So you own a property, multiple properties or are thinking about buying one? That’s great! You are on a path to investment that will likely continue to benefit you for years to come. But how do you know what to do with your property once you have it? What is the best option? Short-term Airbnb type rental? A traditional long-term lease? What do you do?
Right out of the gate I want to say that there are a lot of factors that go into determining the success of any rental, short- or long-term. You need to consider aspects like location, marketing strategies and the time that you’re willing to invest. For instance, in high tourist areas it might make more sense to Airbnb, but a more residential suburb may have you leaning more toward a long-term strategy. With that in mind, obviously you know your property much better than I do. You alone will be the best judge of what rental strategy is the best for you. But, I will be happy to provide input and help you make the decision.
There are considerable benefits as a landlord to using Airbnb to rent out your property. The first and most obvious one being that you can charge significantly more for an Airbnb compared to a traditional long-term rental. A good analogy for this difference would be if you think about purchasing candy bars. If you go to a wholesale retailer (Costco, Sam’s Club, etc) you can purchase a large number of candy bars for a lower price per candy bar than if you went to a regular store and purchased the same number of candy bars individually. It is a classic scenario of paying less per unit but spending more overall. In this case, the long term renters are interested in the bulk candy purchase and the short term tenants are only interested in a single candy bar.
From a consumer point of view, the average Airbnb user is interested in avoiding the high costs of hotels while enjoying the amenities of a real home. In comparison, a long term tenant is interested in finding a place that they can enjoy every day, not just a place that feels comfortable for a few nights. To go back to the candy analogy, the short term renters are the people who decide that they are going to bring their own snacks (the candy bar that they bought at the grocery store) into the movie rather than buying snacks at the movie theater snack-bar. Both the seller of the candy bar and the consumer of the candy bar benefit in this scenario. The seller is able to charge a higher price for the candy bar than if they were sold in bulk and the consumer is able to avoid the higher prices of the specialty location (the movie theater). Similarly, with short-term rentals consumers are avoiding the premium prices of a hotel, but are not reaping the benefits of the “buy in bulk” mentality that accompanies a long-term lease. Hence, both you and the tenant are maximizing your cash.
What you have to consider as a landlord is if you are more interested in consistent cash flow or the possibility of much greater cash flow. A long-term tenant guarantees that you can depend on receiving a check for the same amount of money each month. Airbnb on the other hand is a little more risky since its short term style means there is no guarantee that your unit will be rented consistently. You will not have the comfort of knowing when and how much revenue you will generate each month. Yet, as I mentioned earlier if you are living in an area where you can be fairly certain that you will have consistent business like a big city or a major tourist destination, then the revenue from a long-term rental does not come close to the revenue from an Airbnb unit.
Another aspect to take into consideration is how involved you want to be with your property. An Airbnb means more involvement simply because the sheer volume of people is so much higher. A long-term rental has one tenant which likely only requires attention once per month (that is a high estimate, I personally have probably called my landlord with an issue twice this whole year). However, an Airbnb has multiple tenants throughout the month meaning that as a landlord you will probably have to be onsite on a much more consistent basis. Some landlords like this, as it gives them a chance to be sure that they are maintaining the property. But, some landlords do not want the hassle that is inherent in Airbnb.
Along with the added time investment that comes with renting your property short-term, you are also adding risk. The more people who rent out your unit the more likely it is that something will go wrong. Think about it, do you treat a hotel the same way that you would treat your own apartment? Would you take a rental car to a car-wash? Probably not and that’s okay because that is one of the benefits of renting short term as a consumer. But, it is also something to consider as a landlord. You will need to make sure that you have good insurance on your property if you are going to rent-short term. In contrast if you go the long-term route you might be able to transfer some of that burden onto the tenants by requiring that they obtain renter’s insurance.
As you can see, there as significant pros and cons to both short and long-term property rental. Obviously I do not have the time in this short article to review all the good, the bad and the ugly that comes along with renting properties, but I hope this short introduction was helpful. Now it’s up to you to sit down and think through your options. How much time you are willing to invest, how much profit you are pushing for, and how steady of an income do you expect? I wish you the best of luck in making this decision. And remember, no matter how you decide to rent out your property we can help. We provide up to date information about average room rental costs as well as other valuable information for both tenants and landlords.
Housing is insanely expensive in many cities around the world. However, some of them, like Hong Kong, compensate for that by having other cheap lifestyle factors, like food or transportation. The Bay Area, on the other hand, does not seem to follow this trend, as not only is the housing expensive, but also other elements like food, entertainment, and transportation. Hence, many of these residents have jumped into the new trend of renting out vacant rooms to offset their costs of living. Therefore, renting out your rooms has its pros and cons, which I am here to explore with you.