Property investment is about a solid ROI, so knowing what options match your goals is key.
Investing in property to rent out provides many opportunities to learn the business, as well as earn extra income. The type of property you choose as an investment is an important consideration: house, apartment, condo, duplex, etc. Another factor is short term or long term property rentals serve different purposes and have different requirements for both landlords and tenants.
About Short Term Rentals
- Short term rentals are typically rented out for a few days or weeks at a time, while long term rentals are rented out for several months or years with a signed lease.
- They are often furnished and include utilities, while long term rentals may or may not be furnished and may require tenants to pay for their own utilities.
- Many are often used for vacations or business trips, while long term rentals are used for more permanent living arrangements.
- Short term rentals may also be subject to different regulations and taxes than long term rentals, depending on the location and local laws.
Short Term Rentals ROI
Short term rentals can offer a higher potential ROI than long term rentals in some cases, but it depends on a variety of factors such as location, demand, and seasonality. They can command higher nightly rates, but also require more management and maintenance. Also, they may be subject to more regulations and restrictions than long term rentals. Ultimately, the decision between short term and long term rentals should be based on a careful analysis of the local market and the specific property in question.
About Long Term Rentals
One of the most obvious benefits of long term rentals is consistent rental income.
- Long term rentals can lock in a flow of monthly income over 12 months or longer depending on the lease.
- They allow you to budget for repairs because you know the rental amount and know what you have to work with.
- They are easier to manage, whether you self-manage or outsource to a property management firm.
- Actually, they are more self-managing because tenants usually think of the property as their home.
- Long term rentals require less management even if you outsource you pay 8-10% of the monthly rental amount as a fee, but with short term rental you may pay up to 30% to a property manager due to more work that’s involved.
- Long term rentals have less turnover because you have a signed lease which is usually no less than one year at a time.
Long Term ROI
Long term rentals can offer a higher potential ROI over time. The extent to which the ROI will impact your revenue stream may be over years, not weeks or months. Long term rentals are also affected by market conditions. Because long term rental require less management and maintenance, it adds to your ROI. Long term rentals are not subject to as many regulations and restrictions in most cases. Again, base your decision on careful analysis of the local market and the details of the property you are considering.
Before you take the first step buying a rental property, whether it’s short or long term, it’s essential that you calculate the details and data for the property. We created our helpful Rental Property Analysis Checklist which provides key details of what to look for before making a purchase decision.
For other smart ideas and real estate investment answers, contact Cousin James Management. As always, remember — we’re here to help.