A short term rental or vacation rental is typically defined as a property rented anywhere from one night up to one month at a time. A long term rental is typically any property rented for one month or more. Which is better for your property? It depends mainly on your location, but let me explain the advantages of vacation rentals vs long term rentals.
Advantages of Long Term Rentals
The rental income is more predictable
The renter is paying a set monthly amount of rent each month. You can plan on a specific amount of revenue and budget yourself accordingly. This is of course assuming you have done proper tenant screening.
Demand is more consistent
Regardless of what the economy or weather or anything else is doing, people will always need a place to live. You should also be able to find a long term renter regardless of where your property is located. Vacations are a luxury that some people may choose to do without, and some locations just don’t work for vacation rentals.
You will have less vacancy
Long-term renters usually sign at least a 6 month lease term. It is not uncommon to see lease terms of 2 to 3 years. This means your property is hardly ever vacant and is doing what you intended it to do, earning you rent. A vacation rental might book 8 nights of the month and sit empty the other 22 nights, by comparison.
Advantages of Vacation Rentals
Vacation rentals typically make more money
Renting by the night to someone that is on vacation can add up pretty quickly. People tend to spend more freely when on vacation, so renters pay more of a premium. For example, rates in Gatlinburg, TN can easily exceed $300 per night. Anyone actually living in a rental property will demand a much lower cost per night.
More flexibility for the owner
Renting by the night or week gives you much more flexibility to use your vacation rental. Take your family down in the off season and enjoy your vacation without interrupting rental income.
Your property will get less wear and tear usually
Owners are always surprised when I tell them this. Their thinking is shorter stays means more guests coming in and out, which means more wear and tear on the property.
Vacation rentals are typically booked on holidays/weekends, and can sit empty for fairly large portions of time. The upside of lower occupancy is less wear and tear. Additionally vacation rental properties are turned over every few days or weeks. That means you or your property manager will be inside to put eyes on the property, fix any maintenance issues and clean it regularly.
Vacation Rental vs Long Term Rental: Conclusion
For me Vacation Rentals are the better option hands-down. The only reason I would consider long term is if I had a property with a location not conducive for vacation rentals.
The additional rental income potential is just too much to ignore. I also love the flexibility that a vacation rental affords. I can still use my property if I want. If I get a bad renter, they are gone in two days instead of six months.
