Rental properties are a great investment; they are relatively low risk and have both short and long term returns through rental income and property appreciation. Originally, the most common and most successful rental model was the traditional long term rental (LTR). However, with the arrival of online platforms like Airbnb and VRBO, the short term rental (STR) model has become a viable and lucrative option. It’s difficult to decide which option works best for you and your investment. There is no definitive answer, but if you’re weighing up whether to move into the STR market, here’s a list of pros and cons that come with having one:
You Make More Money
This is by far the biggest pro for most people when looking at STRs as a possible option. If you decide to go down this avenue, you can typically expect an increase of 50% or more in rental income. There are risks (explained in the cons section) but if managed right, you will significantly increase your returns from your investment.
If you’re not sure how long you want to rent out your property or are planning to use it as an occasional personal holiday home, then having an STR will give you the flexibility and freedom to do just that. You can completely control what dates you want to reserve, choose how far in advance you want it to be booked, and even restrict how long your guests can stay.
You Can Be Quicker to Adjust to the Market
Sometimes outside influences, like a big event or a local sports stadium opening up, can really impact the market. Having an STR means you would be able to easily take advantage of the market and significantly increase your returns. Whereas, with an LTR you’re somewhat restricted.
Less Wear and Tear
Having a higher turnover of guests in an STR would lead one to believe that it would increase the wear and tear on your property; but in actual fact, STR’s do the opposite. Having the house cleaned and maintained regularly means that any issues are reported early and addressed before they become expensive problems. Also, LTRs inevitably go through more wear and tear than STR’s because generally, there are more days a year that the property is lived in.
You’ll Never Be Stuck With a Bad Guest For Long
One worry for a property owner is that they’ll end up with a bad guest. In an LTR, it can become extremely difficult to remove these guests, as they have more legal protection and a much longer contract. Whereas, with an STR you normally only have to wait a couple of days and then they’re gone.
The additional work that comes with a short term rental is by far the biggest con of having an STR. Having a much higher turnover, needing to regularly communicate with guests, cleaning up after them, and adjusting the pricing daily to the ever changing market will significantly increase the workload needed to manage your investment property. To some, this increase in workload outweighs the financial benefits.
Though you will most likely make more money from an STR, the income can be inconsistent. There will be times when the property is empty and income can be irregular as some months will be smaller than other months. If you do not have the financial flexibility for a couple of quiet months a year then an STR isn’t for you.
You Pay the Bills
All the utilities, and other charges associated with renting out your property, will be down to you to pay. This can obviously provide some risks, but as long as you price your property right and use tools like a smart meter, you can go a long way to mitigating those risks.
Location Dependent and Seasonal
People are no longer using STR’s for only their summer vacation. Platforms like Airbnb have helped open STRs to the rest of the hospitality market. This means they are less reliant on traditional vacation tourism and therefore less seasonal. However, having a property in the right area can make a significant difference. Not all locations are a great place to have an STR, so always do your research before investing!
So where does that leave you? STRs are a great way to make more money than a traditional LTR. But it comes with the caveat of being a lot more work to manage. If you want all the benefits of an STR but don’t want to put all that effort into managing it, then you should look at what Hideaway Hosting can offer you. We’re an end to end STR management company; designed to manage your property so that you can still benefit from all the pros of having an STR without needing to be involved with all the work of managing it! To find out more information please visit our website – Hideaway Hosting.