short term rental vs long term rental in the US
As a rental property owner in the US, the inevitable 2023 recession has probably caused you to rethink your investment strategy. But don’t worry, we’re here to help guide you through these uncertain times.
Whether you own short-term or long-term rental properties, this article provides you with valuable insights on how to make sound investment decisions. We believe that economic data should not only be accessible to analysts, but also to property owners. By incorporating easy-to-use data analytics, you can maximize your real estate investments and stay ahead of the game during the upcoming downturn.
Let’s first distinguish one from the other. As we all know, long-term rentals have been a traditional form of housing. They are offered to tenants who choose to reside on a property for at least 6 months with a binding lease agreement. Property owners decide to collect a higher rent than the mortgage to generate monthly income that remains unchanged regardless of the ever-changing economic circumstance.
On the other hand, the setup for a short-term rental is renting out a property to visitors or guests for a very short period. It works pretty much like hotels where guests can stay in for only a couple of days. This can viably extend to weeks or even months. Short-term rentals offer a cozy atmosphere as well as significantly cheaper nightly rates compared to hotels. This is why guests keep coming back to short-term rentals.
Since short-term rentals have become widely used all over the world, rental arbitrage is another popular trend. It has given a lot of nonproperty owners a steady stream of passive income by simply re-renting a unit and listing it on Airbnb, VRBO, or HomeAway. This is a wise, effective, and legal income-generating hustle. Just imagine having a side income from a property that you do not own.
Tenants in the United States have certain rights that are protected by law. Landlords should also provide tenants with a written lease agreement that complies with all relevant laws and regulations. This includes clearly stating the leasing period, monthly rental rates, and the names of all tenants.
One of the most important rights that a tenant has is the right to a habitable dwelling. This means that the landlord is legally obligated to provide a safe and livable space, free from hazards like mold, lead paint, or structural defects. If tenants notice any serious problems with the dwelling, landlords should act immediately right after they are notified.
Another key tenant’s right is the right to privacy. Landlords cannot enter the property without the tenants’ permission – except in emergency situations or with proper notice. This means that tenants have the right to enjoy their living space without fear of intrusion or harassment.
For more information, check out the state-specific laws from this blog.
As an Airbnb host, it’s crucial to be aware of the regulations that govern short-term rentals in the United States. Regulations vary by city and state, but some general guidelines can help ensure compliance with local laws. Some cities have imposed restrictions on short-term rentals to protect long-term housing availability. For instance, in New York City, it is illegal to rent out an entire apartment for less than 30 days without the owner being present. Additionally, hosts may be required to pay taxes or fees on their rentals. For example, Chicago mandates hosts to obtain a vacation rental license and pay a 4% hotel accommodation tax.
Hosts must also be mindful of building and safety codes, as they may need to make upgrades or changes to meet local requirements. Being a responsible and considerate host is equally important. It’s essential to communicate clearly with guests, provide them with accurate property information. Hosts should ensure their safety and comfort during their stay. By staying up-to-date with the regulations in the area, hosts can enjoy a successful and rewarding experience on Airbnb.
Below are the advantages of operating a long-term or traditional rental property in the United States:
On the other hand, here are perks that short-term rentals can offer to Airbnb hosts in the United States:
To know which setup can yield more returns to property owners, here is a view of various short-term rental cities in the US with their respective average yields from both short-term and long-term rental properties:
As an investor, you want to make the most out of your capital, which can range from hundreds of thousands to millions of dollars. However, real estate investments can be tricky, with limited options for property optimization. That’s why owners of US rental properties should consider strategizing their rental business to ensure financial security, especially in times of economic recession.
Now that you know the difference between short-term vs long-term rental income, Airbnb is the key to having better returns. But to make it work, Airbnb hosts must also do their part. Incorporating data analytics into your strategy can provide valuable insights for setting the right nightly rates. Fortunately, Airbtics offers macro and micro views of rental markets, enabling you to make data-driven decisions and increase your market rent.
Whether you choose a short-term or long-term rental strategy, ensuring timely rent payments is crucial for maintaining steady income. Many landlords are now exploring how to report rent payments to credit bureau services to encourage on-time payments and help tenants build their credit history. This approach benefits both parties by promoting financial responsibility and reducing the risk of missed payments.
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