short term rental vs long term rental in chicago
Key Takeaways:
- For traditional landlords in Chicago who want to up their rental collection, short-term rentals are a way to go. But for it to work, Airbnb hosts also need to do their part. If you’re already a short-term rental operator, incorporating data analytics into your strategy will give you a ton of insights when it comes to charging a nightly rate.
Introduction
Pundits have declared that the 2023 recession is inevitable. As someone who owns one or several rental properties in Chicago, you are surely restrategizing to make the most out of your real estate investments. So, we’re here to guide you through.
Whether you own a short-term or long-term rental property in Chicago, this article is for you! We believe that economic analysts should not be the only people who have access to numbers. You too can make sound investment decisions in the upcoming downturn by relying on easy-to-use data analytics.
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.
If you’re interested in having more streams of income via real estate, here’s everything you need to know about rental arbitrage in Chicago.
Rental Regulations in Chicago
Chicago Long-Term Rentals
Traditional forms of rentals in Chicago are regulated by the Residential Landlord and Tenant Ordinance. As a nudge to improve the quality of housing conditions in the city. it highlights the rights and responsibilities of both the property owners and tenants. The ordinance is a comprehensive guide that covers rental agreements, security of deposits, foreclosure, and habitability of the rental property.
Chicago Short-Term Rentals
The Chicago rental market trends have influenced the local government to oversee the industry in the city. Short-term rentals are regulated by Chicago’s Shared Housing Ordinance. This compels property owners to obtain necessary licenses from Business Affairs and Consumer Protection. Licenses are valid for 1 year, and hosts have to pay $125 annually for every registered unit. Only then that they can list and advertise their Chicago rental properties on Airbnb, VRBO, HomeAway, and similar websites.
Advantages of Long-Term Rentals in Chicago:
Below are the advantages of operating a long-term or traditional rental property in Chicago:
- Strong population – With over 2.5 million residents, Chicago is the largest city by population in Illinois and third in the United States. This fact alone can guarantee landlords a strong market demand for long-term rental properties.
- 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 Chicago is $1,950.
- 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 Chicago:
On the other hand, here are perks that short-term rentals can offer to Airbnb hosts in Chicago:
- Moderate seasonality – While the seasonality is 69%, your unit will still get booked in most parts of the year.
- 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.
Do you make more money on Airbnb or long-term rentals in Chicago?
According to Airbtics’ Data, you can earn more from an Airbnb in Chicago. For example, a 2-bedroom property can earn $1,850 / month or $22,200 annually. But an Airbnb with the same property size close to the area can earn $67,431 per year. The earning can come from the average nightly rate of $335 with a 52% occupancy rate.
Short-Term Rental Markets in Chicago
We already have an idea of short-term vs long-term rental income in Chicago. Airbnb is the way to go. Chicago is already a rental market – and a very huge one at that. Not for nothing this city’s market is regarded as one of the short-term rental trends in the US 2023. But what landlords do not know is Chicago can be broken down into smaller markets where you can monitor your closest competitors.
It just so happens that Airbtics has this innovation that allows users to create a Custom Market. Let us now dive deep into the top rental markets in Chicago and learn the best property features with the highest occupancy rate and corresponding annual revenue:
1. Lincoln Park
- Existing Airbnb listings: 233
- Average daily rate: $206
- Airbnb occupancy rate: 71%
- Airbnb annual revenue: $57,441
- Best property size: 2 bedrooms
- Occupancy rate: 75%
- Annual revenue: $69,908
2. Wicker Park
- Existing Airbnb listings: 153
- Average daily rate: $195
- Airbnb occupancy rate: 69%
- Airbnb annual revenue: $52,310
- Best property size: 2 bedrooms
- Occupancy rate: 79%
- Annual revenue: $54,007
3. Logan Square
- Existing Airbnb listings: 289
- Average daily rate: $135
- Airbnb occupancy rate: 74%
- Airbnb annual revenue: $40,940
- Best property size: 2 bedrooms
- Occupancy rate: 77%
- Annual revenue: $44,879
Maximize Your Rental Income
Every investor wants to get the most out of their investment This is understandable because their capital can be a few hundred thousand to even a million dollars. Real estate investments can be a bit tricky since there’s really nothing much that you can do with the property. Instead, homeowners can strategize their rental business for their financial freedom to be unscathed in the upcoming economic recession. This can allow homeowners not only to keep but also increase their market rent in Chicago.
For traditional landlords who want to up their rental collection, short-term rentals are a way to go. But for it to work, Airbnb hosts also need to do their part. If you’re already a short-term rental operator, incorporating data analytics into your strategy will give you a ton of insights when it comes to charging a nightly rate. As we have seen, Airbtics can provide us with macro and micro views of rental markets for you to arrive at a data-driven decision!
Take your Airbnb to the next level, try this powerful Short-Term Rental Profit Calculator!
Make your Airbnb in Chicago Recession Ready
