Coastal towns tend to attract a wide variety of renters, from summer vacationers to families looking to move closer to the beach. In peak tourist season, vacation home investors can earn impressive profits in the short-term renting market. But once winter hits and fewer people rent vacation homes, investors may wonder whether the short-term market is really the best option.
Both the short-term and long-term rental markets have benefits and drawbacks. Determining the best market for you depends on what you value most. Here are some of the pros and cons of investing in short-term and long-term rentals:
Pros of Long-Term Rentals
- Cash flow is more consistent. Long-term pay rates are typically the same every month, so you can calculate how much money you will make on your rental each year.
- Long-term renters usually cover utilities. In particular extreme weather locations, utility bills can get really high.
- There are usually fewer management demands. Long-term renters generally bring their own furniture, so you won’t have to worry about furnishing your rental property. You will also be able to avoid certain maintenance responsibilities required in the short-term market, like restocking toilet paper and cleaning. Additionally, you won’t have nearly the amount of advertising requirements as short-term renters.
- Property management is typically cheaper. It is much cheaper to hire a property manager in the long-term rental market because there is less turnover and fewer ongoing maintenance and marketing responsibilities.
Cons of Long-Term Rentals
- You probably can’t visit your vacation home. Most people who purchase and rent out coastal properties do so because they hope to take sporadic vacations to the area.
- Securing good tenants can be challenging. The process of seeking quality long-term tenants is often extensive and draining. And once a renter signs the lease, you’re stuck in a contract, even if the tenant consistently pays late or is reckless with your property.
- You can’t check on your property as much. Certain laws protect long-term renters from spontaneous home inspections, so you will have to give plenty of notice before you come check on your property.
- HOA fees and restrictions are high. If you rent long-term in a neighborhood that typically serves the short-term market, you will encounter far higher homeowners’ administration fees and restrictions because of the higher insurance premiums covering the extra amenities typically offered by short-term rental properties.
Pros of Short-Term Rentals
- Your home is more open for personal use. Because short-term renters typically stay for a short period of time, you and your family can enjoy more vacation time if you block off the desired time on your rental availability calendar.
- There will likely be less wear and tear. Short-term rental homes are typically not occupied year round, so your rental property will likely experience less wear and tear. Plus, your home will be cleaned between each visitor’s stay.
- Rental income will probably be higher. Although your income from the short-term market may not be consistent, your annual earnings should surpass those of the long-term market.
- You can more easily adjust pricing. If inventory begins filling up quickly, you can more easily raise the pay rate to maximize your profits.
Cons of Short-Term Rentals
- You’ll have to upgrade your home constantly. To continue attracting vacationers, you should frequently upgrade your rental home with quality furniture, appliances, and decor.
- There is a greater need for marketing. If you have a property manager, they may do some marketing for you. But if not, you may have to put extra time and effort into marketing your property.
- The logistics can be overwhelming. From managing and organizing your rental calendar to arranging key exchanges and screening potential guests, there are lots of details you need to keep track of when you rent in the short-term market.
- You can expect off-season vacancies. This just means you’ll have to factor these vacancies into your yearly costs and determine your rates accordingly.
Whether you invest in the short-term or long-term rental markets, Network Real Estate is here to help. If you have any additional questions or are ready to list your property and start getting bookings, give us a call at 910-395-4100.