Tag: propertymanager

Best Cities to start Airbnb Rental Arbitrage Business in the US.

Post author By jae an
Post date June 21, 2021

Best Cities to Start Airbnb Rental Arbitrage Business

The pandemic has hit short-term rental businesses all over the world, but it’s not the case in the US. It’s backed by data that many of the remote US destinations have experienced the most profitable Summer in 2020 and are looking for another profitable Summer in 2021. So it might seem the world is falling apart and everything is going down. But the data is speaking otherwise, according to 2020 airbnb data this is a great time to start your STR journey. The market is about to bounce back as people are craving the outdoors. So to help you focus more on the important things in your STR journey, and not the boring research part, we have compiled a list of the best cities to start Airbnb in US.

The Airbnb business is booming

The rental arbitrage model is extremely attractive for hungry and motivated entrepreneurs. You don’t need much money to get started with your first rental. In fact, you can even start by renting out your own room (and you stay the night at your car or friend’s house) to save up the initial deposit to start your first arbitrage unit. However, the rental arbitrage won’t generate passive income – It’s not true passive income because you constantly need to pitch to landlords and manage day to day operations.

What is Airbnb Rental Arbitrage?

Maximize your rental property revenue with more inventory and dynamic pricing tools.

Data-backed Market Research: You start with conducting thorough research about the market to find the profitable neighborhoods, amenities, and styles.

Pitch to landlords: Now you know the number and you know this property will generate profit for sure. It’s time to contact landlords to get permission to do rental arbitrage and get accepted.

Efficient operation & Profit: A lot of hustles in putting your listings on various channels, right pricing, and many other tactics. Still, I trust that you will be able to learn along the way as long as you have started with the right properties.

How to identify profitable rentals for rental arbitrage?

Make more informed decisions with the power of accurate data.

Definition of Arbitrage: In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets.

As the definition suggests, you need to find the gap between the “long-term rental market” and the “short-term rental market”. Fortunately, finding a long-term market base price is straightforward. You can easily find the market prices for the long-term rental market in Zillow. Finding the short-term rental market price is more difficult since looking at “daily rate” and “cleaning fees” on Airbnb isn’t enough because you also need to know “occupancy rates”. Therefore, the key to the success of rental arbitrage research is in short-term rental market research.

Then, what is the “key” of short-term rental market research? It is basically clearly identifying the range of profit of properties in different neighborhoods and by the size of properties.

The profit consists of three variables – 1) occupancy rate, 2) average daily rate and 3) expenses. The size of properties is a little bit more complex as it consists of the “number of bedrooms, bathrooms, and the total number of beds”. I will go through different tools to find out the occupancy rate and daily rate of different neighborhoods a little bit later.

How much does it cost to start your first rental arbitrage?

Stay up-to-date with relevant industry trends.

Don’t panic. After all, the starting cost is quite predictable once you do enough research.

Deposit
First-month rent
Furnishing (Beds, Sofa, Dishes etc)
Supplies (Here’s a checklist)

If I were you, I would start with basic furniture only – one mattress with a base and a cover per room, one used sofa, a pot, a pen, and plastic cutleries. Once I receive a few bookings, then, I will start investing more stuff like lamps, coffee pots, and so on. Starting with a huge budget will make you feel pressured to get a better return, so please be a minimalist when you get started.

Tips to do market research effectively and correctly

Use competitive and intelligent data to your advantage.

You need to make a comparison table to structure your research and efficiently search for your next properties. The template could look like below.

Profit before paying rent = (occupancy rate * daily rate) + cleaning fees (that you charged from guests) – cleaning fees (that you actually spent) – other expenses

Now you know the profit before paying rent, so now you can just identify which properties on Zillow can be profitable when you rent them. On Zillow, as of today (2021-06-20), there is only one property that can profit $500 a month to you.

How much does it cost to start your first rental arbitrage?

Stay up-to-date with relevant industry trends.

Now I guess you are wondering how much a short-term rental around your neighborhoods is making.

You can use our research tool to find it. You can choose one city, and if you zoom in to a specific neighborhood, it will show the average daily rate and occupancy rates from the short-term rentals on the map.

If you do research, you will find out that there are so many profit combinations (neighborhoods x property size).

Now let’s take a look at the best cities to start airbnb in the US.

Best Cities to Start Airbnb in US

To make it easy for you, below are some (not all) best cities to start Airbnb in the US that have possible profitable combinations for rental arbitrage.

There’s no point in giving you some numbers of expected rental arbitrage returns because it will be depending on the exact neighbourhood and the size of properties you are going to rent. Please do your thorough research to find out some areas where there’s a high demand for short-term rentals while having excessive long-term rental supplies.

What's next?

If you are doubtful about using data solutions, I’d recommend you to 1) speak to a property manager in your area 2) ask other Airbnb hosts in various Airbnb host’s communities 3) collect data on your own from Airbnb website.

If you are lost, you can find other Airbnb hosts from the following links.

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How to do Airbnb Pricing right in 2021 using vacation rental data?

Post author By jae an
Post date May 14, 2021

Pricing Short-term rentals correctly for this upcoming (2021) Summer became a challenging thing as the supply-demand of rentals in your market has never been like this before. This post describes how a revenue manager could use vacation rental data to price your listing efficiently. After reading the post, you will learn what type of vacation rental data is available and how accurate and useful it could be to your future pricing strategy.

So…what is the vacation rental data we are talking about here? The three widely used data for vacation rental revenue managers come from 1) their listings 2) from other property managers 3) from web scraped data.

The fundamental Airbnb data you need for Airbnb Pricing

Did you know that web scraped data can show 1) average daily rate 2) price year on year trend 3) seasonality 4) weekday vs weekend price 5) events and 6) other promotion prices?

Firstly, there is the baseline market price. It is the average booked nightly price of a specific market for a specific type of property.

Secondly, you need to know the trend derived from historical data. It can show you whether this market’s price has been increasing over years or decreasing.

Thirdly, seasonality. It is how a specific week or month is performing compared to other months. Does this market get more visitors in Summer than Winter? Then the nightly rate in Summer is probably higher than the winter given that the supply remains consistent throughout the year.

Fourth, the prices of the week of the day. The most typical pattern is that Friday and Saturday night has 10 – 50% higher prices than Sunday – Monday. But this can vary by market and type of property.

Fifth, the local events, holidays, and global events. You typically see these days booked in well advance with higher nightly rates.

Sixth, booking lead time. How many days in advance do nights get booked in this market?

Lastly, the promotion prices. This includes a special discount for long-term stays or a discount for unpopular days like Monday.

The dynamic Airbnb pricing data you need for Airbnb Pricing

The pricing data changes every hour and knowing that can make you more competitive. These are the dynamic Airbnb pricing data you can get from web scraped data.

Firstly, the last-minute pricing. Many Airbnb hosts or revenue management teams drop their prices if nights are not booked until the last minute. Knowing those prices can be useful information if you want to grab more bookings. Your competitors might have been monitoring your listings and taking the majority of bookings by just lowering $3-5/night than yours.

Secondly, recently made booking data. You can also get nearly real-time booking data (nearly because in the case of us, it takes somewhere between 1 – 23 hours to process the booking data). This gives you a good idea of what is happening in the market currently.

How to do pricing right for this Summer?

Your focus should be on the supply and demand of this year, not the previous years. Start with a general understanding of your market by looking at search volume data. This will give you a general idea about the demand of your market this year. So, let’s say if the summer in 2019 was 75% booked in your market, and the search volume has increased by 10%, you can expect around 82.5% of rooms will be booked this Summer if the supply remained constant.

Tip1. If your market won’t do well this year from the search data, you should probably lower your rates to get those few bookings. If your market does well, then, you should carefully design promotion strategies based on the expected booking lead time we will discuss below.

The next thing you could do is tracking the summer occupancy rate of your market. Compare that with your “expected 2021 summer occupancy rate”, and once it hits 60-70% of the “expected 2021 summer occupancy rate”, you should start sending the promotional offers and discounts. In most markets, you can expect the 60-70% to be happening a lot later than 2019, since globally, the booking lead time has decreased significantly. However, this year, the booking lead time has been increased from the last year.

Tip2. If you are booked quicker than your market’s average booking lead time, you should consider raising the price, you are probably underpricing. Or, are you less booked than your competitors or market, maybe you should lower your price.

How to get 2021 Summer Vacation Rental Data

If you are resonating with the methods outlined above, it’s probably the best bet to contact us to get the data mentioned above. We will be able to deliver a daily pricing report of your market to your inbox every morning.

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Vacation Rental Pricing Tools in 2022

Post author By Delia Valdez
Post date April 17, 2021

The primary needs of guests are summed up in four forces to set your base price.

This article is written for experienced vacation rental managers who have a background an understanding of the rental market and its pricing.

There are two types of vacation rental pricing tools when it comes to price efficiency for your vacation rentals.

Dynamic pricing solution
1. PriceLabs, BeyondPricing, DPGO
Build your in-house pricing solution using data
1. SeeTransparent, Airbtics, AirDNA, Alltherooms Analytics, Key Data Dashboard

Dynamic pricing is convenient for vacation rental managers as they set the prices for you. They take care of events, supply-demand, and seasonality into account to price. Some of the providers allow you to apply customized rules too.

If you are a savvy rental manager or if you have a revenue management team, you need to have more control over the dynamic pricing algorithms. This is when you start using the in-house pricing solution. You start needing to have better control of your pricing while automatically applying seasonality, supply-demand, and events into consideration.

Here are three data-driven ways to perfect your pricing to maximize the RevPAR.

Track how competitors are pricing and adjust the price accordingly.
See the breakdown of your market by price and refine your market positioning.
Analyze the guest demands in your area and increase the daily rate by serving under-supplied needs.

Track how competitors are pricing and adjust the price accordingly with vacation rental pricing tools

AirDNA, SeeTransparent, and Airbtics are vacation rental data providers, but they also offer Airbnb Pricing Tool. All of them commonly have a calendar view of future 365 days rates and occupancy rates. This view allows you to understand the rate changes on specific events or over the seasons.

Make sure you only see the data of your competitors! If you are luxury rentals, it only makes sense to track the rating of other luxury rentals. Airbtics offers a custom calendar view that filters and shows your competitor rates only, grab a 15-minute demo!

Enhance your vacation rental pricing strategy by understanding your market positioning

The objective of market positioning is to establish the image or identity of your vacation rental. By understanding this, you can advertise your vacation rental more efficiently.

This is how a market positioning map for a vacation rental could look like. Airbtics provides market analytics per price range, which helps you to build this positioning map.

You can select your daily rate, and find out what a typical listing looks like with your pricing point. You can also go through different pricing ranges and see which pricing range your listing fit and research how you can move your pricing range.

Analyze the guest demands in your area and increase the daily rate by serving under-supplied needs

Guests to your destination have different needs and those could be summed up into 4 forces –

Location
Capacity
Service
Amenity

Using our research tool you can find out how the daily rate, occupancy rate, and RevPAR are being affected by those 4 demands. When there are under-supplied needs, it’ll have abruptly high.

Conclusion

The vacation rental industry has been continuously evolving and adapting to use better data to optimize their rental pricing. By going through the 3 steps I’ve mentioned above, you should have a better understanding of your pricing strategy. Nearly all of our customers had increased their RevPAR through fine-tuning their pricing using the data, and the number varies from 5 – 40%.

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Increase your RevPAR by analyzing guest demands

Post author By jae an
Post date April 8, 2021

How to increase the daily rate of your Airbnb listing while keeping your occupancy rate? Our team has been doing a crazy experiment using Airbnb data for the last couple of months. We wanted to see if we can make Airbnb hosts charge 20-30% more daily rate while maintaining their occupancy rates and without investing a hefty fee.

We are a short-term rental analytics company processing 2 billion nights of Airbnb nights data every week and using this we were able to conclude that you can increase your daily rate and get the same amount of bookings, but by attracting different crowds and amending your offers.

These are the example of common daily rate driver

Pet-friendly
Hot tub or Pool
Family-friendly
Remote worker-friendly
Long-term stay friendly
Parking

But the question is – how much of a higher daily rate can I increase by adding each of those services? A better question is, is there a way to identify this?

Good news! Our demand research tool shows you the daily rate comparison of listings with certain services or amenity VS without. This can be useful if you are thinking of doing a rental arbitrage or if you already own vacation homes but looking to boost your revenue for this Summer.

Here are some case studies. These graphs are screenshotted from our app.

Should I keep my strict cancellation policy?

Case 1. San Antonio, TX. Does your rental have a strict cancellation policy and happens to be located in San Antonio? Sad news, your listing is expected to have 40% fewer bookings than the listings without. If you want to increase your RevPAR, you may want to reconsider your cancellation option.

Should I make my Airbnb mid-term stay friendly?

Case 2. Navarre Beach, FL. It looks like it’s time to take care of the needs for mid-term stays. Airbnb guests are looking for a kitchen, washer, and parking rather than paying a premium for a hot tub or pool. They may prefer to just visit a beach nearby! You are highly likely to increase your RevPAR by equipping washer and kitchen (and parking if you can).

Should I make my Airbnb pet-friendly?

Case 3. Sunriver OR (But this pattern was observed from many other destinations in the US)

Americans love traveling with their pets or at least they are willing to pay a huge premium for it, at least according to the data we see. We’ve seen a surge in both ADR and occupancy rates for pet-friendly listings in Sunriver, OR. For your reference, Sunriver is one of the top summer destinations in the US in 2021, 60% of Airbnb nights are already booked for this summer.

There will be much more wear and tear by allowing pets to be at your vacation home, but you may change your mind after knowing how much you can earn more by allowing pets at your home.

Should I buy a washer for my Airbnb?

Case 4. Brighton, UK.

What’s happening in the UK? There’s a high demand for a mid-term stay in this traditional vacation destination called Brighton. This reflects the current travel restriction in the UK. People aren’t allowed to travel unless it’s necessary. Listings with hot tubs or pools won’t be booked, but listing with kitchen and washer are on-demand.

Here’s a disclaimer. The data only shows the daily rate and the occupancy rate difference between listings with a specific amenity vs without. So, there could be a scenario where listings with pools have lower daily rates but it’s not because of the pool but because the listings with pools tend to be far away from a beach.

Nevertheless, this can help you understand the demand in your market. Many of our users are using this tool to find the supply-demand gap in the market. Then, they strategically market their listings to target the under-supplied group of guests. This typically results in a surge in their amount of bookings and an increase in the RevPAR.

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Airbnb hosting: Why you should be checking out your competition

Post author By hannah mandapat
Post date February 15, 2021

Whether you’re an Airbnb host as a full-time business or renting out your spare room for some extra cash, there’s a lot of work that needs to be done to be able to do it well. Creating your listings, taking photos of your property, ensuring the calendar is accurate, confirming bookings, etc. And that’s just the beginning. There are various tasks you need to complete before and after every booking to ensure a pleasant experience for your guests.

Yet after all the hard work already put in, your bookings don’t seem to be going up and the calendar remains empty. Especially in the middle of a pandemic when travel is limited, every booking you make is valuable. It makes you wonder if it’s even worth it.

While each host’s situation is different, checking out what the competition is up to should give you an idea of what steps you can take to improve your situation.

Here are four reasons why you should check out your competitors today.

1. Gives you a benchmark

How is your pricing compared to other vacation rentals in your area? Too high? Too low?

If you’re just starting out with Airbnb hosting, checking out what other Airbnb hosts in your area are already doing would give you a good idea of how you should price your property and what to provide. It would also give you a chance to see how much revenue you can potentially make. Doing a search on the Airbnb site for available properties in the area and checking out each listing or using Airbnb’s own pricing suggestion tool are a few ways to do it.

But if you’re short on time or want to see more in-depth information in a given area at once then using a vacation rental analytics platform would be the best option. This type of platform can provide you with a breakdown of various metrics such as the occupancy rate and average daily rate of your area over a period of time. You can easily slice and dice the data available to get a better understanding of your market.

2. Helps you understand your target audience better

You might feel that your offerings are already at a competitive level, but might still be struggling to draw in those extra guests.

Regularly checking out your competition ensures you have your finger on the pulse. Reading your competitors’ review section will allow you to find out qualitative information on what customers enjoy or don’t enjoy in certain accommodations, what their needs are, and what gaps are there that you can fill in with your own offerings.

3. Improves your marketing

How did others promote their listings? Did they mainly rely on just the Airbnb listing or have they posted on other sites too? Do they also have a dedicated website or social media accounts for their vacation rentals?

How can people book your place if they don’t know about it? Once you’ve got a good grasp of the people you can target, you would be able to ramp up your efforts to make sure your marketing is personalised to your prospective customers. With COVID-19 changing the way we travel, it’s important to showcase that you’ve taken such considerations, such as an increased emphasis on cleanliness or staycations becoming more commonplace. Here are some of our suggestions on increasing your Airbnb bookings during the pandemic.

4. Determines whether it’s worth the investment

As mentioned earlier, great Airbnb hosting, while can be fun and extremely rewarding, is no walk in the park. If you’re just starting out, seeing what’s already out there and understanding how they’re performing means that you can determine whether it’s worth putting in the time and resources for you.

Airbtics analytics platform’s upcoming update will make price benchmarking and finding out your potential revenue a lot easier. The new Benchmark dashboard means you’d be able to see the top ten listings of your area by revenue, along with property type, ADR and reviews at a glance. If you’d like to get a firsthand look, make sure to join the community and receive news about our latest feature updates and releases.

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Should Airbnb hosts engage in Airbnb Experiences?

Post author By Shyeni Gan
Post date January 16, 2021

While accommodation is one of the first things people look for when planning for their travel, many people travel primarily for local experiences. Airbnb recognizes this and as you might be aware, they introduced ‘Airbnb Experiences’ in 2016 which allows users to host activities, tours and classes, and users can book directly on the platform.

What are the pros and cons?

Nowadays, people seek for authenticity. Airbnb Experiences started off by reaching out to the locals on things to do in their cities. It adds a personal touch, rather than the usual “top things to do” recommended by tour guides, where many would be deemed as tourist traps. That sets Airbnb Experiences apart from other booking platforms. Furthermore, it is always helpful for travelers to be able to book both their accommodations and activities for their trips through the same platform. As for the hosts, they can be getting paid for doing something that they love, be it introducing their hobby or simply the engagement with people. It may also help to bring more guests to their rental properties listed on Airbnb through those experiences.

However, the downside of Airbnb Experiences is that they may not be available in all regions. It is dependent on the interest of the locals and in some places, it may be hard to get them to be involved. Having said that, the authenticity and unique experiences of those activities may be what attracts people, so it can be a double-edge sword. Since the experiences offered are based on personal interests and passion of the hosts, it may be hard to keep track of their quality of service in delivering the services. On the other hand, for the local hosts, they may worry about the volume of people visiting their city. If it is not a popular city, there may not be people interested in engaging in the experiences they offer. There could also be language barriers between the hosts and guests.

How has the response been?

68% of the travelers regard food and drinks as the most important component of travel, as mentioned in an article by Eater. Hence, Airbnb Experiences have included more than 3000 experiences in cooking-related activities. Other popular experiences are horse yoga, mindful movement (meditating and hiking), Nama’ Tastings (wine and yoga), Carb Feast (pizza and pasta), tie dye classes and historical walking tours. Airbnb came up with a list of the trending cities to visit in 2019 and the top 3 cities are Kaikoura in New Zealand, Xiamen in China and Puebla in Mexico.

Airbnb Experiences also opened up business opportunities for countries where STRs are not allowed. For example, in Singapore, the government banned short term stays and the minimum period of stay is 6 months. With the launch of Airbnb Experiences, local hosts can make revenue through this channel.

How has COVID-19 affected Airbnb Experiences?

With Covid-19, Airbnb Experiences adapted with the situation. They shifted their target to the domestic market and added more online activities. As of May 2020, there were 300 online experiences on the platform. Some of the popular online experiences include “Sangria and Secrets with Drag Queens” in Lisbon, Portugal with $150k of revenue in their first month and “Tarot Reading with Mak Jagger” in Austin, Texas with $11k of revenue in one month.

However, there are still hosts who are unable to transition to the channels online. It may be due to many reasons like not having a stable internet connection in their region, the hosts not being tech-savvy or the experience is simply too difficult to be carried out online. Such hosts are solely dependent on the domestic market for as long as the Covid-19 situation persists.

Conclusion

Airbnb Experiences has grown 13 times faster than their rental property business, making a revenue of more than $1 billion in the second quarter of 2019. If you’re looking for a creative way to increase your revenue, it’s worth considering hosting Airbnb Experiences. You may just find something that the market is willing to spend money on, be it online or physically. The first step is always a gamble as to the feasibility of the ideas but with some time, things get easier and better!

But before you start advertising your Experience package, you might want to consider whether you have enough visitors visiting your city to engage in the experiences you are offering. Airbtics provides close to real-time data on the number of visitors visiting any specified cities, as well as booking rate, occupancy rate, pricing strategies and other customizable data that may be useful boosting your revenue. With Airbtics data, you can have a better grasp of the market and decide what types of experience you can offer. If you are not able to shift your experiences online, it is even more important to know your market and competitors well, which will help you better plan your next move in boosting your revenue.

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Short-Term or Long-Term Rentals: Which One is Better?

Post author By Rachell Lee
Post date January 14, 2021
No Comments on Short-Term or Long-Term Rentals: Which One is Better?

As a first-time property investor, you are bound to run into the classic dilemma: short-term or long-term rentals. This issue is not just about how long to rent out your properties for, but also an issue of owning vs. renting property. Traditionally, owning real estate is the ultimate goal for property investors, but ownership has become less common over the years.

Building your real estate portfolio or property management business is now more achievable through short-term rental options that can also bring you passive income and reliable cash flow. The differences between the two types of rental properties should not be overlooked; take some time to understand which type is tailored best to your business goals and objectives.

For some investors, the end goal is solely focused on turning a profit, but for others, managing a property business is about enjoying a side hustle.

First, let’s take a more detailed look at the definition of each rental type.

Short-Term or Long-Term Rentals: What is the difference?

A short-term rental is typically a vacation rental property that is rented out on a short-term basis to guests in a similar fashion to hotels. However, this type of rental allows the guests to feel more comfortable and “at-home” because these properties are typically furnished like so.

One popular cash flow model used for this type of rental is rental arbitrage, which is essentially renting out a property or apartment unit and then re-renting it out on a short-term basis on vacation rental platforms like Airbnb, VRBO, or HomeAway. This type of rental business is quite common among entrepreneurs who would rather avoid the complexities involved in becoming a property owner (background check, loan approvals, credit check, etc).

On the other hand, a long-term rental is the traditional type of rental property that is typically used for residential purposes. This rental property type is usually protected by a lease agreement of at least 6 months or more with more binding terms than a short-term rental would. Many homeowners choose to rent out their properties to tenants at a higher price than their mortgage to bring in stable, monthly income that remains consistent regardless of the economic conditions. Most people are usually more familiar with this type of rental property as it is more traditional and widely-known.

Now that we understand the definition of both vacation rentals and long-term rental properties, let’s dive into each aspect of rental properties that outlines both the benefits and downsides of a short-term or long-term rental.

Profitability

The end goal of every business is to turn a profit. With both vacation rentals and long-term rentals, there is no doubt that both types provide a lucrative stream of monthly income. The question is: Are short-term or long-term rentals more profitable?

The short answer is that short-term rentals have the potential to earn more cash flow (2x to 5x) each month.

Here is why:

Many short-term rental business owners opt to use the rental arbitrage business model in which property investors can pick up multiple properties with rental leases instead of buying properties that require binding mortgages.

This process of serial renting allows for a fast-scaling business. Also, the investment costs of doing rental arbitrage for vacation rentals vs. long-term rental costs are much smaller. Short-term rentals require security deposits for the lease, furnishing costs, and monthly rent plus utilities, which might amount to a couple of thousand dollars.

However, running a short-term vs. long-term rental means your monthly budget will include replacing furniture, sheets, cleaning fees/supplies, property management software fees, unexpected guest damages, soap, toiletries, and more.

Vacation rentals can be even more equipped with household goods than hotels are with pots, pans, dish soap, laundry detergent, and just about anything you can think of that a regular home has.

In the name of convenience and homeliness, there is a cost associated with all these extra, special touches. However, these small details are worth the cost even if they add up because your monthly profit should surpass your expenses if your vacation rental is managed properly.

Long-term rentals, on the other hand, may require a 20% down payment, property taxes, HOA fees, and utilities. The initial investment for long-term rentals can be tens of thousands of dollars more expensive than short-term rentals (acquired by rental arbitrage). Also, owning a long-term rental property may require a whole year or more to regenerate the original investment money amount and buy a second property.

Even if you do own a short-term rental property instead of doing rental arbitrage, short-term rentals can help you easily scale your business into more cash flow each month, thus increasing your opportunity to invest in more properties in the future.

Make sure to do your market research for your niche, target guests, and location in order to maximize your potential profitability from short-term or long-term rentals.

Maintenance and Cleaning

Short-term rentals undergo constant maintenance and cleaning, which ensures the property investor’s ability to maintain the quality of the property on almost a daily basis. Although the cleaning is your responsibility, you have the option to outsource the cleaning duties to a cleaning company or hire a cleaning service so you don’t need to personally clean yourself.

For long-term rentals, on the other hand, maintenance is taken out of your hands and cleaning duties are mostly in the hands of the tenant. You own the property, so the maintenance that you need to do only involves large damages, such as broken A/C or damaged infrastructure.

This lowkey maintenance seems like less upkeep, but residential rentals are more difficult to monitor for cleanliness on a daily basis. You cannot go inside whenever you want without the tenant’s permission and it’s difficult to control how clean the tenant will keep your property.

Background Checks

Whether you decide to do a short-term or long-term rental, the one factor that is important to consider is who your guests or tenants are.

One downside of short-term rentals is that hosts and property owners are not able to screen guests. This aspect of short-term rentals is inevitable. In this business, as with any other business, you will encounter undesirable guests at some point or another.

One weekend you might have wild party guests who damage your property (a host’s worst nightmare), and then have the best guests ever the next weekend. According to Airbnb, they do not routinely perform background checks on its users, although they reserve the right to do so.

Despite not being able to run an official background check on short-term rental guests, here are some questions to ask potential guests before allowing them to reserve your calendar:

What is the purpose of your trip?
How many adults and how many children will be staying in the rental?
Have you stayed with us before or at another vacation rental before?
Do you smoke or do you have any pets you will be bringing on the trip with you?

These questions should help you make a good judgment on whether or not you would like to rent your property out to a potential guest, without doing an official background check.

Take some time to have a conversation with the potential guests and explain your rules for the stay, such as no smoking, no parties, no more than 6 additional guests (due to COVID-19). Keep in mind that you are not allowed to ask questions that violate discrimination laws involving age, sexual orientation, marital status, pregnancy, disabilities, and more. Your purpose in asking questions is to make a good judgment on a guest’s character, not to discriminate against them.

Fortunately, as a long-term rental property owner, you won’t run into the same problem. Residential rentals allow you the leverage to run proper tenant screening and background checks to make sure that the tenant is reliable and trustworthy. For some property investors, this option may be more preferable.

Commitment

Managing one rental property, let alone an entire portfolio of real estate requires a level of commitment and maintenance that varies depending on the rental property type and how you decide to operate. Vacation rentals are a full-time business commitment; it’s a 24/7 hustle like many hospitality services.

There are several factors to consider when renting out your property on a short-term basis (from every night to every few nights), such as constant maintenance, marketing, management, coordinating maintenance, purchasing supplies, hiring cleaners, and more.

However, short-term rentals are not as financially binding as long-term rentals are if you do rental arbitrage. Instead of being tied down by massive startup costs, property investors have the flexibility to test out new locations and have less commitment to yearly rental leases.

If your short-term rentals are not performing well in a specific location, the worst that will happen is you break the lease, pay the lease extermination fees, and move on to a new location that is more profitable. Mortgages do not allow for this flexibility, but those are the responsibilities that come with property ownership.

Tax purposes

As a business or property owner, filing for taxes can either be daunting or a blessing in disguise. There are different tax advantages as well as disadvantages associated with both vacation rentals and long-term rentals, so here’s a quick overview:

Short-term rental businesses can receive tax deductions for property decorations, furniture, paint, etc.
Running an STR through rental arbitrage means no property taxes and no need to insure property appliances
Long-term rental costs include property taxes and HOA fees
However, long-term rentals can also receive tax deductions from mortgage interest, depreciation, property taxes, and property repairs
In some parts of the world, tax rates for LTRs are much higher than STRs

This list of tax considerations for each rental property type is indefinite, so make sure to consult with your accountant and financial advisor about your taxes for rental properties.

Flexibility in Pricing and Occupancy

One huge advantage of short-term rentals over long-term rentals is the flexibility in pricing models and control over your calendar. When pricing your daily rates for a vacation rental, don’t forget to do your market research!

Occupancy rates and average daily rates are not random numbers pulled out of thin air; this data depends on several factors, such as your location, the seasonality, the historical rates, the amenities you provide, the quality of your property, the rent or mortgage of the property each month, and the list goes on.

You have the power to price your property the way you want to, but make sure that your pricing is reasonable and backed by accurate information (and covers your monthly expenses).

With short-term rentals, you also have more control over your calendar. Through direct booking sites, Airbnb, VRBO, or Homeaway, hosts have the flexibility to block off dates whenever they want, meaning they have control over when they want your property to be occupied. If you have family visiting you in town for a holiday, you can block off those specific dates and accommodate your family instead of other guests.

Your dates are at your discretion.

With long-term rental properties, landlords typically charge tenants rent that is around 1% of the home’s value instead of charging per night like with vacation rentals. There isn’t much flexibility in the homeowner’s ability to upcharge based on the number of tenants or rule violations with residential rentals.

Additionally, tenants in long-term rentals usually live in the property for at least 6 months or usually yearly lease contracts.

Regulations

The rise of short-term rentals combined with the increased spread of COVID-19 has caused STR regulations and rules to evolve all around the world. Even before the pandemic, many local communities either banned property investors from STR or required them to obtain STR licenses, permits.

So before you start your short-term rental empire, make sure to research your region or city’s rules and regulations to avoid future headaches.

Nowadays, strict regulations for short-term rentals are becoming more prominent in some regions, especially as COVID-19 continues to damage the travel industry. Some hosts saw a drastic drop in guest occupancy in 2020, while others received bookings from people who were trying to escape hard-hit areas, or who wanted to ride out the isolation in a more comfortable environment.

Some local authorities were not pleased with the influx of out-of-town visitors, which could increase the spread of the virus. This led to even tighter short-term rental restrictions in communities in Northern California, Colorado, and more.

Restrictions are not just from the local government, they can also be from a homeowner’s association. Long-term rentals are also subject to HOA rules and regulations, but there are no restrictive bans or required licenses to operate a long-term rental.

Hospitality vs. Pride of Ownership

Do you prefer running a hospitality business or having pride in owning property while enjoying low maintenance?

The differences between vacation and residential rentals are paramount to your values and personal preferences. With STR, you have the opportunity to meet new people almost every day.

Short-term rentals allow you the opportunity to meet travelers and visitors from all around the world who want a more authentic stay. Running a short-term rental business is about making connections with people around the globe through a shared home, which may serve as an invaluable experience for many property owners.

You may discover a passion for hosting new people and creating long-lasting relationships through your lodging services, or you might realize that you feel the exact opposite. In that case, you can switch over to a long-term rental or outsource the customer service aspects of an STR business to someone else.

Having pride in property ownership may seem more valuable to some property investors than others because there is a myriad of other ways to create passive income with real estate. Additionally, homeownership is not limited to only long-term rentals; short-term rentals are also owned property.

Seasonality vs. Stability

The last aspect of comparing vacation rentals and long-term rentals involves whether or not you prefer some fast-paced, peak months, and some slow months or a stable income that does not fluctuate.

For short-term rentals, there can be several slow, off-months when vacation rentals are not in-season while other months might be jam-packed and fully booked for local events or holidays. This is why many hosts decide to save their revenue for safety income during the slow seasons.

On the contrary, long-term rentals provide a stable stream of income regardless of holidays, slow seasons, or the state of the economy due to the binding nature of residential leases. Some property investors enjoy more peace of mind with this stability and predictability, while others enjoy the unpredictability of the short-term rental industry, like this successful Airbnb host in Dallas, TX.

The short-term rental industry may not be as traditionally “stable” as long-term rentals are, but using data intelligence and accurate information to strengthen your business strategy can help you achieve even more cash flow and stability.

After reviewing the extensive and inexhaustible list of benefits and downfalls of both types, it’s safe to say that short-term rentals have the potential to provide more lucrative cash flow with less investment costs, but with more daily commitment.

Long-term rentals require less daily maintenance, higher investment costs, and a certain sense of stability. Take the time to review your options and decide which rental property type is best suited for your goals and aspirations.

Access accurate data analytics in our interactive dashboard here to understand your target market.

Tags comparison, long-term rentals, profitability, propertymanager, seeall, short-term rentals, vacation rentals

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Conclusion

Should I keep my strict cancellation policy?

Should I make my Airbnb mid-term stay friendly?

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Should I buy a washer for my Airbnb?

1. Gives you a benchmark

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4. Determines whether it’s worth the investment

Table of Contents

What are the pros and cons?

How has the response been?

How has COVID-19 affected Airbnb Experiences?

Conclusion

Table of Contents

Short-Term or Long-Term Rentals: What is the difference?

Profitability

Maintenance and Cleaning

Background Checks

Commitment

Tax purposes

Flexibility in Pricing and Occupancy

Regulations

Hospitality vs. Pride of Ownership

Seasonality vs. Stability

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Product

Company

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