Owning a rental property these days doesn’t mean you have to follow the traditional rental income route. You don’t have to collect monthly rent from tenants who sign long-term leases. There are options. Today, landlords can treat rental properties as investment properties. But they could also decide to turn it into an Airbnb rental service.
There are many reasons why you might want to compare Airbnb to renting a home. The biggest controversy is that more than 1 billion guests have stayed on Airbnb to date. This number shows the demand, and the benefits of using a vacation rental website to attract people to your rental property.
However, vacation rentals aren’t the obvious choice, and using your rental as an Airbnb property may not be more profitable or easier than traditional rentals. So take the time to compare, think about what is important to you when it comes to steady cash flow for your property, and choose a side.
Do you want a rental property or an investment property?
When considering rental income, both Airbnb rentals and long-term rental properties achieve the same goals. They all bring you more income. The difference is that you have to put in the time to keep the property in high demand.
Rental properties have income potential because you attract people who want to live there long-term. Long-term tenants consider your property their home, which means they will invest their time and energy. They’ll sign the lease agreement and pay the rent, so you’ll have a steady income for at least a year.
Using your property as a short-term rental basically works the same way as Airbnb, it’s just that the attitude of your tenants is different. On average, Airbnb guests will view your property as a vacation rental. They will not have any responsibility for the place and therefore may not treat it very carefully. You will also need to furnish your rental home and include certain amenities. After all, guests want their Airbnb to look a certain way.
There are pros and cons to both leasing strategies, but it really depends on how you view leasing. Is it a vacation home or a piece of real estate that you would like others to call home?
Advantages of long-term leasing
The biggest benefit of long-term rentals is consistency. You’ll get paid consistently, so you won’t have an inconsistent income. You can establish a consistent screening process for new tenants, so hopefully there are no bad tenants. You’ll be able to tap into local markets and establish a competitive leasing strategy to maintain consistent rental prices.
The second biggest benefit of long-term leasing is the lease agreement itself. An agreement is actually required to set out the house rules and protect your rental property and bank account.
Need to know some other benefits that make it easy to lean toward long-term rentals? Whatever a real estate investor’s goals are, there are many.
Insulated from market fluctuations
Leasing your property long-term can provide you with protection from market fluctuations. It allows you to have a stable real estate investment strategy. When you lease long-term, you lock in a fixed price for an extended period of time, which can save you money when the market becomes unstable. As long as you sign a lease, the tenant is required to pay rent for the entire term, even if comparable rents decline.
reliable property value
Long-term rental properties can also provide you with more reliable property values. Because you are protected from the vagaries of the market and this is a long-term real estate investment, you are confident that your property will maintain its value over time.
Long-term rentals are also generally better for cash flow. With a long-term lease, you can spread the cost of your mortgage over a longer period, making it easier to manage your finances.
Cheaper overhead
Management fees also tend to be lower when you rent out your property long-term. This is because you don’t have to worry about advertising costs or turnover costs, both of which are important when you’re renting short-term.
You can also collect a security deposit to cover issues beyond normal wear and tear and eliminate the need to pay for home improvements. These benefits don’t necessarily mean huge profits on leasing, but they can mean improved cash flow so you can start making some money sooner.
No seasonal fluctuations
Another advantage of long-term leasing is that it is not subject to seasonal fluctuations. With a long-term lease, you can be sure that the rent will be the same every month of the year, which makes it easier to budget.
Better tenant screening
Because you’re not looking for short-term-only tenants, you can be more selective in your screening process. This can help you avoid problem tenants and ensure your property has good, reliable tenants. You can take the time to conduct a proper background check, check your credit history, and even gather references from previous landlords and current employers. You can be more selective about who can live on your property.
less restrictive
Long-term rentals also tend to have fewer restrictions than short-term rentals when it comes to local laws. This is because you are not subject to the same regulations and zoning laws that apply to short-term rentals. As a result, property management becomes easier and you have more flexibility in how you use your property.
Disadvantages of short-term rentals
Although the company offers the Airbnb Host Guarantee to protect hosts like you, there are still many negatives to using your property for this type of short-term rental.
Your upfront costs are higher
While you may have the ability to be flexible with your pricing and bring in more Airbnb revenue, you also have the potential to pay more. Damage is more common in short-term rentals.
You’ll also incur additional costs by cleaning and replenishing items or replacing certain items with your property after each rental.
seasonal vacancies
Airbnb hosts are also affected by seasonal trends in the short-term rental market. Your property might be vacant for a few months each year, or if there’s no good weather or attractive local attractions, you’ll have very few bookings.
Local laws may work against you
Some cities also limit the number of days an Airbnb rental can last, forcing you to intentionally leave your property vacant during certain times of the year.
advertising fee
In addition to spending all your time keeping your house clean and ready for guests, you also need to put a lot of effort into attracting them. Marketing an Airbnb property takes a lot of work. Not only do you need to take high-quality photos, you should also replace them each season to keep your property relevant. You’ll also need to put in extra effort into writing the property description, as you’ll have to talk about why the home is a great place to stay and promote the things surrounding it to attract people who will only live there for a short period of time.
Airbnb vs. Rental Homes
Real estate investors around the world are looking at their long-term investments and wondering whether to rent them out in the traditional way or convert them into short-term rentals. It’s a personal choice, but there are many reasons to rent out your property long-term. From providing protection from market fluctuations to lower management costs and fewer hassles, long-term leasing is a great option for investors.
