Long-term vs. short-term rentals: Which is right for you?

If your second home is currently sitting empty and not generating income, you’ll soon come to a crossroads. Should you rent it out to tenants as a long-term rental? Or to travelers as a short-term rental? Both can seem appealing at first glance—one is more lucrative, the other generally provides more constant income.

Determining which type of rental is the best fit for your financial and lifestyle goals takes further review. Don’t worry, we’re here to help. We’ve examined the perks and drawbacks of both rental strategies for you.

What is considered a short-term rental (STR)?

Short-term rentals, often referred to as vacation rentals, are furnished residences generally rented out to travelers looking to stay anywhere from one night to one month (depending on your market). Guests typically book these rentals for a few days. People are drawn to vacation rentals as an alternative to hotels primarily for the increased space and for the residential conveniences, like a kitchen and a washer/dryer.

Advantages of short-term vacation rentals

High profit potential

Vacation rentals can be lucrative. Especially if you charge the right rates at the right time. This is one of the biggest benefits of short-term rentals—the flexibility to align your nightly rates with demand. For example, special events, high season, and weather can all be reasons to charge higher rates. At Vacasa, our revenue analysts update our homes’ rates daily to match future demand, so you can effortlessly capitalize on those peak periods. Long-term rental leases, on the other hand, usually cap your earnings and lock you into a set rent amount month after month.

You decide when to rent and when to stay

Since guests only stay for short bursts of time, you’ll have more flexibility to book your own personal vacations at your property or have an impromptu getaway when there’s a gap in reservations.

You can block off periods on your calendar as much or as little as you like with Vacasa. In other words—stay when you want, rent when you don’t. In comparison, your long-term rental is off-limits for personal use. Once your renter has moved in, it’s their home for the entire lease term.

Less wear and tear

A great upside to using your home as a vacation rental is that guests don’t occupy your home on a daily basis. So, it can take much longer to build up any noticeable wear and tear in your home. Long-term renters live in your property day in and day out, usually leaving your home in need of more maintenance and repairs from overuse.

Hands-off ownership

It’s easier now more than ever to own a vacation rental and successfully rent it out without lifting a finger. You can use smart locks in lieu of handing off keys, and smart thermostats to set temperature and save energy.

For a truly hands-off experience, work with a full-service vacation rental management company like Vacasa that will handle it all for you—cleaning, marketing, setting rates, 24/7 guest service, and more.

Challenges of short-term rentals

More maintenance and upkeep

Today’s travelers are vocal. They won’t hesitate to post reviews complaining about dirty floors, broken air conditioners, or threadbare towels. So regular upkeep and cleaning between stays is vital to your review scores and future success.

At Vacasa, we provide professional housekeeping at no extra cost. If homeowners opt in to our Linen Program, we’ll also stock their home with hotel-quality towels and sheets, and replace them when needed. Plus, our local teams will coordinate maintenance and repairs on your behalf.

Fluctuating income

Your vacation rental bookings will depend on the on and off seasons of your destination. While you can adjust rates to compensate for a slow season, rental income isn’t guaranteed.

However, there are ways to help increase your off-season bookings, like installing a hot tub.(Winter temperatures and outdoor hot tubs are a perfect match for guests—plus you can earn 15–20% more in rental income.) If you market your vacation home yourself, you can also try sending promotions to your email list ahead of time, and actively posting content on your blog and social media channels to stay top-of-mind all year round.

https://www.vacasa.ca/property-management/hot-tub-installation-maintenanceToo many responsibilities

Owning and managing a vacation home can require a lot of work. Marketing, cleaning, responding to guests, keeping up with all your listings online, constantly setting rates to match rental market demand, conducting repairs—it can quickly become overwhelming.

That’s why savvy homeowners choose companies like Vacasa to take care of everything. With Vacasa, your vacation home can potentially become a hands-free investment, as you’ll now have a team of vacation rental pros working on your behalf.

Confusing short-term rental regulations

Before using your second home as a short-term rental, check if they’re allowed in your local jurisdiction to begin with. Some municipalities frown on them and impose various restrictions, such as capping how many total days you can rent out your home. Certain locations ban short-term rentals completely, while others are more flexible.

What we’ve found in our years of working in the vacation rental industry is that every area is different. And short-term rental laws and restrictions continue to change. We help our vacation home owners navigate any regulations and necessary permits. If you’re in the market for a short-term rental, we publish an annual list of top destinations to buy a vacation home (where vacation rentals aren’t just legal—they’re flourishing).

What is considered a long-term rental (LTR)?

The definition of a long-term rental varies significantly from state to state. In some locations it can mean a lease term of at least 30 days, while in others it refers to stays of 180 days or longer. One-year lease terms are most common for long-term rentals. Let’s take a look at both the upsides and downsides to investing in long-term rental properties.

Advantages of long-term rentals

Reliable income

Slow and steady—that’s how you’ll earn income with long-term rental properties. Usually, you’ll collect monthly rent with little effort, no matter the season. Consistent income is the biggest benefit to renting your second home to long-term tenants. Plus, residents usually pay for their own utilities, such as water, gas, electric, and WiFi.

Less to manage

Once you find a tenant for your long-term property, there is little left to handle. You no longer have to market the property, clean it regularly, or prepare it to be rented. For the most part, long-term tenants take care of their own bills, plus some of the upkeep of the property. Generally, you’ll only have to step in to address repairs and home maintenance projects.

No need to furnish

Long-term residents generally expect to bring in their own furniture and make the space their own. This counts as a big cost savings, since you don’t have to invest in furnishing your entire home.

You can collect a security deposit

It’s common for long-term rental landlords to require a security deposit before tenants move in. This can ease any worries you have about damage to the property. Tenants can generally get their full security deposit back once you’re sure no damage was left behind and the property is in the same condition as when they moved in.

Less turnover

Long-term tenants typically secure a year-long lease. This means you don’t have to worry about finding new tenants, doing security checks, or handing over keys until that rental agreement expires.

Challenges of long-term rentals

Less income potential

The biggest disadvantage to long-term rentals comes down to this—weaker earning power. With long-term properties, you can’t adjust rates throughout the year to match demand or peak season. In short, you set rates, then forget them.

Plus, long-term residents expect to pay much less than a traveler would on their vacation. A one-bedroom property that’s currently renting for $1,000 a month could potentially garner hundreds of dollars a night as a vacation rental (depending on location, amenities, and demand).

No personal use

With long-term rentals, you sacrifice using your property as your personal vacation spot. Goodbye, birthday celebrations at your beachfront condo. Farewell, impromptu getaways to your mountain cabin. Once you take on a new tenant, that property is off-limits to you, except to conduct repairs or maintenance.

You have to relinquish control

Renting long term means trusting one tenant for the long haul. And you’re no longer calling the shots. Want to check for any messes or property damage after neighbors complain of a rowdy party? You generally have to give your renters notice before showing up. Need to kick out a difficult tenant? Evictions (and possible arbitration) could possibly take longer and cost more in legal fees and lost rent than you anticipate.

In comparison, renting in short bursts to vacation rental guests means you don’t make any long-term commitments—and you can use the pauses between guests to inspect, clean, and account for everything.

Finding the right tenant can take time

Posting Craigslist ads, background checks, and endless back-and-forth communication... That’s just a fraction of what it takes to secure a long-term tenant. Even after they’ve signed a lease, there’s still the possibility you’ll feel locked into the contract when things aren’t ideal. If you rent your vacation home with Vacasa, our team will vet your guests quickly behind the scenes.

Higher risk of damage

Long-term renters generally live on your property full-time and could cause more damage and wear and tear over time than guests only staying for a few days. Since you can’t access your long-term rental as easily, blinds could be broken or rugs stained for months before you ever find out.

At Vacasa, we have housekeepers and local property managers who inspect and survey your vacation home after every stay, taking stock that everything is still in great condition and in place.

What about mid-term rentals (MTR)?

In many areas, a mid-term rental is longer than a short-term rental, but not quite a long-term rental.

Mid-term renting could be the right fit if you’re looking to rent your vacation home for a season or two, but want to keep it open for yourself the rest of the year. Your options could include finding a tenant to rent your snowbird property on the Gulf Coast for the whole summer, or renting out your mountain cabin for the winter season.

Many of the benefits and drawbacks of mid-term renting overlap with either short-term or long-term renting. For instance, you’ll most likely still need to furnish the home, but the rental income is more consistent during the fixed lease period.

Looking for the right partner to maximize your short-term rental income? Reach out and we’ll connect you to your local Vacasa expert.