Thinking of renting out your property? You’ve basically got two choices: short-term rentals (like Airbnb) or long-term rentals. Profit is usually the driving factor when considering renting, but understanding the other key factors involved can help you reach your goals and maximize potential returns. So, which option is best for you? In this post, we’ll break down the pros and cons of each option to help you choose how to rent out your property.
Short Term Rentals
Short-term rentals involve renting out a property for a few days or weeks at a time, offering temporary accommodation to travelors or visitors. The rise of online platforms has made it easier for property owners to connect with potential guests, manage bookings and streamline the short-term rental process. Although it’s easier than ever, there’s been a big push for more rules around short-term rentals. Many cities are trying to balance housing availability with economic growth, and in high-demand areas, they’re starting to lean more towards long-term rentals to help with affordability. Because the rules, regulations, and tax requirements can vary widely by location, it’s essential to do thorough research before moving forward. If you’re considering short-term rentals, stay informed and up to date on the regulations that apply to your property.
Advantages of Short-Term Rentals
Flexibility: One of the biggest perks of short-term or vacation rentals is the flexibility they offer property owners. When the property isn’t booked, you can use it yourself, take care of inspections, or handle maintenance without inconveniencing any guests. This flexibility is a huge benefit for owners who want to balance earning rental income with the option of personal use. Plus, if you ever decide to sell the property, you won’t have to worry about asking a tenant to move out first.
High Returns: Short-term rentals also have the potential to generate higher income. Because nightly rates are typically higher, especially during peak seasons, owners can often earn more than they would with long-term rentals. This is particularly true if you manage the property yourself instead of using a property manager, even after factoring in extra expenses and the seasonal nature of the market.
Guest Relationships: Another advantage is that legal disputes with tenants are much less common in short-term rentals. Guests stay for short periods, so you avoid the prolonged landlord-tenant relationships that can sometimes lead to disagreements and legal challenges. That said, providing a great experience for every guest is essential, good reviews are one of the best ways to attract future bookings.
Challenges of Short-Term Rentals
Fluctuating Demand: One of the biggest challenge of short-term rentals is dealing with seasonal demand. Depending on your location, there may be periods of low occupancy, which can make it difficult to budget or accurately forecast your income. Rates often fluctuate too, so you’ll need to stay on top of your pricing to remain competitive, especially in areas where vacation rentals are popular and you’re constantly competing with neighbours for bookings.
Time-Consuming Management: Short-term rentals also require a much more hands-on approach than long-term rentals. You’ll need to be actively involved in guest communication, handling bookings, coordinating check-ins and check-outs, and addressing any issues that come up during a guest’s stay. From the moment a guest confirms their reservation to the time they leave, it’s important to create a smooth experience, bad reviews can hurt future bookings.
Operational Costs: Beyond that, short-term rentals often have higher operational and marketing costs. These can include professional photography and advertising on multiple channels to help attract guests, and booking platforms also charge fees that can cut into your profits. Another major consideration is the frequent cleaning and upkeep required between guests. You can do this yourself if you live nearby, or you can hire someone, but professional cleaning and upkeep services can cost 20–30% of your revenue.
Neighbourhood Disturbances: Neighbour relations can be another challenge. Because guests are constantly coming and going, there’s a higher risk of disturbances like parties, noise, and parking issues. These problems can lead to complaint sand strained relationships with neighbours.
Wear & Tear: Finally, there’s the cost of furnishing and maintaining the property. Short-term rental guests expect a fully furnished space, so you’ll need to invest in furniture, appliances, and decor. With higher turnover, these items also tend to experience more wear and tear. Spills, stains, and damage are more common, meaning you may need to clean or replace items more frequently than you would in a long-term rental.
Long-term Rentals
Long-term rentals involve leasing out a property to tenants for an extended period, usually six months or more, under a formal lease agreement. This agreement clearly outlines the responsibilities of both the landlord and the tenants, so everyone knows what to expect.
If you’re planning to list a long-term rental, you have a few options: you can handle it yourself using online platforms like rentals.ca, work with a property manager, or partner with a real estate agent. Long term rentals are typically a safe bet with demand pretty steady, but it’s important to think about the type of tenants you want to attract. Are you targeting students who need accommodation during the school year, or professionals who value convenient commuting options? Understanding your local rental market is key to setting a competitive price and drawing in the right tenants. Long-term rentals provide a more predictable income stream, but they also come with their own tax considerations, staying up to date on the latest rules and regulations is essential. If you’re an investor, it’s a good idea to consult with an accountant or real estate professional to make sure you’re structuring your rental property in the most tax-efficient way.
Advantages of Long-Term Rentals
Consistent Cash Flow: Choosing to make your property a long-term rental usually means signing a lease with tenants who will stay for several months, or even years. This stability provides a consistent cash flow, making it much easier to plan your finances. You can budget for property maintenance, set aside funds for future upgrades, and even explore new investment opportunities with more confidence.
Lower Operating Costs: Another benefit is that ongoing costs tend to be lower. Tenants are typically responsible for their own utilities, and maintenance expenses for landlords are generally less frequent and more predictable.
Sense of Ownership: Long-term tenants also tend to treat the property as their home. They’re more likely to handle day-to-day upkeep, such as cleaning, minor repairs, and yard work, and will usually report any issues promptly so you can address them before they become costly problems.
Ease of Planning: When tenants eventually move out, the vacancy period can actually work to your advantage. It gives you the opportunity to schedule repairs, renovations, or upgrades on your own timeline. This ability to plan ahead allows you to shop around for the best prices and avoid the financial strain that can come from the immediate turnover demands of short-term rentals.
Challenges of Long-Term Rentals
Flexibility: One of the biggest differences compared to short-term rentals is flexibility. With long-term tenants in place, you won’t have the option to block off dates for personal use or let friends and family stay at the property whenever it’s vacant.
Lower Income Potential: Income potential can also be lower, especially if your property is in a high-demand area where short-term rentals could command higher nightly or weekly rates. Setting the right rental price is essential, and that means carefully comparing your property to similar rentals in the area. In some markets, rent control laws or market saturation may limit how much you can charge.
Problematic Tenants: Tenant issues are another challenge. Even with thorough screening, there’s always the possibility of late payments, property damage, or other issues that can lead to time-consuming disputes. Evicting non-paying tenants can be a lengthy and complex process because tenant rights laws are designed to protect renters. As a landlord, it’s crucial to understand all applicable laws and regulations to help you stay compliant, protect yourself legally, and maintain a positive and fair relationship with your tenants.
Short-term rental vs. long-term rental- which is better for you?
Both rental strategies come with their own pros and cons, so the right choice really depends on your situation. Your income goals, property location, market demand, and how involved you want to be in managing the property all play a big role in deciding which option is best. By taking the time to evaluate these factors and fully understand what each approach involves, you’ll be in a much better position to choose the strategy that aligns with your goals and ultimately maximize the returns on your investment.
