Benefits of short-term rentals
High Profitability. Short-term rentals can yield significantly higher income compared to long-term ones. Property owners can often set higher nightly rates, especially if the property is located in a popular area or has unique features.
Flexibility and Control. As an owner, you have more control over when and how you rent out your property. You can block dates for personal use, exclude bookings for specific periods, and establish rules for guests.
Diverse Clientele. With short-term rentals of your property, you can attract a variety of guests, including tourists, business travelers, long layover visitors, and many others.
Examples of Short-Term Rental Income
Let's analyze a few examples in more detail to better understand how much you can earn from short-term property rentals.
Example 1: downtown city apartments
Suppose you own apartments in the historic center of a popular tourist city. The average weekly rental rate is $1,000. If your property is occupied at 80% throughout the year, your annual income can be calculated as follows:
- Average weekly income: $1000
- Annual occupancy rate: 80% (or 41 weeks per year)
- Annual income: $1000 * 41 weeks = $41000
Example 2: lakeside house
Imagine you have a beautiful lakeside house in a picturesque area that you rent out on weekends for $300 per night. With occupancy on 30 weekends per year, your annual income can be calculated as follows:
- Average nightly rental rate: $300
- Number of weekend rentals: 30 weekends per year
- Annual income: $300 * 30 weekends = $9000
Example 3: downtown business district apartment
If your property is located in the downtown business district and attracts business travelers, you can rent it out on a weekly basis for $150 per night. With a 70% occupancy rate throughout the year, your annual income can be calculated as follows:
- Average nightly rental rate: $150
- Annual occupancy rate: 70% (or 36 weeks per year)
- Annual income: $150 * 36 weeks = $5400
Short-Term Rental vs. Long-Term Rental
When it comes to generating income from real estate, investors face a choice between two main strategies: short-term rental and long-term rental. Both strategies have their advantages and disadvantages, and the choice depends on your goals and comfort level with risk. Let's take a closer look at the key differences between these two approaches:
1. Yield:
- Short-Term Rental. This strategy typically generates higher income in the short term. You can charge higher daily or weekly rates, especially if your property is in a popular tourist destination. However, the yield can be less stable and predictable due to seasonal fluctuations and changes in demand.
- Long-Term Rental. In this case, the yield is usually more stable and predictable, but the income level may be lower. You receive regular rental payments over an extended period, creating a more consistent income stream.
2. Maintenance Costs:
- Short-Term Rental. Successful short-term rentals may require more effort in terms of management, cleaning, and maintaining the property to maintain a high standard for guests.
- Long-Term Rental. Typically requires less effort and maintenance costs, as long-term tenants are generally more responsible.
3. Flexibility:
- Short-Term Rental. Provides greater flexibility in using the property for personal use or renting it out at different times. However, it is less predictable and may require adaptation to changes in demand and seasonal fluctuations.
- Long-Term Rental. Ensures stability and reliability with long-term tenants but reduces your flexibility in using the property during the lease term.
Real estate investors often consider a mixed portfolio that includes both strategies to diversify risks and generate outgoing income from different sources.
In the end, the choice between short-term and long-term rentals depends on your financial goals, resources, and level of management skills. But one thing is clear: short-term rentals offer the potential for significant income and a variety of clients, making them attractive to investors seeking new opportunities in the real estate market.
