A Rental Property Investment Comparison: Long-term vs. Short-term

How often do you think about the best ways to make money? How often did you consider investing in rental property as a solution? If you keep coming back to purchasing rental property as an option, there are several things you must first consider. Among the most important things to consider is: Which type of property rental will provide better return on investment; long-term rentals or short-term holiday home rentals??

Unfortunately, as with most major questions in property rental, this one does not have a straightforward answer. There are many factors that must be considered. In order to help you make your decision as a rental property investor, we have prepared for you a list of the benefits of both rental strategies.

The Benefits of Long-Term Rentals

  1. There will always be demand

Regardless of the location and the time, people will always need places to live. As many housing markets are too expensive for ordinary people to buy a home, these people turn towards rental properties and become your tenants. This means that there will always be demand for traditional rentals, regardless of the location and regardless of the time.

  1. The vacancy periods are lower

If you own a long-term rental, you’re set for the next few months or even years once you find your tenants. Vacancy rates for traditional rentals are generally low because these properties are rented out on a monthly basis, unlike short-term holiday rentals which are rented out on a nightly basis. As a landlord and a rental property investor, unoccupied property is a less favorable outcome as every moment of vacancy means that you’re losing money. Mortgage and insurance payments, taxes, and maintenance for your property will not cease or be placed on hold just because the property is vacant.

  1. There are few legal issues

Reasonable landlord-tenant legislation exists to protect the rights of both groups accordingly.

 

The Advantages of Short-Term Rentals

  1. There is more flexibility

With short-term holiday/vacation rental properties, you gain more flexibility as a landlord and a rental property investor. These rentals can serve a dual purpose. You can use them for your own family holiday and rent them out on a short-term basis for the rest of the year. In this way, you can enjoy your holiday from the comfort of your second home and make money as a rental property investor.

  1. There’s an easy entry into rental property investing

While it’s true that long-term rental property gives you many opportunities to build wealth, this option wouldn’t suit everybody. Some people just don’t make good landlords for all sorts of reasons. With a short-term holiday home rental, you can give rental property investing a try, and if you decide that this business is absolutely not the right thing for you, you’re left with a second home which you use for your own purposes. On the other hand, if you decide that you were indeed suited to be a landlord, you can look into options to expand your rental property investment portfolio to include more short-term and long-term rentals.

  1. Property management gives you the option of a hands-off experience as a landlord

As we mentioned earlier, some people simply wouldn’t make a good landlord. Property management tailored for short-term holiday letting gives you an easy way to be a rental property investor without having to deal with the hassle. You can leave all aspects of managing your holiday home to the professionals while enjoying your passive rental income.

  1. Short-term holiday lets tend to make more money

Each market is different, but when you cut to the chase, holiday home rentals generate more income than long-term rentals. Even if they’re not occupied all the time, the nightly rate for short-term holiday home rentals is typically high enough to bring more cash flow to rental property investors than that of traditional rentals. Since your ultimate goal as a rental property investor is to make money from your rental properties, the rental income is the most important advantage of short-term rentals over long-term rentals.

What Do the Numbers Say?

Don’t just take our word for it. As a savvy rental property investor, you should dig through the data to make a conclusion on your investment decision.

Below you’ll see the monthly rental income for 10 of the hottest Dublin properties in 2017 based on data from AirDNA, an advanced rental property analytics tool. We’ve also included the highest and lowest average monthly income for long-term rental properties in Ireland. From the example, the average annual income for a long-term rental property is €11,832.

 

 

As you can see, short-term holiday rentals produced significantly higher rental income than long-term rentals in Dublin.

In Conclusion

Short-term holiday home rentals have tended to provide better ROI than traditional long-term rentals in the form of monthly rental income, as well as cash on cash return. Just remember to conduct careful comparative market analysis and investment property analysis, or check with the experts, before you buy your short-term rental property in order to be sure that you’re choosing the optimal rental strategy.

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