Short-Term Vs Long-Term Rental Making Informed Choices
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April 4, 2023

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As you consider your options as a real estate investor, one question will immediately move to the forefront: Should you consider a short-term or long-term rental properly?

Short-term rentals: investor profiles

If you like high-stakes, action-packed, and management-heavy investing (all for more profit), vacation rental investing could be for you.

1. The cash-flow investor

Money, money, money—you’re an investor who wants to maximize cash flow, even if it means more management and more risk.

If you’re willing to put in the work, a short-term rental can reward you with almost immediate cash flow.

2. The full-time, hands-on investor

Some investors like to be hands-on at all times. Others, not so much. If you fall into the former category, a short-term rental is the right choice. This gives you the opportunity to focus as much time and energy as you want on your property.

3. The eternal marketer

Many rental property owners enjoy marketing their properties more than any other facet of the job. As a short-term rental owner, it’s crucial to market your property with the goal of keeping it occupied for as many days as possible.

4. The creative investor

Short-term rental properties allow you to think outside the box. Perhaps you have a treehouse to rent. Or maybe a tiny home on an expansive farm. You can consider buying unique properties that the typical landlord wouldn’t touch. If you have an “out of the box” property, turn it into a short-term rental.

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5. The flexible investor

You enjoy the fact that tenants are only in your property for a short period. This gives you flexibility in regards to how much you charge and making changes to the property. If you feel you may want to sell the property on a whim, this may also be the right option for you.

Get pre-approved for an STR loan.

Long-term rentals: investor profiles

If you like stability and predictability, and less management and risk, you might fit the long-term property investor profile.

1. The “set it and forget it” investor

Let’s start here: There’s no such thing as completely passive income when you’re a landlord.

However, you can get close to that goal by purchasing long-term rentals and hiring a qualified property management company. The drawback is that you’re likely to sacrifice cash flow.

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2. The risk-averse investor

Imagine these scenarios.

Scenario #1: Every two to three years you have one highly trusted and vetted tenant on your property.

Scenario #2: Every month, tenants check in and check out.

Which one sounds like more of a risk? Risk of property damage. Risk of being sued.

Even barring the worst-case scenario — such as a serious injury or act of violence — there’s always a better chance of a lawsuit with short-term rentals. This is due simply to the number of people coming in and out of the property.

3. The long-term income investor

Do you have your sights set on the future? Are you hoping to use your rental income to live a more comfortable life in retirement? A long long rental property can help you fulfill that goal.

Let your rental property (and tenant) grow with you. While your property appreciates, you can continue to collect monthly rent checks. Upon retirement, you’re left with the following:

  • A property that is worth more than when you purchased it
  • A monthly income to supplement retirement cash flow

4. The hands-off investor

After purchasing a property and bringing it up to speed, you’re ready to take a step back. You have no desire to make continual improvements. Instead, you want to maintain the property, keep your tenant happy, and collect monthly rent checks.

A long-term rental allows you to take a hands-off approach.

5. The cost-conscious investor

It’s important for all investors to take a cost-conscious approach to property management. It’s easier to do so as a long-term rental owner thanks to lower operating costs and tenant stability.

Compared to short-term rental properties, you can expect lower costs due to fewer inspections, maintenance requests, and cleanings.

Submit your long-term investment property scenario.

Short-Term vs. Long-Term Rental Investor: Where do you fit in?

With those 10 profiles in mind, think about where you fit in as a real estate investor.

There’s a good chance that you align with several of these profiles. There’s nothing wrong with that. It means that you have options, and that helps you make an informed decision on where to spend your money.

It’s not critical that you place yourself into one of these investor profile “buckets.” However, you should use these profiles to better understand if you’re best suited as a short or long-term rental investor.

Get approved for your short- or long-term rental loan.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.

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