Long-term and short-term rentals each have benefits and drawbacks for both landlords and tenants. A short-term rental is one that is rented anywhere from one evening up to one month. Long-term rentals are those that are leased for one month or longer.
So which one is right for you? Here’s what you need to know to make an informed decision.
Short-Term Rentals for Tenants
There are some excellent benefits (and just a couple of drawbacks) to short-term rentals for those who only need housing for a limited period of time.
Short-term rentals are most often condos, houses, or apartments. Many travelers find that they prefer short-term rentals for their trips instead of hotels or motels because they feel more at home in rentals.
One of the biggest benefits of short-term rentals is that they usually come furnished with everything a person would need, aside from personal items.
The biggest drawback to renting short-term is the price. Short-term rentals are usually more expensive than long-term ones. For the most part, the shorter the lease is, the more expensive the rent will be.
Long-Term Rentals for Tenants
Property leased for longer periods of time carry leases that are much different than those of short-term rentals.
Rental rates are usually lower with a long-term contract than they are for short-term rentals. Long-term contracts are the better option if tenants don’t need a fully furnished space and intend to stay long enough to settle in.
Although rent is generally lower, if you’re the tenant of a long-term rental, you’ll be locked into that legally binding lease for a longer period of time.
In addition, the longer lease time also means that the rental will not be cleaned by the landlord nearly as often as short-term rentals are; you’ll have to do that yourself!
Long-term rentals are not usually furnished, so you will likely need to bring your own furnishings, as well.
Short-Term Rentals for Landlords
Short-term rentals can be a very profitable endeavor for a landlord, despite some drawbacks.
Owners of short-term rentals enjoy a higher income potential with shorter vacancy periods. This is especially true in vacation areas.
Rent payments are higher with short-term rentals, which helps to defray the higher management expenses of these properties.
Another benefit is that if you are a landlord who has rented short-term to a less-than-ideal tenant, you won’t have to deal with them for very long before another one comes along.
Landlords can also quickly and easily adjust pricing in between tenants instead of waiting out a long lease to do so. If something needs to be maintained or repaired, you can use your short vacancy period to address it, rather than working around your renters’ schedules.
Short-term landlords deal with extremely high turnover rates, which translates to more cleaning, repairing, and replacing in between tenants. This means that management costs are higher than they would be with long-term properties.
Landlords are generally still responsible for paying utilities for a short-term rental. In addition, most people expect short-term rentals to come furnished, which also is an added expense for you as a landlord.
Long-Term Rentals for Landlords
This is a suitable option for many landlords, as there are numerous advantages and only a few disadvantages to long-term rental agreements.
Long-term rentals for landlords offer consistent income for longer periods of time.
Long-term rentals are easier to manage because landlords don’t have to advertise, clean, or deal with tenant turnover nearly as often.
Tenants are generally responsible for paying utilities in a long-term rental. Maintenance isn’t required as often, and with less turnover, property management can also be cheaper.
Although a steady stream of income is a plus, the downside is that you lose the ability to frequently raise rent prices, even if the market shifts. Also, long-term rentals hold the potential for more property damage as tenants cause more wear and tear the longer they stay.
Lastly, if you get stuck in a contract with a bad tenant, you might be stuck for a while. If you have to evict a tenant, the process is expensive and can take a long time.
Which Is Best? It Depends on Your Needs
There are many considerations to think about when you’re setting up a new rental property or pursuing a rental agreement. With these factors in mind, you can make an informed decision.