Airbnb Vs. Long-Term Rental: Which One Is More Beneficial?

Marco Green
October 22, 2020

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Property owners quite often search for the most profitable ways to rent their property out. For real estate investing, a vacation rental is compared to a long-term rental, the pros, and cons of each option, as well as opportunities and risks. 

The basic things to consider before entering any of these markets are the following:

  • Supply - analyze competitors, the dynamics of the pricing, find out if an offer like your popular or in short supply. 
  • Rates - simple calculations will help you realize the expected income.
  • Target Audience - who are your potential tenants or guests, what is important to them, how much they are ready to pay.
  • Profit vs Expenses - you can also make rough calculations to understand if your market rates are optimal or they have room for growth.

The main benefits of the Airbnb business

Airbnb offers a great number of opportunities: you can rent out a house, a part of the house, or a room. You can make your property available only several days a month to make the Airbnb short-term rental business a source of additional income or make it your full-time job. 

Other benefits of Airbnb rental include the following: 

  • Flexible terms and flexible pricing - you can set flexible rates to meet the demand, react to a growing market, or improve the booking rate. You can activate and deactivate your listing anytime and select only guests you trust. 
  • Experiences and adventures - for hosts, who enjoy being involved there is a separate Experiences section on Airbnb. You can include additional services, like sightseeing tours, transfer or delivery to gain more profit and make the stay more comfortable for your guests. For example, some hosts offer cooking or gardening classes, extreme tours, pub crawling nights, and so on. 
  • Secure mediation and Host Protection - hosts can feel safe for their property due to the availability of reviews about guests and the insurance protection for hosts. The maximum refund amount is $1 million.
  • Free listings - any host can add their property to the Airbnb catalog free of charge. However, the platform charges a 3% fee for processing the order. 

Difficulties and risks of the Airbnb business

While Airbnb offers hosts a lot of flexibility with their listing, there are some drawbacks

  • Risks of damages - despite having insurance protection from losses and damages caused by guests or external factors, property damage is great stress. The process of coverage is time-consuming, too.
  • Unstable income - a general problem for most property owners is that the income-earning potential is not always realized in full. The booking rate can be inconsistent depending on the season, location, culture, and entertainment events or sudden game-changing factors, like the COVID-19, for example.
  • Compliance of Airbnb rules to the local legislation - in some countries the laws regulating the short-term rental are stricter than those listed on the Airbnb platform. Make sure you study both. 
  • Maintenance efforts and expenses - renting out property on Airbnb, you should be ready to deal with cleaners, maintenance staff, and calendar scheduling. It requires extra time or extra costs, so it should be considered as well (more about this service on https://masterhost.ca/airbnb-cleaning/).

Key pros of a long-term rental

If you are searching for a stable source of income, which is not likely to skyrocket and hardly depends on your efforts, you may choose a long-term rental. It works as a passive investment strategy, and definitely has certain benefits:

  • Fewer duties - hosts do not need to spend time or additionally invest in their property in most cases. There is no flow of guests, so you need to find a tenant, sign an agreement, and get paid monthly. 
  • Consistent income - you can plan your income in a mid-term perspective to understand your financial status and opportunities. Your income doesn’t depend on the season, you get guaranteed year-round financing, although it may not reach the potential of a vacation rental. 
  • Favorable taxation - keep in mind that income earned from Airbnb short-term rental is taxed as any other income you get. For long-term rentals, the taxes are usually lower. 

Major cons of a long-term rental

With consistency and stability on one hand, on the other hand, the long-term rental investment is less flexible and tends to be lower. Other cons of a long-term rental in comparison to Airbnb include these:

  • Being under the lease agreement - such an agreement imposes terms and responsibilities on the property owner, including such things as the amount of payment and the term. Hosts should be ready for limitations associated with such conditions because they cannot get rid of their tenants overnight if they decide to. 
  • Tedious eviction process - while your rights are as protected as the rights of your tenants, in case you want to get your property free you will undergo the eviction process, which is nervous, time-consuming, and quite costly.
  • Additional costs for property management - to avoid any tasks related to long-term rental, some hosts can hire property managers, which leads to additional expenses. 

Final Takeaways

The answer, what is more profitable: Airbnb business or long-term rental, significantly depends on such factors as location, the involvement of the host, season, and plans. Carefully compare the pros and cons of each option to decide, which one matches your expectations better.

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