Long-term vs. Short-term rentals. Pros and Cons

Data: 2017.03.25

Short-term rentals are based on a daily rent fee and usually last no longer than a week, whereas long-term rentals typically have monthly rent fees and tenants stay in the properties for years. There are many other differences between these two rental types, so in this blog I will cover the key points.

Long-term Pros

Consistency. The property owner or manager is assured of receiving the agreed amount of money every month. It is very important for companies to receive all budgeted income, as it is then easier to plan expenses and make other important business decisions.

The possibility of charging a high security deposit. Property managers can take a security deposit at the beginning of the contract to be sure that damage done to the premises will be covered. Usually the security deposit is returned to the tenant during move-out, or tenants simply don’t pay rent for the final months of the rental period.

Utilities can be charged to the tenant. In addition, rental fee tenants are usually charged for utilities and other maintenance costs. Direct utilities such as electricity or water can be calculated based on meter readings. Other costs such as cleaning, maintenance, and security are usually distributed to the tenants based on the area of their premises. Property managers can be sure that everything they pay out to maintain the property will be charged.

Long-term Cons

Less flexibility. Since the premises are rented out for a long period, property owners cannot use those areas for other purposes or carry out major changes. Everything needs to be planned very carefully, because later it can be very hard to find a compromise among several tenants.

Difficulty of finding a good tenant. Before renting the premises for a long period, property managers need to be sure that the tenant is a good fit. Checking a potential tenant and gathering references may take much time and effort.

Less control over the premises. When a tenant comes to premises for a long period he wants everything to conform to his needs. Furniture, design and similar items are usually changed with each change of tenant.

Short-term Pros

Flexibility. The property owner or manager can just stop renting the premises whenever he wants. This allows for some maintenance work to be done, or the property manager can just use the property for his own needs and then start renting again for tenants.

Higher income. Short-term rent fees are higher than for a long-term lease. If the property manager doesn’t have many vacant days for the premises, the earnings will be significantly higher.

Easy to rent. It is much easier to rent premises for a short term. There is no need to make any changes to the property before move-in. Usually premises are rented instantly without any tenant checks or other references.

Short-term Cons

Management. Short-term rentals are harder to manage, due to frequent tenant changes, cleaning and administration. The property manager has to be on the job every day in case the tenants need something. There should always be someone on duty to let tenants in and out. Short-term rentals can be hard work, so the property manager needs to have the right tools.

Maintenance. If one doesn’t want to receive negative reviews, then the premises need to be well maintained. Regular cleaning, gardening, paint fixes, care of electronic devices – everything is the property owner’s responsibility.

No guaranteed income. Despite the fact that the rent rates are much higher than for a long-term contract, vacancies are also higher and the property manager cannot be sure that he will have a tenant during subsequent periods. This may not a problem during the peak season, but at other times of the year the manager must work hard to find enough tenants. This might lead to reducing the rent, so a consistent budget may well be impossible.

What is your experience with short- or long-term rentals? Do you agree on the points above? Let me know your opinion or challenges with one or another rental and I might be able to help you overcome them with the right tools at info@soft4realestate.com.

SOFT4, as a provider of a software solution for commercial property management, is constantly releasing blog articles about how to meet and cope with  trends, tendencies, and challenges, and giving suggestions as to how to react to the changing environment in order to stay competitive.

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