Have a Second Home? How To Decide If Listing It on Airbnb or Finding a Long-Term Renter Is Better for You

Have a Second Home? How To Decide If Listing It on Airbnb or Finding a Long-Term Renter Is Better for You

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If you’re someone with a second home looking to make extra cash, you might be facing a win-win situation. The vacation rental industry is quickly rebounding from the COVID-19 pandemic, while the long-term rental market continues to see double-digit growth.

But, in the long run, the question remains which option offers the best return on your investment: the short-term rental market (e.g., Airbnb) or the long-term rental market (i.e., tenants who sign a lease).

“As a Realtor® for almost 20 years, I always advise my clients to start with a long-term rental,” says Lauren Rosin, founder and CEO of Rosin Real Estate Team, EXP Realty, with offices in Scottsdale, AZ, and San Diego. “If that goes well and they have the stomach for it, try a short-term rental next.”

But before you decide which option is better for you, let’s take a look at a few things to consider when choosing to rent out your second home.

Know the local rental laws

Before you consider turning your investment property into a short-term vacation rental or a long-term rental, research the laws governing rentals in your area.

Visit the local city offices and find out what rules and permits are required to turn your property into a rental. And also check with your homeowners association—if you have one—for restrictions on rentals.

Many cities have adopted bans or enforced specific rules surrounding turning your property into a short-term rental. For example, Honolulu adopted complex regulations in 2019 to ban rentals beyond 30 days.

Make sure you do your due diligence and familiarize yourself with the area’s laws.

How much time do you have to manage the property?

The answer to this question depends on where your investment property is located. Is it nearby so you can respond to immediate requests from vacation renters? And do you even have the time to respond to requests as they arise?

Between the two types of rentals, a long-term tenant is often easier to manage while a short-term rental will require handling a steady cadence of bookings, turning over the property, cleaning the unit, and restocking supplies.

“As a long-term landlord, no one is calling you to bring more K-Cups or creamer on a Sunday morning,” says Heather Imig, a real estate agent with Neighborhood Experts Real Estate in Gig Harbor, WA. “People paying top dollar for a short-term rental nightly are needy.”

With a long-term rental, you’ll generally have to patch up nail holes and make a few repairs at the end of each lease.

Do you have the budget to furnish the property?

Unlike a long-term rental, vacation rentals need to be furnished. People renting these properties expect to arrive with a suitcase and a few personal items. As the property owner, you will have to provide all furniture, appliances, decor, and household supplies (e.g., toiletries, kitchen items, towels, etc.) that are needed during a stay.

If you don’t have the budget to furnish the property, then a longer rental might be the way to go. Most long-term renters need much less in general, says Imig.

Who will be renting your property?

For most property owners, it’s essential to know about the people staying in their homes, whether it’s for the short or long term. However, while Airbnb and other vacation rental sites conduct background checks on renters and hosts, the company admits that “background checks have limitations.” And so, short-term rental sites recommend that hosts use their best judgment when choosing to rent to a group of people.

But with a long-term rental, most owners conduct their own screening process, which involves reviewing the potential tenant’s credit score, monthly income, and rental history.

Which has the best ROI?

The question of how much money you’ll make with each rental strategy can only be answered with another question: What is your risk tolerance and long-term strategy for your second home?

Short-term rentals have the potential to yield a higher ROI because owners can typically set a higher rate per night than with a long-term rental. But there’s a risk that your property could sit vacant for weeks, if not months, at a time. In addition, Airbnb properties often experience higher vacancy rates due to seasonality and location.

“The main appeal of a long-term lease is that it helps simplify and streamline the entire process of generating income from a property investment,” says Johana Williams, senior property manager with Utopia Management, which operates in California, Washington, Nevada, and Oregon. “It also makes income more reliable and resistant to changes in the market, which is attractive to investors looking for stable, conservative ROI.”

The post Have a Second Home? How To Decide If Listing It on Airbnb or Finding a Long-Term Renter Is Better for You appeared first on Real Estate News & Insights | realtor.com®.

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