You are currently viewing Short-Term vs Long-Term Rentals: Why Less Can Earn You More

Short-Term vs Long-Term Rentals: Why Less Can Earn You More

The short-term property rental sector is blowing up and leaving lots of homeowners and property managers scratching their heads wondering why so many people are willing to deal with the headache.

Renting short-term is, no doubt, a ton of work. With new guests coming in and out all the time, a (hopefully) constant stream of inquiries to address and regular cleaning and preparation tasks, it may seem like a no brainer to choose the much more hands-off option of long-term renting.

In truth, however, both options present their own unique challenges and rewards, and all property managers need to be aware of both before deciding which route is right for them.

As we’ve already touched upon briefly, short-term rentals involve a lot of turnover.

This means screening guests and approving requests as frequently as every few days. It also means having less time and opportunity to get to know the people you are entrusting with your property, even if for just a short while.

Then there’s the logistical side of it – arranging key exchanges, keeping track of contact details, organizing your calendar to avoid vacancies and double bookings, and adjusting your price points to optimize revenue.

Additionally, choosing to rent short-term leaves you with the responsibility of cleaning and maintaining the home between visits as well as regularly stocking up on essentials that guests will expect access to throughout their stay.

But of course, all of this is dependent on you securing the guests in the first place, which requires strategic marketing and continuous efforts.

View from behind of hands wrapped behind head of two ladies relaxing on the couch considering whether to rent their extra property out on a short term or long term basis.
Rear view of female roommates relaxing on couch in living room. Back view of young lesbian couple enjoying weekend at home. Real estate concept

The Ball and Chain of the Long-Term Rental

Committing to one tenant for an extended period of time may do away with a lot of the work involved in recruiting, impressing, and preparing for an endless parade of travelers, but it also means that you may find yourself stuck in a binding contract when things aren’t ideal. For this reason, the process of finding the right tenants for your home is often long and draining. While temporary guests may not always be the most courteous, short-term property rental managers can breathe easy knowing their stay will be brief.

A second challenge is that opting to rent your properties long-term forces you and the homeowners who’ve hired you to give up a lot of control over their premises. Whereas short-stay rentals can be inspected and accounted for between every guest, long-term rentals must be handed over and entrusted to renters for months at a time, if not years.

Generally, long-term tenants also expect to be given certain freedoms with regard to the design of the property as they will be calling it home for quite a while. Some homeowners prefer to call all the shots when it comes to the aesthetic arrangements of their rentals.

Moreover, while short-stay rentals can often be reserved by their owners for a visit here and there, allowing them to enjoy the accommodations when they like and profit from them the rest of the year, long-term rental arrangements obviously don’t provide that luxury.

The Tiebreaker

Of course, every con of one option is a pro of the other.

The hassle of communicating with new guests on a regular basis disappears when you rent long-term.

The fear of handing over your properties and relinquishing control over them for as long as a year is non-existent when you choose to go the short-term route.

If it seems like a toss up that can go either way, depending on which challenges the property manager finds more daunting, that’s probably because we haven’t gotten to the tiebreaker.

There is a notable discrepancy between long and short-term rentals when it comes to the ultimate variable, the one that likely holds the most weight for anyone in the business world – earning power.

The fact of the matter is, buying in bulk is always cheaper, and long-term rentals are essentially the “wholesale” of the real estate market. As vacation rental stays are short-lived, one-time expenses, it is acceptable for them to be significantly inflated.

Coins stacked to create a graph that builds to a glass jar filled with coins representing the income from renting out your property on a short term basis.

How significantly?

According to The Telegraph, short-term rentals can bring in around 30% higher profits than long-term lets.

But the potential is greater than even that. Reports have indicated that the same property that can bring in R10,000 dollars a month when rented long-term, can yield as much as R30,000 dollars when rented out to a collection of guests in short spurts.

Yep, you read that right. That’s more than double the revenue. That’s a difference of R240,000 a year!

Yes, short-term property rentals inherently require more frequent involvement, but the extra profit is well worth the investment, especially with so many effective tools out there to automate your tasks and make the entire management process smoother.