If you are looking to purchase a rental property, one of the first decisions that you need to make is determining whether to rent it to short-term renters or whether to rent it to long-term renters. As such, it is important to learn the difference between short-term vs long-term rental investment and decide which may be the better option for you. Keep reading to learn some of the key differences between a vacation rental, also called a short-term rental, and a long-term rental.
The Long-Term Versus Short-Term Rental Market
One of the differences between a short-term vs long-term rental investment is the rental market. Many tourist destinations have a market for short-term rentals. However, places that are not exactly hot with travelers may not have much of a market for vacation rentals. On the flip side, some markets have voids in the long-term rental market, while other markets may be saturated. You always want to look at the rental market in the area you are considering purchasing in to find out if there is currently a market for either short-term or long-term rentals and which market may be the best fit for you.
The Length of Time the Property Is Rented Out
One of the key differences between short-term rentals and long-term rentals is the length of time that a property is rented out for. Most short-term rentals allow someone to rent a space for as little as one or two nights, and for as long as 90 days. Whereas most long-term rentals require you to stay for at least six months to a year, depending on the landlord's preferences. If you are looking for an investment property, you have to think about whether you constantly want to find new tenants for a short-term rental or whether you want to rent your property out for a prolonged period of time to just one renter.
The Amount of Money You Can Get For the Property
Another difference between short-term vs long-term rental investment is how much money you can get for the property. As a general rule of thumb, short-term rentals are more expensive on a nightly basis compared to long-term rentals. However, long-term rentals guarantee you a specific amount of income each month, while many vacation rentals can vary from month to month based on the number of people who rent out your vacation rental and how many nights it is rented out. If you are looking for guaranteed monthly rental income, you have to decide which option may make the most sense for you.
Local Ordinances and Business Licensing
As you go about debating whether to rent your investment property out as a vacation property or a long-term rental, you should always learn about local ordinances and business licensing requirements. Many counties and cities are starting to regular long-term vacation rental properties. They may limit the number of properties that can be rented in a certain neighborhood or zip code, or they may place limits on how long your vacation home can be rented for. Some counties even prohibited short-term rentals in an effort to keep property values high. Additionally, if you are allowed to have short-term or vacation rentals, you may be required to obtain a business license. Always learn local laws so you do not get fined or have your business shut down.
Home Insurance Prices
The last factor that you need to consider as you try to select between a vacation rental and a long-term rental is your home insurance prices. The type of insurance you need will vary based on whether you are using your home as a short-term rental, vacation rental or a long-term rental. As a general rule of thumb, you will pay more to insure your home if you use it as a vacation property. Always do your research to ensure that you can make a profit, and consider the increased home insurance prices.
If you are looking to invest in real estate, deciding to make the property a short-term versus a long-term rental is extremely important. However, taking the time to learn about some of the key difference between short-term vs long-term rental investment can help you make a decision that is ideal based on many, many factors. If you are looking to get into the world of real estate investing, real estate investing guru, Chandler David Smith, would love to help you. Visit his website today to learn more or to get started.