Long-Term vs. Short-Term Rentals: What You Need to Know

When investing in real estate for vacation rental purposes, owners have to decide what they want to do with their new home.

Many factors can help owners and managers weigh up whether they should opt for long or short-term vacation rentals. Most of the time, this decision is made easily and depends on the nature of your property itself and what you want to achieve. There are, however, several advantages and disadvantages to these two rental strategies.

If you need help deciding whether short or long-term renting will suit your home best, you’re in safe hands. Sit tight while we outline the pros and cons of both types of vacation rental strategy.

What is a short-term vacation rental?

Before anything else, let’s familiarize ourselves with the definition of a short-term rental.

A short-term rental (commonly referred to as a vacation rental), is the leasing out of a furnished property on a short-term basis. Depending on the owner, rental location and many other factors, these properties are rented by the week or by the night.

Many owners of short-term vacation rentals rent their property for the majority of the year when they are not using it themselves.

They have become a hugely popular alternative to hotels in the last 20 or so years, most notably with the surge of sharing economy websites such as HomeAway, Airbnb and VRBO.

Advantages of short-term vacation rentals

While long-term rentals offer consistent income and are generally easier to manage, there are several advantages to consider a short-term rental instead:

1. Higher rental income potential

Not only can you set fluctuating rates depending on your area’s high and low season, but you can also set a minimum length of stay for your most popular times of year to ensure you receive maximum profits.

2. More flexibility

For owners who rent their properties short term, there is a lot more flexibility involved for you and yours. You can specifically block off calendar periods that you want to keep free for your personal use without inconveniencing anyone.

3. Less wear and tear

In general, vacation rental contract lengths range from a few days to a few weeks maximum. Receiving guests in short bursts like these ensure that guests are simply visiting your property, and so won’t be thinking about redecorating or rearranging furniture.

Short-term vacation rental

4. Tax breaks and deductions

Many vacation rental owners are entitled to certain tax breaks or even deductible property expenses because the property isn’t being let long term. Be sure to check your local authority’s rules and regulations on this.

5. Contribute to the sharing economy

We hear a lot these days about the sharing economy and its positive effects on wider society. By letting your property short term to vacationers, you’re showing that you’re an innovator who is helping contribute to this modern way of living and thinking.

6. Automate property management 

Advancements in technology such as smart apps or smart locks, have made it easier to manage vacation rentals even if you don’t live nearby.

Challenges of short-term vacation rentals

When managing a vacation rental, you will have to consider looking into local laws, property maintenance and slow seasons.

1. More maintenance and upgrades

When your business is vacation rentals, you need to maintain great general upkeep of the property or you could receive some negative reviews. Not only does this include things such as regular cleaning, maintenance such as drain unclogging and paint fixes, it also takes into account changing technologies and modern inventions. You’ll need to update your rental amenities every so often to include all the essentials and more for a pleasant stay – and this can come with a hefty price tag.

2. Not guaranteed income

One frustration many vacation rental owners face is the effect of seasonality on their business. While their high season is fully booked, off-peak bookings are scarce which can ultimately cause them to lose money. While rates can be adjusted to compensate this seasonality (cheap deals off-peak and more expensive during peak times), income and bookings are not always guaranteed.

Dining room short-term rental

3. Competition from surrounding properties

Unlike the housing market, whereby apartments and houses are swamped with interest by renters, the vacation rental or short-term market sees many more homes listed than travelers searching. This may put some owners at a disadvantage (again, depending on location and availability) because competition for vacation rentals could be rife in your area.

4. Too many things to manage

While for some owners, vacation rentals are a retirement hobby-turned-vocation, for others they’re a full-time job. There are plenty of tasks to keep you occupied throughout every guest’s stay. From ensuring calendar availability is correct to facilitate a smooth booking process, plus a simple and easy check-in and check-out, and not to mention cleaners, gardeners and the rest – vacation rentals can be hard work if you don’t have the right tools.

What is a long-term rental?

Unlike short-term vacation rentals, long-term accommodation typically refers to that which is leased for periods of one month or longer. Whether it’s an entire home or just one room for rent, in general, renters pay the homeowner each month and typically take care of other expenses such as utility bills.

Advantages of long-term rentals

There are certain advantages of investing in long-term properties; here are a few of the major advantages:

1. Consistent income

One of the key advantages of renting your property on a long-term basis is knowing that you have a monthly rental income that you can rely on. This can help take the pressure off new homeowners who have a lot of other expenses to worry about. Additionally, long-term renters are generally responsible for paying monthly and quarterly utility bills for electricity, gas, water and even the internet.

2. Easier to manage

Whether you choose to hire a property manager or manage the property yourself, it will require less time than a short-term rental. You don’t have to promote the rental property as much, tackle frequent rental turnover or make sure it’s ready to rent.

3. Less turnover

If you’re renting to long-term guests, you’ll find you’ll have less to worry about when it comes to administrative tasks such as paperwork, key handover, and even marketing. Once your renter signs the lease, you know how long (to a certain extent) you can expect them to stay. You only need to worry about filling the house again once you know it will be vacated.

Long term rental property

4. There may be no need to furnish

Some (though not all) long-term guests come with their furniture in tow. This can make the decision easy if you’re thinking about leasing your unfurnished property. Not only will you have a guaranteed monthly rent payment coming in, but you also won’t need to fork out on new furnishings for your home.

6. You can charge a high-security deposit

If you’re worried about the finer details of renting, such as insurance, rental agreements and security deposits, then there’s no need to panic. For long-term rentals, you can usually charge quite a high-security deposit, which will be returned to the guest at the end of the tenancy unless in case of property damage. These deposits can give owners a lot of peace of mind when it comes to renting out their properties.

Challenges of long-term vacation rentals

Some of the challenges worth noting are less earning potential and higher occupancy rates. Some other cons include:

1. Less earning potential

Vacation rental properties that are rented over a longer period of time are usually discounted by as much as 40%. Charging premium rates for peak season are not always feasible.

2. The owner has less flexibility

Unfortunately, in the world of long-term rentals, there are no spontaneous trips to your mountain lodge or July 4th getaway to your beach hut for celebrations. If you have a tenant in your home, you can’t ask them to leave for a weekend here and there. This can be a huge turnoff for many owners who are renting out their property simply to gain some extra income in the months and weeks it’s not used.

Less control over your rental property

3. Less control over the property

Most of the time, nothing goes wrong during a rental stay. There is, however, a big difference between the short-term and long-term options when it comes to checking up on your property.

For short-term rentals, owners benefit from being able to inspect the property between each guest, to check everything is in working order and that nothing is broken or damaged. For long-term rentals, however, it’s a bit more complicated. You would likely have to give considerable notice (from 24 hours to one week) before dropping by for routine maintenance and security checks.

4. Restrictions in your neighborhood/city

Depending on your property type and it’s location, there will be different laws, restrictions and licenses you need to take into account before leasing it out long term, which can often be stricter and more costly than short term renting.

5. The lengthy process to find the right tenant

When someone is going to stay in your home for a long time, you want to make sure they’re a good fit. But when you consider the time you’ll spend vetting and checking references before drawing up the contract, this can soon turn into a very long process. In contrast, for short-term renting it’s generally a much easier process – especially with tools like instant booking.

What’s the best option for you?

There’s no perfect answer for everyone because what sounds like a con for you, may be a pro for others.

However, the biggest differentiating factor between long and short-term rentals is earning power. What’s more, according to The Telegraph, short-term rentals can bring about 30% higher profits than long-term rentals.

Studies have shown that the same rental property that would bring $ 1,000 a month as a long-term rental, can make three times more when rented out to several guests in short term rents. So you could potentially make up to $ 24,000 more a year with the same property!

Short-term rentals require more overseeing, but the additional revenue is worth the investment, especially with the right vacation rental software to automate your tasks. Short-term renting is a great option to bring more income and flexibility, while at the same time contributing to the collaborative economy, getting to know guests from all over the world and taking advantage of tax breaks.

Overall, there are plenty of benefits to both long and short-term renting, which go above and beyond those listed here.

What do you think about this article?

Show Comments (12)
  1. It makes sense that a long term rental would provide the security of a monthly income to rely on. If the property you owned was a condo vacation rental you could rent it out when you didn’t want to use it and when you did you could just go and live there yourself! It would essentially pay for itself because of the money you would make while you weren’t living there.

  2. If you are not sure you want to remain in the same location or expect future growth or are just unsure about the future of the company then a short-term renting might be the best option.

  3. I like how you said that you can block off calendar periods that you want to yourself. My grandma used to have a house she rented to people, but we were allowed to stay in it. It was a perfect balance.

  4. Short term rentals are usually based on the time length of renting a particular property. Vacation rentals are a kind of short term rental. Also, this has gone as far as even renting out for commercial properties.

  5. I liked that youo said that one thing to look for when you are trying to find someone to rent your vacation beach rental is to make sure that they are planning to rent for a long time so that you have consistency. I have been thinking about renting out my vacation beach home but I have been worried that I wouldn’t be able to find a renter. I would be sure to try to find someone who would be a long-term renter so that I wouldn’t have to worry about finding new tenants.

  6. I appreciate the idea that long-term rentals could handle a larger security deposit. My wife and I have a cabin we only visit during the summer, and we’ve wanted to rent it out during the rest of the year. The main thing holding us back was that we didn’t want to risk it getting trashed while we were gone. Hopefully, that would give us the security to trust a tenant with our cabin.

  7. I think the short term is more income generation, long term rental I guess is for steady income. I am planning to mixed my short term and long term property rentals. This way I have a steady income and higher income too.

  8. I like how you said that rental properties can set a minimum length of stay so that you have an idea of how much money you’ll make from each rental. I think this is also a great way to help people better plan their vacations. They will accommodate their whole trip to fit the schedule of a nice vacation rental.

  9. I have had both. Pre covid ( 2018) I added up the rental income and the subtraction of mortgages / taxes / house insurance/ landscaping/ etc

    The positive cash flow for 12 months vs 12 weeks was 915 vs 925 for 1 year.

    Sooooo for us the short term vacation rental is less work and the same money and we can use it more often.

  10. I like how short-term rentals are a lot more flexible. The last thing I want is to deal with a landlord that is too strict. Vacations change, especially your arrival times so the rentals need that flexibility.

  11. Thanks for explaining how vacation rental contracts last between a few days to a few weeks. I am thinking about going on vacation this summer, but I have yet to find lodging for the summer trip I am planning. I’ll start looking for a vacation rental that I can stay at for a few days.

Your email address will not be published. Required fields are marked *

Ready to take more direct bookings?

No set up fees, no credit card details, no obligation. Try Lodgify free for 7 days.