Airbnb vs Renting — Which rental strategy yields higher income?

It’s a fact that property rental is more valuable on a daily basis as an Airbnb vs Renting. Think of the cost of renting a hotel room for a night. A week spent at a hotel is comparable in cost to a mortgage payment, let alone one month of rent. If you are able to rent the property as an Airbnb with as few open dates as possible throughout the year, you will certainly turn a profit two to three times greater than if the property was a conventional rental.

Unfortunately it’s not a perfect world and there will be gaps in bookings due to times of low demand or simply for the need to clean between guest stays. If you’re charging two times the amount daily as an Airbnb vs renting then you could have half a year of open dates to clear the same amount of money. If you’re able to charge three times as much you’d then need only 4 months of bookings to make the same amount. For most properties, the amount you make will fluctuate based on seasonal demand.

What You Should Know about Long-term Renting

With a long term rental it may take a month or two to find the right tenant for your property, but once the tenant is in place, there are no more vacancies in your schedule. In addition, the onus for day to day cleaning of the property is no longer yours. This is not to say that you will not have maintenance for larger issues, but day to day checkup will be off your plate. This tenant will now be in place, guaranteeing income 365 days a year, potentially for months or years depending on the lease.

Of course, you need to handle more serious maintenance issues. You’ll likely have to deal with a few maintenance emergencies and you’re on the hook if appliances break or there is a large expense. The same is true with an Airbnb. Any property you own is your responsibility. The difference with a long-term rental is that a lot of the day to day stuff you deal with when you live onsite or when you are renting short-term won’t be an issue with a long-term rental.

Airbnb Short-term Rental

Renting an Airbnb offers many benefits, despite sacrificing the consistency you get with a long-term rental.

A significant amount of the cost of investing in an Airbnb property is what you’ll need to pay upfront. This is true whether you are buying a second property separate from your own home or if you intend to rent space within your primary residence.

With an Airbnb an initial investment is needed to furnish the property with furniture as well as paying for utilities and basic necessities like condiments and toiletries. You are going to be making investments similar to what you would make if you were operating a hotel or a traditional bed & breakfast. In a long term rental these costs are on your tenant and you don’t need to worry about furniture or amenities unless you intend to offer these things to long term residents.

In addition, booking the property as an Airbnb requires the property to be checked up on and cleaned between every rental. This allows the property to be consistently maintained, which is a positive, but requires dedication and time. Additional time is also required with an Airbnb in monitoring when your property is booked, scheduling cleanings between bookings, as well as rating and leaving feedback on tenants. If you don’t have the time to do this a property manager would need to be hired adding additional costs.

How Do You Know Whether a Short-term Airbnb Rental is Right for You?

The simplest answer is it depends on your situation. For some, the answer is obvious. They want the flexibility and income benefits of operating a short-term rental. They can decide when the property is available to guests and they can change their rates based on a variety of factors throughout the year.

In other cases, it will be obvious a long-term rental is the better option. This would be the case if a person didn’t have the time or ability to maintain the property or clean it as frequently as is required with short-term rentals. If you want an income investment that is somewhat more “set it and forget it,” a long-term rental is a better option.

Additionally, you might not have the option of short-term renting in your community. State and local laws vary from place to place and there might even be HOA or condo association issues with short-term rentals. Some neighborhoods aren’t conducive to short-term renting because of the neighbors. Even if you are legally allowed to do it, do you really want to invite the wrath of those living around you?

On the other hand, if you are looking for a rental opportunity that offers flexibility and allows you to create a schedule that works for you. Yes, you’ll be working more on an ongoing basis than you would be if you were dealing with a long-term but you can take your property “off the market” for a period of time and not rent to anyone. You’re able to take breaks instead of being a full-time property manager or landlord. In many ways, you are getting the best of both worlds and you can decide any time to stop listing your property if renting isn’t right for you.

The decision to rent a property as an Airbnb vs Renting to a single consumer really comes down these questions.

  • Do you have the money for an initial investment to furnish the property?
  • Do you have the time to maintain the property between bookings, or hire someone to do the cleaning?
  • Does your property have demand and value for the majority of the year?
  • Most importantly, can you charge enough for your property as an Airbnb that you make enough to cover these costs and still turn a profit?
  • Does local regulation on short term rentals make traditional renting the better option?
  • Finally, is this profit worth the additional time you have invested?

Where do you stand?

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