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Short Term Rental vs Long Term Rental in the US

short term rental vs long term rental in the US

Key Takeaways
  • If you’re a traditional landlord in the US looking to increase your income, short-term rentals could be the solution you’re looking for. However, as an Airbnb host, it’s essential to do your part to make your short-term rental profitable. One effective way to do this is by incorporating data analytics into your rental strategy. By analyzing market trends and pricing, you can charge a competitive nightly rate and attract more guests.

Introduction

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.

Differences between Short Term Rental Vs Long Term Rental

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. 

Rental Regulations in the United States

Tenant’s Right

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.

Airbnb Regulations

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.

Advantages of Long-Term Rentals in The United States:

Below are the advantages of operating a long-term or traditional rental property in the United States:

• Strong population – With over 334 million residents, the United States is the third most populous country in the world. This fact alone can guarantee landlords a strong market demand for long-term rental properties. In 2022 alone, the US population rose to 0.4% – indicating recovery from the COVID-19 Pandemic.

• A steady stream of income – You are ensured to have a steady and regular monthly income immune to erratic economic conditions. The average monthly rent in the United States is $1,702.

• Steady operating costs – You do not need to shell out money upfront for furnishings since the tenants will most likely have their own.

Laid-back management – You will have less interaction with your tenants, and you do not need to be hands-on with managing your property. This is risky, however, since damages on the property can get worse if they’re left unattended. 

Advantages of Short-Term Rentals in the United States:

On the other hand, here are perks that short-term rentals can offer to Airbnb hosts in the United States:

• Strong travel and tourism industry – The tourism sector in the United States produced an economic output of $1.9 trillion, providing employment to 9.5 million Americans and contributing 2.9% to the country’s GDP. The United States is the country where international travelers spend the most, accounting for 14.5% of international travel expenses worldwide.

• Flexible pricing – You can adjust the nightly rate depending on seasonality or market demand.

Experience managing the property – Building connections with people by hosting different guests. If this is not your thing, you can still manage the property remotely via automated management tools.

Feel more control over the property –  Since guests only stay in for a limited time, you can easily make changes to your property. Without getting worse, any damages can be repaired in no time and also be covered by Airbnb insurance.

US Rental Markets

To know which setup can yield more returns to property owners, here is a view of various US rental markets with their respective average yields from both short-term and long-term rental properties:

1. Los Angeles 
  • Median Rent: $2,995
  • Existing Airbnb listings: 2,543
  • Airbnb annual revenue: $42,474
  • Airbnb occupancy rate: 79%
  • Average daily rate: $142
2. Seattle
  • Median Rent: $2,995
  • Existing Airbnb listings: 4,057
  • Airbnb annual revenue: $47,368
  • Airbnb occupancy rate: 81%
  • Average daily rate: $145
3. Houston
  • Median Rent: $1,800
  • Existing Airbnb listings: 7,591
  • Airbnb annual revenue: $21,399
  • Airbnb occupancy rate: 48%
  • Average daily rate: $111
4. Boston
  • Median Rent: $3,225
  • Existing Airbnb listings: 2,141
  • Airbnb annual revenue: $51,653
  • Airbnb occupancy rate: 77%
  • Average daily rate: $185
5. Detroit
  • Median Rent: $1,200
  • Existing Airbnb listings: 998
  • Airbnb annual revenue: $20,285
  • Airbnb occupancy rate: 44%
  • Average daily rate: $121
6. Portland
  • Median Rent: $1,775
  • Existing Airbnb listings: 3,221
  • Airbnb annual revenue: $36,749
  • Airbnb occupancy rate: 81%
  • Average daily rate: $112
7. New Orleans
  • Median Rent: $1,802
  • Existing Airbnb listings: 5,707
  • Airbnb annual revenue: $46,797
  • Airbnb occupancy rate: 65%
  • Average daily rate: $186
8. Phoenix 
  • Median Rent: $2,100
  • Existing Airbnb listings: 5,560
  • Airbnb annual revenue: $40,585
  • Airbnb occupancy rate: 64%
  • Average daily rate: $158
9. Austin
  • Median Rent: $2,326
  • Existing Airbnb listings: 7,768
  • Airbnb annual revenue: $45,655
  • Airbnb occupancy rate: 65%
  • Average daily rate: $181
10. Richmond
  • Median Rent: $1,499
  • Existing Airbnb listings: 588
  • Airbnb annual revenue: $38,656
  • Airbnb occupancy rate: 76%
  • Average daily rate: $128

Conclusion

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.

Be on Top of Your Airbnb Market &
Make Your Property Investment Recession Ready!

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