What Rental Strategy to Choose: Airbnb vs Renting Out Traditionally?

Deciding on an investment strategy takes both time and effort. The real estate investor needs to weigh the options and decide the highest return on investment ratio for each strategy. With the buy-and-hold investment strategy, real estate investors are often left weighing Airbnb vs renting out traditionally. Of course, each rental strategy offers different attractions.

Airbnb vs renting out traditionally defined

Airbnb rental strategy is often defined as a short-term rental strategy. This short-term rental strategy is used to find short-term tenants or in this case (guests) to occupy a space for a period of less than thirty days. Moreover, the short-term rental is often leased furnished by the property owner/real estate investor who has to manage the costs and utilities.

On the other hand, traditional rentals don’t require a furnished space; some may be, but it’s not a requirement. With traditional rental properties, real estate investors rent out a property on a monthly basis or a yearly one. It’s a long-term rental strategy that works with different kinds of properties. Whether you own a single-family investment property or a multi-family investment property, you can employ this rental strategy within it.

Airbnb vs renting out traditionally: pros and cons

Airbnb rental strategy pros and cons

When it comes to Airbnb vs renting out traditionally, there is really no apparent winner. For some types of investment properties, Airbnb renting may be the optimal rental strategy. Meanwhile, for other properties, it may be more lucrative to have it as a long-term rental.

The pros of Airbnb rentals

Higher rental income

The higher rental income is the lead factor for investing in Airbnb rentals. You can decide on the appropriate price to charge for your space and adjust it instantly. For example, if it’s the holiday season and you notice that most Airbnb rentals in your area have been booked, you can take advantage and turn up your nightly rate. For tips on increasing your Airbnb rental income, read this: How to Boost Your Airbnb Rental Income: Tips from an Airbnb Super Host

Listing a property on Airbnb is free

Listing a rental property on Airbnb is free; the website only charges you when the guest confirms the reservation, and their percentage comes out of the total amount paid by the guest.

Short stays

When putting Airbnb vs renting out traditionally in comparison, Airbnb wins in freedom of usage. Mainly because it lets you use your investment property most of the year. In other words, you are making a rental income and have an empty property to use however you like.

Guest and host reviews

With Airbnb and most other short-term rental sites, you can review the guest and the guest can review you. Meaning, if your guest misbehaves and ends up trashing your rental property, he/she will know that a repelling review is on its way to Airbnb.

The cons of Airbnb rentals

Fluctuating rental income

If you don’t mind the everchanging rental income, go for it. If you’re looking for a monthly stable rental income, we’d recommend you go for traditional rentals. The main cause for that is tourism remains seasonal work. Therefore, Airbnb renting is seasonal work- you’ll have a busy season and a slow one.

Laws

Many states and cities have restrictions on Airbnb rentals. Make sure to check your city’s policy prior to investing in Airbnb rentals. To find out more about Airbnb laws, read this blog post: Top 3 Cities in the US with Strict Airbnb Regulations.

Hosting

If you’re a successful real estate investor but not an outgoing and easy-going person, don’t go for Airbnb rentals. You’ll constantly have to deal with Airbnb guests’ issues and even ensure to help them with tourist tips.

Traditional rental strategy: Pros and cons

The pros of Traditional rentals

When looking at Airbnb vs renting out traditionally, there arise important pros for traditional rentals and they are as follows:

Less effort

With long-term rental properties, you don’t have to deal with guests coming and going. Most importantly, you don’t have to make sure the place is presentable every other day. When comparing Airbnb vs renting out traditionally, traditional rentals are a win with this one.

Costs

The costs of a short-term rental are higher than that of a long-term traditional rental. Why so? The key factor in this remains the tenant turnover. You will be replacing house appliances more often and even maintenance costs.

Stable cash flow

When it comes to income producing assets, traditional rentals are the winner in the residential real estate market. In comparison, an Airbnb rental can produce a larger amount of rental income in a short period of time. However, when looking at the overall calendar, you will realize that a long-term rental generated a more substantial and predictable cash flow.

Management costs

If you choose to manage your own investment properties, good for you! On the other hand, if you own multiple rental properties or have opted for out-of-state real estate investing, that’s a different case. In any case, hiring professional property management is going to cost you less when renting out as a traditional rental.

If you’re wondering whether you should or shouldn’t hire professional property management services, read this blog post: When Should Landlords Opt for Professional Property Management?

The cons of Traditional rentals

Control

With traditional rentals, you have minimal control over your property as long as your tenant is paying rent and adhering to his/her contract. However, with Airbnb rentals, due to the short rental period, you have more control over your property as you get to decide when your investment property is to be used.

Payments

With Airbnb rentals, you never have to worry about delayed payments as you always get paid in advance. On the other hand, you’ll have to wait until the end of the month and wait for your tenant to send you the rent check.

Less rental income

With investment properties, the higher the rental yield, the better. Taking Airbnb vs renting out traditionally in comparison, traditional rentals are the ones making less money.

How to choose the optimal rental strategy for your investment property

Choosing a rental strategy for your rental property can be done with speculations (which is not recommended) or with an investment property calculator. Why an investment property calculator? An investment property calculator is ideal as it gives you the occupancy rate of each rental strategy and ensures you’re making the most money out of your property. Through Mashvisor’s investment property calculator, a real estate investor can find out the return on investment, expected rental income, and even rental costs. It also provides real estate investors with the cash on cash return ratio and cap rate. To make use of the 14-day free trial with Mashvisor’s investment property calculator, click here.

Airbnb vs renting out traditionally: Which one is right for your investment property?

When it comes to choosing an investment property, real estate investors can choose from the wide selection of residential, commercial, and even industrial investment properties. With residential real estate, Airbnb vs renting out traditionally comes as the second question any investor must ask him/herself. There is no wrong or right answer, there is only a more suitable rental strategy. Don’t hesitate to invest in real estate, you can choose how to make money in real estate.

If you have any more insights on Airbnb renting or traditional renting, please share them in the comments section.

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