Exploring Rental Properties: Your Guide to Understanding the Different Types of Rentals Available

Have you seen the growing popularity of Airbnb properties and thought to yourself, “Maybe I should invest in one of those?”

Historically, even in times of economic instability, real estate is one of the most reliable and profitable investments out there, and this fact has many investing in rental properties. But the question is, should you focus on long-term rentals, or should you jump on the bandwagon of short-term rentals like Airbnb's?

When deciding how to lease out your investment property, there are a few key differences between short-term and long-term rentals to consider.

Long-term rentals give you stability. Generally, leases are signed for 12 months or longer, providing a steady and predictable income. And predictable income is especially important if your rental property has a mortgage. Long-term rentals also allow vetting your tenant with financial and background checks before handing over the keys.

On the other side of the coin, though, long-term rentals make it harder to perform maintenance, upgrades, or renovations on your property. And if rent prices increase in the area, you can't raise the rent until the lease is up, losing out on potential income.

Ok, what about short-term rentals? With the popularity of accommodation-sharing platforms like Airbnb, landlords increasingly list their properties as short-stay rentals. Billed by the day or week, short-term rentals are attractive because they can potentially generate 2-3 times the income of a long-term rental.

The downside is that bookings can be inconsistent, and while unoccupied, a short-term rental property costs you money rather than making you money. Another risk of short-term rentals is that tenants are notoriously careless and often treat your property like a hotel room. For this reason, short-term rentals generally cost more in ongoing maintenance and cleaning. There's also the issue of who maintains the property in between guests. If you don't live locally, you'll need a professional cleaner and maintenance crew to service the premises.

Overall, both short-term and long-term rentals have pros and cons, but ultimately it comes down to what scenario you can manage and what kind of returns you expect. In either case, having rentals is an excellent wealth-building strategy.

So if you are ready to start adding rental properties to your investment portfolio, whether in the US or overseas, I can help.