Back to All Stories All Stories

Long-term vs. Short-term rental of your property

Pros and Cons of Long-term and Short-term Rental The investment strategy of your rental property really depends on the location. A property in any popular, urban city filled with travelers (business & holiday) and residents will likely benefit more from short-term rentals as the demand will likely always be high and the fees tend to […]

  • By George
  • 3 minutes reading

Pros and Cons of Long-term and Short-term Rental

The investment strategy of your rental property really depends on the location. A property in any popular, urban city filled with travelers (business & holiday) and residents will likely benefit more from short-term rentals as the demand will likely always be high and the fees tend to be higher for short-term guests. Properties in up and coming areas or that are more family-friendly, for instance, may be more appealing to long-term tenants.

Short-term Rental  Long-term Rental 
Pros
  • Higher fees per day (especially during peak seasons or if using dynamic pricing)
  • Better flexibility in occupancy management
  • Less wear and tear or property damage
  • Guaranteed occupancy rate
  • Less guest management and communications
  • Minimal housekeeping and furnishing duties
  • More established legal/regulatory environment
Cons
  • High maintenance services required such as furnishing, cleaning, restocking supplies and 24/7 guest communication
  • Minimal control over occupancy rate (and could easily be influenced by seasonal/external factors)
  • Less legal protection
  • Limited flexibility in property management once occupied
  • Limited flexibility in pricing
  • Higher likelihood of property deterioration and damag
  • Higher cost of booking (e.g., broker’s fee)

How to decide the investment strategy for your property

Now that you know the benefits and risks of each option, you should consider your preference based on a range of factors.

Start with the legal and regulatory environment your property is bound by. Certain locales or buildings could have restrictions on short-term rentals. The state and territory governments and the Federal Government in Australia are still deciding and finessing their positions on the rights of the guests vs. the host.

If both options are viable, then consider the characteristics of the neighborhood. Is it more family-friendly and near a good school? In this case, you’ll be able to charge a higher ongoing rent price to a long-term tenant. Is it a popular tourist spot? In this case, you’ll be able to make a lot more money as a short-term rental.

It also depends on your willingness and availability to dedicate to property management. Short-term rentals require consistent, 24/7 management of guest communications, listing management (pricing optimisation), and housekeeping. Hiring a property manager (link to internal) may be an option but that normally entails giving away 18-20% of your revenue. You may also want to use the property from time to time, in which case, long-term rental doesn’t allow you that kind of flexibility.

You can check pricing and occupancy rate of similar properties to see what your revenue projection will be for each option. For short-term rentals, you can check Airbnb to see how booked similar properties are and what the average daily accommodation fee is (will vary based on ratings, furnishing, etc.). You can also see average long-term rental prices of similar properties and track how fast deposits are being taken. Doing some market research will help maximise your revenue stream and minimise your risk exposure. There are communities of hosts and property owners freely available where you can share insights and guidance. So learn from other property investors!

George

See Profile

SELF MANAGED GUIDES

Overview

Airbnb Hosting 101

You can post either the entire place or part of the property for rent (private room or shared room) on Airbnb. Airbnb will take 3% commission from the hosts and 6-12% from the guests.
Be memorable

Furnishing and Amenities

You want to make sure the guests have access to the bare minimum they would have come to expect nowadays and also deliver pleasant surprises to make their stay memorable in a positive way.
Attract attention

Making a Good Listing

You want to include the photos highlighting the best features of the property but also want to set realistic expectations with the guests.
What to charge

Pricing Strategy

While the maximum and minimum you can charge are likely set by the value of your property (based on size, location, etc.), you have quite more control over the revenue stream than you realise.
Guidelines

Guest Screening & House Rules

If expectations are not clearly set, you can be on the hook for damages caused by guest behaviours not explicitly prohibited by your house rules.
Ratings affect your status

Reviews & Becoming a Super Host

According to the survey, 94% of consumers will avoid dealing with a business with bad reviews. People don’t trust businesses with lower than 4-star ratings. So listings with lower ratings will have to compromise seriously on the price to attract bookings.
Listing occupancy

Maximising Airbnb Occupancy

You want your occupancy rate to be 80% or higher for the next couple weeks and be at about 30-60% for the next 2 months.
What you should know

Insurance & Risk Management

Airbnb offers $1M host protection insurance and $1M host guarantee to almost all hosts globally. The host guarantee is not insurance but a resolution program offered by Airbnb to help hosts in cases of theft or property damages.
Dedicated management

Using Property Managers

Oftentimes property managers will offer a shared revenue model in exchange for full management services. Some (although not a lot) offer a la carte services where a host can cherry pick some key services a property manager can offer.
What is it?

Airbnb Plus & Luxe

Airbnb Plus is an invite-only programme made up of top superhosts and places. Airbnb Luxe, on the other hand, is even more of an elite programme for the most extraordinary homes handpicked by the Airbnb team.
Back to top