Both short-term rentals and long-term rentals can be either a good investment choice or not.
I’m going to share some pros and cons to both of these types of rental properties to help you decide which type you would like to include in your investment portfolio.
First – what is the difference? A short-term rental typically rents for one to 30 days. A long-term rental typically rents for 6 to 12 months.
Long-Term Rental Income is usually consistent.
Short-Term Rental Income is usually seasonal.
For this purpose, I’m using a vacation rental as an example. If you are buying an investment in a ski-resort, your income will be generated mostly during the winter months when it snows.
If you are buying an investment in a coastal area, your income will be generated primarily during the spring and summer months. Of course, there are vacationers who, for example, prefer to visit Colorado during the summer. There are Winter Texans, vacationers who head to the southern states to escape the cold winters.
The income produced during the off seasons should be considered supplemental and not necessarily the main income for your investment property.
Long Term Rental Property Advantages Include:
A longer lease could generate more consistent income.
The renter usually maintains the lawn and pays the utility bills.
The owner can charge a higher security deposit and hold for damages.
Disadvantages of Long-Term Rental Properties Include:
Higher risk of property damage.
Risk of eviction if renter stops paying the rent due to job loss or other reasons.
Lower profit margins, partially because rents can’t be increased during the lease term.
Advantages of Short-Term Rental Properties Include:
Personal use for vacation.
Reduced risk of damages to the property.
Higher income potential.
Rents can be increased for demand or decreased during lower occupancy times to generate more income. More flexibility.
Disadvantages of Short-Term Rental Properties Include:
Furnishing must be maintained. Linens, dishes, etc. must be stocked as needed.
Occupancy limits and local regulations and permits needed.
Income is not consistent due to seasonal nature of rentals.
My advice is to consider your goals for your portfolio. As in all investments, it’s a good idea to diversify, so you may want to own several of each type of rental property – both long term and short term.
If you are interested in finding out more information about properties for sale in the Port Aransas, North Padre or Rockport areas, I’d be happy to help. Please drop a comment below or feel free to text or call me.
