Should I long term or short term let my investment property?
Find out the pros and cons of different rental options in our article below, or view our video for a quick overview.
Investment property is an excellent way to earn passive income. However, one crucial decision to make as a property owner is whether to short-term or long-term let your property.
Short-term letting, commonly associated with Airbnb-style rentals, can be more profitable, but long-term letting provides a more stable and consistent income stream.
In this blog, we will explore the pros and cons of each option to help you make an informed decision that aligns with your investment goals.
Pros and Cons of Short-Term Letting
Short-term letting has the potential to generate higher rental income. However, it comes with several downsides. Firstly, you will need to renovate and fully furnish the property, which can cost between $15,000 to $50,000 upfront. You will also have to deal with additional wear and tear on the property and more regular maintenance, such as cleaning and resetting Wi-Fi and TVs. Furthermore, your insurance premiums may be higher.
Short-term tenants may require more modern finishes and expect to see a unique style of décor, so it’s essential to consider the style that would appeal to your guests. However, working with a short-term letting provider that manages advertising, payment collection, cleaning, and meeting guests at the property can make the process less time-consuming.
Pros of Short-Term Letting:
Higher Rental Income Potential: Short-term letting can generate more income compared to long-term rentals.
Cons of Short-Term Letting:
Upfront Renovation and Furnishing Costs: Expect to spend $15,000 to $50,000 to get the property ready for guests.
Increased Wear and Tear: More guests mean more usage, leading to additional wear and tear on the property.
Regular Maintenance: Frequent cleaning and resetting of amenities like Wi-Fi and TVs are necessary.
Higher Insurance Premiums: Insuring a short-term let property often costs more than a long-term rental.
Expectation for Modern Finishes and Unique Décor: Short-term tenants usually look for properties with modern amenities and a distinctive style.
Management Assistance: While a short-term letting provider can handle advertising, payment, cleaning, and guest interactions, making the process easier, it also implies reliance on their services.
Pros and Cons of Long-Term Letting
Long-term letting provides a more consistent income stream and stable occupancy rates. Tenants are typically responsible for their utilities and contribute towards maintenance costs. However, the rental income from long-term tenants is generally lower than that of short-term tenants.
While a long-term rental property doesn’t require frequent renovations, you may need to set aside funds for occasional maintenance and upgrades. Long-term tenants also have more rights than short-term tenants, so it’s essential to ensure that you have a solid lease agreement in place.
Pros of Long-Term Letting:
- Consistent Income Stream: Offers a steady flow of income with stable occupancy rates.
- Lower Maintenance Costs: Tenants often pay for their utilities and contribute to maintenance expenses.
- Less Frequent Renovations: Not required to renovate the property as often, saving on costs.
- Tenant Rights: Having a solid lease agreement ensures clear terms and conditions, protecting both landlord and tenant.
Cons of Long-Term Letting:
- Lower Rental Income: Generally, the income from long-term rentals is less than what you can earn from short-term lettings.
- Occasional Maintenance and Upgrades: While not as frequent, you’ll need to budget for periodic maintenance and property upgrades.
- More Tenant Rights: Long-term tenants have more rights, which can sometimes make the eviction process or deal with problematic tenants more challenging.
Deciding Between Short-Term & Long-Term Letting
Ultimately, the decision to short-term or long-term let your property comes down to personal preference and investment goals. If you’re looking for a stable income stream with lower input, a long-term lease is a better option. However, if you’re willing to invest in the property upfront and take on additional responsibilities, short-term letting can be more profitable.
Contact Porters House to Discuss Your Options
If you’re considering purchasing an investment property or need advice on whether to short-term or long-term let your property, Porters House can help. Our expert team provides tailored advice to help you make informed decisions that align with your investment goals. Contact us today for a consultation.