Is it Better to Rent a Property Long-Term or Use it as an Airbnb?
If you’re a real estate investor, you may be considering the pros and cons of buying a long-term rental or an Airbnb. This guide can help you decide.
Is it Better to Rent a Property Long-Term or Use it as an Airbnb?
If you’re trying to decide between turning a property into a long-term rental or an Airbnb, ask yourself:
- What are my goals?
- How much profit can I make on each?
- What will each cost me?
Here’s a closer look at each.
Question #1 to Help You Decide Between a Long-Term Rental and an Airbnb: What Are My Goals?
Your goals will likely fall into 1 of 3 categories:
- Generate immediate cash flow
- Build long-term wealth
- Do a little of both
If you’re looking to generate immediate cash flow, then a long-term rental is generally the better option. With an Airbnb, you’ll have higher vacancy rates and fewer months where you’re generating income.
On the other hand, if you’re focused on building long-term wealth, then an Airbnb may be a better option. You’ll likely make more money with an Airbnb, and you can eventually sell the property for a profit.
If your goal is to do a little of both, then it really depends on the market you’re in. In some markets, you can make more money with a long-term rental, while in others, an Airbnb may be more profitable.
It’s also important to consider your goals for the property itself. Are you looking for a hands-off investment, or are you willing to put in the work to renovate and manage it? If you’re looking for a hands-off investment, a long-term rental is generally the better option. With an Airbnb, you’ll need to be more involved in the property, from managing bookings to cleaning and maintaining the space.
Related: Can you keep a tenant’s security deposit in California?
Question #2 to Help You Decide Between a Long-Term Rental and an Airbnb: How Much Profit Can I Make on Each?
In order to make a profit on a long-term rental, you’ll need to charge enough rent to cover your mortgage, taxes, insurance, and other costs. You may also want to set aside money for repairs and maintenance.
With an Airbnb, you’ll also need to cover your mortgage, taxes, and insurance. However, you’ll likely be able to charge more per night than you could for a long-term rental. You’ll also need to factor in the cost of cleaning and maintaining the space.
It’s important to remember that profitability is not the only consideration when it comes to investing in real estate. Many people invest in real estate for the cash flow, even if it’s not the most profitable option.
Related: Is it better to flip a property or rent it out?
Question #3 to Help You Decide Between a Long-Term Rental and an Airbnb: What Will Each Cost Me?
The cost of a long-term rental property includes the purchase price, closing costs, renovation costs (if any), and ongoing costs like mortgage payments, insurance, and taxes.
The cost of an Airbnb property includes the purchase price, closing costs, and renovation costs (if any). You’ll also need to factor in the cost of furniture and decor, as well as the cost of cleaning and maintaining the space.
Related: Landlords’ rights when tenants damage a property in California
Which is More Profitable: a Long-Term Rental or an Airbnb?
As we’ve seen, there’s no simple answer to this question. It depends on your goals, the market you’re in, and the specific property you’re considering.
If you’re looking to generate immediate cash flow, then a long-term rental is generally the better option. With an Airbnb, you’ll have higher vacancy rates and fewer months where you’re generating income.
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