Airbnb vs. long term rental: What is an Airbnb rental?
Airbnb is a platform that connects people who are willing to share a space with guests for money. Basically, what you have to do is to list your room, house, villa, or even yacht on the website, and wait for reservations. Airbnb rentals are considered a short term rental strategy because the properties are usually rented up to one month only.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
Airbnb vs. long term rental: What is a traditional rental?
Traditional rentals are one of the long term investment strategies. In traditional renting, a real estate investor buys a rental property in order to rent it out for at least 6 months, during which the tenants will pay rent on a steady basis agreed upon in the lease agreement.
Now let us take a look at the two rental strategies’ pros and cons:
Airbnb vs. long term rental: What are the pros of an Airbnb rental and the cons of a long term rental?
Airbnb = Adventure!: Well, if you are the type of person who loves to meet new people all the time, then this is for you. Since Airbnb rentals are based on short term stays, you can enjoy having a new guest every few days. On the other hand, with long term rentals, you will have the same tenants for a long time.
Flexible pricing: When it comes to making money, Airbnb is the way to go. Airbnb gives you the chance to change your pricing every time you wish to. You can either lower your prices or charge more depending on your situation as well as your goals. Once you have signed the lease agreement in long term rentals, you can’t change the rent, which means you will be getting the same income for the whole duration of your tenants’ stay, no matter how much you lose.
Related: Housing Market Trends: How Airbnb Affects Home Prices and Rents
Host/guest reviews: After each reservation, both the Airbnb guests and the Airbnb hosts get to write a review. However, for you, as a host, Airbnb guest reviews are of great benefit. A good review will bring you more reservations along the way. It could also help you find the right tenants as hosts get to write reviews as well. Therefore, it can save you the pain of dealing with bad tenants. With long term rentals, however, there is a chance you will get bad tenants, which means you might get stuck with them for a long time. Though you can avoid this by running a background check on them before signing the lease agreement, still, you can’t avoid it completely.
Listing is free: Of course, everybody likes free stuff! That is exactly what Airbnb provides. You get to create an account and list your property for rent for free. The only fees that apply are the service fees on each booking. If you compare this to long term rentals, then it is called marketing, which costs money. You will have to do proper marketing in order to get your property rented out, so keep that in mind when going through your expenses.
Airbnb vs. long term rental: What are the cons of an Airbnb rental and the pros of a long term rental?
Hospitality: Well, if you are not that good with people, you might not want to rent your property on Airbnb. It requires dealing with your visitors directly, while in long-term rentals you will only have to deal with your tenants when signing the lease and if any situation occurs.
No property management: You will also have to manage your property alone if you want to make the most money with Airbnb rentals. This also means you will have to invest a lot of your time in this. In traditional rentals, meanwhile, you have the option of hiring a property management firm to take care of your property for you. They are going to handle tenants, rent collection, and other operations related to your investment property. Therefore, you will not have to deal with your tenants unless a situation requires your presence.
Taxes: Tax is one of the major differences when comparing an Airbnb vs. long term rental. Taxes for Airbnb are different from other real estate investments taxes. You are basically paying an income tax which applies to every booking of your property. On the contrary, traditional rentals and residential rentals, in particular, are subject to tax benefits. These benefits apply to loan payments, depreciation, and other property expenses which saves the investor a good amount of money.
Unstable rental income: Airbnb is seasonal sometimes. For instance, if you are renting your investment property that is located on the beach, then there is less chance to have it rented during the winter, which means that there are seasons when you won’t have guests and, therefore, rental income. The good thing about traditional rentals, now, is the steady rental income. When you rent out your property, you can sit back and enjoy an income for the whole duration of the lease agreement. As long as you manage your property the right way, you can maintain a positive cash flow that you can use to grow your business.
To start looking for and analyzing the best investment properties (Airbnb or long term) in your city and neighborhood of choice, click here.
Airbnb vs. long term rental: What is in common?
Appreciation!
This is actually the only advantage that comes in common when analyzing an Airbnb vs. long term rental. Appreciation is basically the rise in a property’s market value over time, which means you will not only be making money in the short term but also in the long term. When the time comes to sell the investment property, you will receive more than you have paid for it when you purchased it. That applies to both Airbnb and long term rentals. So, if that is a concern of yours, you do not have to worry.
Related: Best Tips for Forced Appreciation in Real Estate Investing
Airbnb vs. long term rental: Our recommendations
We, on Mashvisor, recommend that you start with Airbnb rentals. It is one of the best real estate investment strategies, especially for beginner real estate investors. If you think carefully about all the pros that we have mentioned, then you will know for sure why Airbnb is so popular. Therefore, you can go ahead and start by buying a house for Airbnb renting and proceed with listing it.
Find and analyze the best Airbnb investment properties right here on Mashvisor. To start your 14-day free trial and subscribe to our services with a 20% discount after, click here.
Nonetheless, we have presented to you both rental strategies (Airbnb vs. long term rental), so you get to analyze them and choose what goes better with your investment goals.