Investing in rental properties is a popular way to generate passive income. But one major question new and seasoned landlords face is whether to go for short-term or long-term rentals. Each comes with its own perks and challenges. Your decision can significantly impact your profits, workload, and even your lifestyle. In this blog, we’ll break down the pros, cons, and profitability of each to help you decide what’s best for you.
What Are Short-Term Rentals?
Short-term rentals typically refer to properties rented for a few days to a few weeks. These are popular on platforms like Airbnb, Vrbo, and Booking.com. Tourists, business travelers, and people in transition often choose these types of stays.
These properties are usually furnished, include utilities, and offer a hotel-like experience. They’re commonly found in high-demand locations like tourist destinations, city centers, or near convention centers.
What Are Long-Term Rentals?
Long-term rentals are leased for extended periods—usually six months to a year or more. Tenants treat the property like their home, often bringing their own furniture and signing formal lease agreements.
These rentals appeal to families, working professionals, or students looking for stable housing. They usually offer more consistent income and fewer tenant turnovers.
Profitability: Short-Term Rentals
Short-term rentals have the potential for higher nightly rates, which can result in more revenue overall. For example, if you charge $150 per night and your unit is occupied for 20 nights a month, you could earn $3,000—much more than a typical monthly rent for the same property.
Additionally, during peak travel seasons or special events, you can charge premium prices. This dynamic pricing flexibility gives you a chance to maximize earnings.
However, this higher potential comes with higher risks and costs. You’ll face vacancies during off-seasons, and frequent cleaning, maintenance, and guest turnover can quickly eat into profits.
Profitability: Long-Term Rentals
Long-term rentals offer stable, predictable income. Even though the monthly rent is usually lower than the income from short-term stays, the consistency often makes up for it. You don’t have to worry about daily guest management, and your property is likely to stay occupied for longer periods.
There’s also the advantage of lower overhead costs. You typically don’t need to furnish the home, and utilities are often paid by the tenant. You also save money on frequent cleanings and repairs due to less wear and tear from changing occupants.
Maintenance and Management
Short-term rentals require hands-on management. You’ll need to coordinate bookings, clean the space between guests, and respond to inquiries and reviews. Many owners end up hiring a property manager or using a cleaning service, which adds to the cost.
You’ll also need to stay on top of guest expectations—Wi-Fi, toiletries, and quick customer service are just the beginning.
Long-term rentals require less day-to-day involvement. Once a tenant moves in, your role becomes more passive. You’ll only need to handle occasional repairs, collect rent, and manage lease renewals or terminations.
This makes long-term rentals more appealing to people looking for a hands-off investment.
Vacancy Rates and Tenant Turnover
Vacancy is a major factor in determining profitability. With short-term rentals, you’re likely to experience frequent vacancies, especially in the off-season. While this can be offset by charging higher nightly rates, you risk having weeks or even months without income.
Long-term rentals have much lower turnover, especially if you screen tenants well and provide a comfortable living space. A good tenant might stay for years, giving you peace of mind and consistent income.
Tenant turnover in long-term rentals is usually less expensive and less frequent, saving you time and effort.
Legal Regulations and Restrictions
Short-term rentals are facing increasing regulations in many cities. Some areas require special permits, restrict the number of days you can rent out a property, or ban short-term rentals altogether. Violating these rules can lead to hefty fines.
Long-term rentals are generally more accepted and regulated, with clearer laws and protections in place for both landlords and tenants. While you’ll still need to comply with local landlord-tenant laws, the risks are usually lower and more predictable.
Before investing, it’s crucial to research your local laws to see which type of rental is legally viable in your area.
Initial Setup and Furnishing Costs
Short-term rentals require a larger upfront investment. You’ll need to fully furnish the home, stock essentials, and create a welcoming environment. This includes beds, sofas, linens, kitchenware, and décor.
Professional photography and marketing also play a big role in attracting guests, which adds to your startup costs.
Long-term rentals are cheaper to set up. Most tenants bring their own furniture and expect an unfurnished unit. You’ll still need to ensure everything is functional and clean, but the cost is significantly lower than preparing a short-term unit.
Marketing and Listing Efforts
Marketing is essential for short-term rentals. You’ll need to actively manage your online presence, respond to reviews, optimize your listings, and use high-quality photos. Visibility is everything, and competition is fierce.
In contrast, long-term rentals require minimal marketing. A few well-placed online listings on platforms like Zillow, Craigslist, or Facebook Marketplace can be enough. Once you find a tenant, you won’t need to market again for months or years.
This makes long-term rentals ideal for landlords who don’t want to spend a lot of time or energy on marketing efforts.
Which is More Profitable?
The answer depends on your goals, location, and risk tolerance. Short-term rentals can generate higher income in the right market, especially tourist-heavy areas or near city attractions. But they also come with higher costs, more involvement, and greater risk.
Long-term rentals offer stability, consistency, and less hassle, making them better suited for investors looking for a steady income with fewer responsibilities.
If you have the time, resources, and flexibility, short-term rentals might be more profitable in high-demand markets. But if you prefer a more passive, reliable investment, long-term rentals are a solid choice.
Final Thoughts
Choosing between short-term and long-term rentals isn’t a one-size-fits-all decision. Consider your financial goals, the location of your property, and how involved you want to be. Short-term rentals can offer excitement and big payouts, but they require hustle. Long-term rentals may not make headlines, but their steady returns can be just as rewarding over time.
Evaluate both options carefully and make the decision that best aligns with your personal lifestyle and investment strategy.