Converting Your Property From A Short
If you’re new to long-term rentals, there are several things you’ll need to consider before putting your investment property on the market. First and foremost, you’ll need to understand that in North Carolina, there are different laws that apply to long-term rentals versus those that apply to vacation rentals. The process outlined below may sound a bit complicated and involved, and, if not undertaken properly, it can be.
One of the best things you can do if you’re entering the long-term rental market for the first time is work with a professional property management company like Sweyer Property Management. We have experts who can guide you through every step of the process from preparing your home for the market and advertising to tenant screening, lease signing and beyond.
This will be another vital component of putting your property on the market. You of course will want to set yourself up to turn a profit each month, but you don’t want to go so high that no one takes a second glance at the home. Looking at comparable properties will help give you a good idea of how to price your home, but you’ll also need to consider what features your home has that others perhaps dont. This is another area where a professional can play a key role and having the home priced right can aid in decreasing your vacancy period.
Target Groups That Are More Likely To Book Longer
Youve got many different travel groups to appeal to. More traditional, 9-5 travelers might not be opting for a month-long stay, while a digital nomad or workcationer will. Make sure youre setting your focus on a group thats going to buy into what youre selling. There are numerous options for marketing to a specific target group. Running social media campaigns on platforms like or might give your property higher visibility to potential guests, for example.
Second Home Vs Investment Property: Requirements To Buy A House
The risks associated with a second home vs investment property vary. This leads to different requirements to buy a house for each property type.
Just like with any major investment, real estate investors should ask themselves âCan I afford a second home?â before making a vacation home purchase. The answer will determine if you need to turn to a mortgage lender.
Second homes are riskier to lenders. This is why second home mortgage rates are usually higher than those of primary residences. Second home mortgage rates are not the only thing higher than their primary residence counterparts. Down payments, which can range from 0% to 25% for primary residences, are usually at a 20% minimum for vacation homes. Many lenders also mandate that the property be located at least 50 miles away from the investorâs primary residence.
Much of the previously mentioned requirements also apply when buying an investment property. Investment property financing, for example, typically requires a 20 to 25% down payment, although there are plenty of methods to reduce and even eliminate the down payment altogether. Mortgage and interest rates are typically higher for investment properties than primary residences as well since they generally carry more risk. Investment property financing, however, is broader than vacation home financing. There is a myriad of options available to finance rental properties. The same cannot be said for second homes.
Don’t Miss: How To Plan Your Vacation
Long Term Vs Short Term Rental
With the advent of online rental platforms like AirBnB and VRBO, many real estate investors have opted for a short-term rental strategy. Others prefer the stability of long-term rentals. This begs the question, long-term rental vs short-term rental whats the better option?
Short-term rentals consist of nightly and partial home rentals. They typically have higher nightly rates but need more management. Long-term rentals include one-year and longer leases. They provide stability but have lower rates. Investors need to weigh the pros and cons to decide what makes sense.
Ill use this article to explain more of the pros and cons of both long-term and short-term rentals. Specifically, Ill cover the following topics:
- An Overview of Short-term and Long-term Rentals
- Short-term Rentals: Advantages
The Pros And Cons Of Owning Long
There are many things to consider when determining whether to list your property as a long-term or short-term rental. To optimize returns on your investment property, its important to understand the benefits and drawbacks to both options.
Location is a top factor. Short-term rentals are becoming a popular alternative to traditional hotels for many vacation-goers in popular touristy areas. If you have a property in the heart of San Diego or a coastal city like Carlsbad or Encinitas, then you might consider a short-term rental for the premium nightly rates and abundant tourists. On the other hand, a long-term rental provides more stability with consistent yearlong tenants.
Here is a guide to some of the pros and cons of short-term and long-term rentals.
Don’t Miss: Rent Disney Vacation Club Points
Vacation Rentals Save Travelers Money
Compared to hotels, vacation rentals are surprisingly affordable and much less restrictive. A study by TripAdvisor found that vacation rentals are actually 39% cheaper than hotels on average. The space offered by a vacation home means more guests can stay together, reducing the cost per person without compromising on space.
The Possibility Of Major Damage
An ultra-short-term renter cares less about your property and the items inside. There is an increased risk of your property being damaged, things being stolen, and other issues.
For example, this Toronto family went south for Christmas and decided to make some extra money by renting out their house on Airbnb. While they were away, they received messages telling them that their tenants had used their home for a party that had hundreds of guests.
What did that cost them? More than $35,000.
Recommended Reading: Landmark Vacation Rentals Highlands Nc
Airbnb Vs Long Term Rental: Evaluating Income
Rental income is the first thing youll want to think about. Vacation rentals have a larger upside in this area because they earn more. Sometimes, the income per night or per week is double what youd earn on a long-term lease.
But, with that upside comes a lot of extra risk to your income. For example, just looking at the COVID pandemic and its impact on travel and tourism may have any owner second-guessing the decision to rent out a vacation home. There may also be an economic recession, causing your income to fluctuate and become unpredictable.
What youre able to earn on a vacation property will also depend on your homes location and condition. We have seen homes of the same size just a few spots away from each other having different views and different parking set-ups. Those things lead to a large variance in what the owner earns.
Long-term rental properties have a more consistent income stream. There isnt a seasonality issue, and theres a low risk of vacancy. Kelowna has a high demand for long-term properties. Theres a lot less risk to your income stream.
Airbnb Vs Renting: Legal Rules And Regulations
Regulations against short-term rental units are on the increase. What makes it more challenging is thatshort-term rental laws may vary from state to state. This means that you have to do your research diligently.
If your city does allow short-term rentals, you might have to apply for a permit. This means that you would have to pay extra fees. If you think to skip this step, think again as you could get fined. In some cases, you might even have to pay for legal action. You may also have to request permission from the HOA if your rental property is in an apartment building or gated community.
Also Check: Marriott Vacation Club Buy Back Program
Airbnb Vs Renting: Rental Income
Airbnb is a third-party website that helps short-term rental homeowners connect to travelers. Hosts can list their properties on its platform and then rent them out on a short-term basis to guests. Airbnb does charge a service fee, but in exchange, it will market your Airbnb listings and take care of the payments.
If you opt for traditional renting, you will be making your property available to be rented out for a period of six months or longer. It will be afull-time responsibility to market your rental and collect the monthly payments unless you choose to work with a property manager.
When comparing Airbnb vs. traditional renting, there are different aspects that may have a direct impact on your income. Also, both approaches have their own advantages and disadvantages.
More Consistent Cash Flow
Since a long term renter usually pays the same amount of money every month, renting to a long term tenant usually provides you with a more constant cash flow as compared to renting to vacationers. When you have a short term rental, the cash flow is usually really good during the high season and usually much less during the low season.
Read Also: Panama City Beach Vacation Rental Management
Vacation Rental Vs Long Term Rental
When investing in your next real estate deal, it is important to consider all the options available. In this article, we discuss vacation rental vs. long term rental investment properties. Then, you can choose a path to follow and generate cash flow.
First, investing in a property you wont be living in brings a whole set of factors to consider. With the goal of maximum return, you will be looking at your options from a more financially strategic point of view.
Today, the short term rental space is experiencing some challenges due to the recurring COVID-19 pandemic. This brings obvious concerns from investors due to the major slowdown in travel and the uncertainty about when the tourism industry will fully recover.
Nevertheless, there will be opportunities for this industry to start picking back up as countries lift travel restrictions. For instance, since large hotels have taken the biggest hit, this leaves the field open for short term rentals to take some of that market share prior to the full opening.
Our recommendation for those Airbnb hosts suffering from the effects of COVID-19 is to look around. For instance, if your rental property is located near hospitals or emergency rooms, you could approach healthcare workers. They may be afraid to go home after being exposed to the virus. These people can rent your property mid-term stays, which can protect your investment while the economy keeps recovering.
Family Home Vs Investment Property Whats The Difference
For many Kiwis today, getting a step up the property ladder raises the question of investing in a family home versus an investment property. Perhaps you can live where you really want to by renting, but own somewhere else ?
Whether youre preparing for retirement, your familys future, the kids future or a change in lifestyle, this blog looks at the differences between owning an investment property compared to a family home, how you should approach each if youre considering buying or selling, and the important financial implications of each.
Buying a property is a big financial decision no matter what stage in life youre at. You know a family home will provide security and happy memories for you and your family But perhaps youre wondering if its wiser to invest in a rental property that could make more financial sense? Heres the major difference: while your family home functions as a primary residence thats bought with the heart, an investment property should be bought with the head. Its a business that should be run to provide you with the maximum return.
Recommended Reading: Old Town Park City Vacation Rental
Short Term Vs Long Term Rentals: Which Is Better
- 12:00 pm
- Real Estate Strategy
When it comes to investment properties, there are a variety of options to choose from. But there are also a variety of conditions to think about prior to making your purchase. In the rental space, you basically have a choice between short term rentals and long-term rentals. There are other sorts of investments available, but these are the two basic types.
Many investors own a combination of both. If youre curious why they wouldnt just choose one type or the other, you came to the right place. In this article, we will discuss the differences between them and why you might choose one or the other.
Renting Versus Buying A Vacation Rental Property
One of the most common questions we are asked is, Is it better to buy or rent a vacation rental property in Maui? For some, the answer might be easy depending on your financial situation and/or how frequently you visit the island. For others, it may not be so simple, especially for those who have never purchased a property before.
At Epic Realty LLC, we are committed to helping simplify the process of buying or renting a vacation rental property based on your needs and goals. We have outlined some of the benefits of buying versus renting below for those who may be interested.
Also Check: Sailboat Vacations In The Caribbean
Vacation Rental Vs Investment Property
Basically with an investment property, the goal of owning the property is purely to use it to gain profit. With owning a vacation rental, its a property that is usually a vacation home or second home that the owner can rent out at short term for vacationers or event goers when the owner is not using the property.
A lot goes into owning a second property in terms of taxes and loan options so do your research before purchasing a second home or an investment property.
This article was written by Cameron Lafontaine.
Insurance May Not Cover Short
Not all insurance companies will cover short-term rentals, and you could be left stranded when you try to make a claim. If youre looking into short-term rentals, you have to dive deep into what insurance companies cover and what theyll do if something happens when renting to someone off of Airbnb.
Theres a risk involved that could leave you paying for damages made by tenants out of your pocket.
Don’t Miss: Maui Banyan Vacation Club Kihei Maui Hawaii
Financial Stability And Forecasting
Long-term rentals provide investors a tremendous level of stability. Once you sign a long-term lease, you know exactly how much rent youll receive for the duration of the lease. Even with variable operating expenses, this continuity allows investors to plan and execute accurate operating budgets for a property. And, these budgets allow investors to conduct long-term cash-flow and investing forecasts, forecasts that enable planning for future investments.
While investors can certainly build models to project short-term rental revenues over time, theyll inherently lack the accuracy of a long-term rental. This can prevent investors from projecting future returns and therefore building a strategy to purchase their next investment.
No Guarantee Of Income
Keeping your home occupied with renters is difficult when using Airbnb. Schedules dont always line up, and your unit may sit unoccupied for long stretches.
And rememberyoure losing money for every night that your unit isnt occupied.
Long-term rentals practically guarantee occupancy, and thats valuable in itself. You can always guarantee that youll collect a consistent rent check at the start of every month for as long as the lease is in place.
Don’t Miss: Vacation Packages From Denver To Cancun
Which Platform To Choose
- Listing a property is free
- Fees are deducted automatically from bookings, making it hassle-free. These fees are currently set at 3%
- Airbnb is popular with business or frequent travelers, enduring high traffic from this genre of guests
- Airbnb has the added advantage of listing popular and noteworthy activities and experiences. It ads a cultural flair and attracts those that would want a different experience to the normal holidaymaker.
- Allows third-party property management
- Listing a property is free
- Hosts have a choice between an annual subscription of $499 or a per-booking fee of 8%.
- Known for its listing options in popular tourist destinations, which would ensure the attraction of holidaymakers in a place like Orlando, Fl.
- Allows third-party property management
- Listing a property is free
- Fees are deducted from your bookings, making it hassle-free. Fees are set at 15%
- Hosts have no control over who is accepted once a booking is made, it is automatically accepted.
- Collecting payment have been known to be more complicated than with Airbnb and VRBO
- A very large market with no set type of traveler. This means the property will be highly visible, but hosts wont know who their guests are
- This option is not set up to allow third-party property managers
- Now that you know more about the options and factors involved, you are better able to decide on your rental strategy. Contact our property management specialists for more information on our services.
Regular Access To The Property For Maintenance Checks
Short-term rentals allow property owners to check on the property regularly between guests. Unlike with long-term rentals, where you have to rely on residents to notify you of maintenance issues, youll be able to physically inspect your short-term rental as guests check in and out, so youre more likely to catch potential maintenance issues before they become a big problem. Youll also be able to manage quick fixes, like replacing faulty fixtures, touching up paint, and deep cleaning in between renters, which will help you keep your rental property in pristine condition.
Recommended Reading: Plan A Vacation To Paris France
Overview Of These Property Types
A short-term rental property is a residential property typically rented out on a daily, weekly, or monthly basis. These properties are most commonly known as vacation rentals that individuals and groups booked through popular sites like Airbnb and Vrbo.
People renting for the short-term are usually either vacation-goers or working professionals looking for flexible housing opportunities in more favorable areas.
A long-term rental property is a residential property typically rented out on an annual basis through a 12-month lease with longer-term tenants. Tenants usually rent for the long-term if they arent ready to buy, or if they want to live in an area where renting is a more desirable option due to high home prices or lack of properties for sale.