Whether you want to capitalize on Orlando’s tourism industry, with its annual influx of 60 million visitors, or to take advantage of its status as America’s second-fastest growing city, evidenced by its growth-rate of 60,000 new residents every year, the Authentic Real Estate Team can help you find the short- or long-term rental that best suits your needs and ambitions.
Both short- and long-term rental investments have their benefits and drawbacks. Although a strong, diversified portfolio will ideally feature both kinds of assets, if you’re at a crossroads with where to start, it can be helpful to know the pros and cons of each. We’ve outlined them below:
SHORT-TERM VS LONG-TERM RENTALS – Short-Term Rentals
Short-term, or vacation, rentals are fully furnished properties which owners rent out on a nightly or weekly basis to vacationers. They are becoming an increasingly popular option for tourists looking for a more comfortable, private, and valuable alternative to staying at a hotel.
- Flexibility: Owners of short-term rentals can utilize their property any time of the year, even having the option to block off whole periods for personal us.
- Damage Control: With the typical guest stay ranging from one night to, at most, a few weeks, owners of short-term rentals don’t have to worry about the pernicious effects long-term tenants can have on a property.
- Higher Returns: Owners of short-term rentals have the luxury of adjusting their rates by season, even having the option to set minimum lengths of stay during the high season.
- Tax Cuts: Because vacation rentals have shorter tenancy lengths than long-term rentals, they’re often eligible for itemized deductions on taxes associated with the property.
- More Upkeep: As the owner of a short-term rental property, you’ll find that renter reviews can make or break your investment. To insure great reviews, you’ll need to not only keep up with regular cleaning and maintenance, but also with the times, as renters will generally demand the latest in trends and technologies.
- Seasonality: As anyone who lives in Orlando can tell you, there are stark contrasts in the on- and off-seasons for vacationers. If you own a short-term rental, you’ll be subjected to this same seasonality, meaning a potentially wide disparity between your returns from one part of the year to the next. Many owners compensate by lowering their rates during the off-peak and raising them again during peak times, but making the right adjustments is no guarantee against the whims of seasonality.
- Competition: In the traditional housing market, there are usually more buyers than homes. But short-term renters are a smaller demographic than homebuyers, meaning that demand for vacation homes isn’t always high, and that the market is highly competitive.
- Work Load: Even though letting a short-term rental is usually a supplementary source of income, it can often feel like a full-time job, especially for owners who aren’t equipped with the right knowledge and resources. Some of the duties entailed are maintaining a conflict-free booking schedule, facilitating check-ins and checkouts, and keeping up with cleaning and maintenance.
SHORT-TERM VS LONG-TERM RENTALS – Long-Term Rentals
Long-term rentals are typically let for at least a month at a time, with payments delivered on a monthly basis. Unlike short-term rentals, tenants of long-term properties usually pay for expenses such as utilities themselves. Long-term rentals are the most popular choice of housing for the 18-34 demographic, with nearly 80% of this group choosing to rent.
- Consistent Income: Unlike with short-term rentals, long-term rental properties usually provide owners with a steady monthly source of income.
- Consistent Occupancy: Long-term rentals obviously have a lower rate of occupant turnover than short-term rentals. This means less administrative work on the owner’s part.
- Furnished by Renter: With some exceptions, the majority of long-term rentals are furnished by their tenants. As quality furniture can be very expensive, not having to personally supply it cuts owners a huge financial break.
- Security Deposit: Owners of long-term rental properties can add security deposits to their rental agreements to guard their investments against damage. And because they are usually refundable, many renters are amenable to these deposits being set fairly high.
- Inflexibility: Unlike short-term rentals, which can be blocked off for use by their owners, long-term rental owners can’t use their property whenever they want.
- Less Control: Whereas a short-term rental owner can pop in between guests and inspect their property, owners of long-term rentals have to give their tenants ample notice, in some cases up to a week prior to their visit.
- Tenant Vetting: If you’re going to have someone stay in your home for months, or even years, at a time, you’re going to want to make sure they’re safe, trustworthy, and have the financial resources to make their payments on time. This can require a lengthy and complicated vetting process.
We’ve shown you just a few PROS AND CONS ABOUT SHORT-TERM VS LONG-TERM RENTALS and the ways these investments can go right, or wrong, for owners. Short- and long-term renting are very different approaches, but if taken with the right knowledge, preparation, and of course, the Authentic Real Estate Team on your side, either approach can be a fulfilling and lucrative enterprise.
SHORT-TERM VS LONG-TERM RENTALS