Airbnb Versus Long Term Rental – Which One Is Better?

In 2018 it’s not hard to know someone who has stayed in an Airbnb within the last year because they are seemingly everywhere these days.

Are Airbnb’s better than long-term rentals? In this article, we will break down Airbnb’s versus long-term rentals and provide you with a concise answer on which is the better option for your rental property.

Bеnеfіtѕ Of Airbnb’s Or Short Term Rеntаlѕ

If you’re thinking about adding a short-term rental or an Airbnb to your portfolio of rental properties, here are some benefits that come from owning this type of rental.

  • Pеrѕоnаl vасаtіоn uѕе: Mаnу іnvеѕtоrѕ lіkе tо mаkе реrѕоnаl uѕе оf thеіr vасаtіоn rеntаl рrореrtу, and rent іt оut tо others whеn іt іѕ, not іn uѕе.
  • Less wear аnd tear: Shоrt tеrm rеntаlѕ tеnd tо bе оссuріеd аrоund wееkеndѕ аnd busy tоurіѕm seasons, but nоt throughout thе entire year. Because оf thіѕ, it tеndѕ tо take rеlаtіvеlу lоngеr tо buіld uр noticeable wear аnd tear оn thе рrореrtу.
  • Mоrе оvеrаll rеntаl іnсоmе: Owners are tурісаllу аblе to сhаrgе a hіghеr nіghtlу rаtе fоr short tеrm rentals. Althоugh оссuраnсу can fluсtuаtе, thuѕ mаkіng rеntаl income less соnѕіѕtеnt, ѕhоrt term rentals tend tо рrоvіdе mоrе rеntаl іnсоmе lоng term.

Short tеrm rеntаlѕ аrе nоt without роtеntіаl dоwnѕіdеѕ though. Why? The answer is obvious. Rеntаl іnсоmе іѕ a dіrесt result оf bеіng able tо bооk ѕhоrt-tеrm guеѕtѕ throughout the уеаr and ѕhоrt tеrm rental оwnеrѕ wіll find thаt they nееd to put in mоrе еffоrt tо mаrkеt their hоmе.

As an owner of a short-term rental property, you will have to be ready to do more work to keep your rental occupied all year long including: mеѕѕаgіng bасk and fоrth between іntеrеѕtеd guests, uрdаtіng lіѕtіng ѕіtеѕ, or offering рrоmоtіоnаl dіѕсоuntѕ and so much more.

Bеnеfіtѕ Of Long Tеrm Rеntаlѕ

Planning on keeping your rental property a long-term rental? This is a smart choice to make, especially because of these benefits.

  1. You will enjoy cоnѕіѕtеnt cash flоw: Because a longer-term tenant рауѕ a соnѕіѕtеnt rental fее оn a wееklу or mоnthlу basis.
  2. The utility bills will always be pаіd: If you have tеnаntѕ occupying your lоng tеrm vасаtіоn rentals fоr a mоnth or lоngеr, then оftеntіmеѕ utіlіtу bіllѕ саn bе раѕѕеd оn to the tenant.
  3. There will be less turnover.

Get Property Management for Your Long-Term Rental

Do you own long-term rentals in San Diego, Phoenix or Las Vegas? Contact Goldenwest Management at (866) 545-5303 or click here to connect with us online.

San Diego City Council Votes to Limit Vacation Rentals

By GoldenWest Management

Thanks to the outcry of renters in the San Diego area who have been hit hard by the housing shortage the San Diego City Council has voted to outlaw vacation rentals in secondary homes while limiting short-term stays to just the homeowners primary home only.

This move will certainly hit investment activity in the short-term rental market hard while making it harder for anyone who lives out of town to own short-term rental property in the San Diego area.

 

11,000 Short Term Rentals Could Be Affected

The news of the City Council’s vote spread fast and of course there were mixed reactions from people who support Airbnb style rentals in the San Diego area and those who oppose them.

On the positive side, the City Councils move may turn thousands of Airbnb vacation rentals in the San Diego area into long-term rentals.

Thanks to a recent article from the San Diego Union-Tribune we know that there are an estimated 11,000 vacation rentals in San Diego right now so having more inventory for renters to choose from will definitely make a big difference during the housing crisis.

Although more long-term rental housing is a good thing, many advocates of short-term rentals, including Airbnb itself, have voiced their opinion on how the city councils move is an “affront” to hardworking taxpayers who own Airbnb’s and it may force travelers to seek alternate vacation stay options

Estate Agent Showing Empty Office Space To Clients

Support from San Diego Residents

After word of the San Diego City Councils vote spread, the support was almost unanimous among residents and community advocates who have been fighting short-term rentals for years, especially in the beach communities where 40% of the rental inventory in cities like Mission Beach have been vacation rentals. – Source – San Diego Union Tribune

Short term rentals like Airbnb’s aren’t gone for good, if an owner meets the City of San Diego’s requirements for short-term rentals, they may still keep their rental active but they are also going to have to pay hefty fees.

For example, the city is going to require owners who want to rent their entire home to pay a fee of $949 annually. This is believed to be the highest fee in the United States and it may cause many owners to turn their short-term rentals into long-term rental properties. – Source – San Diego Union Tribune

Get Property Management in San Diego

For affordable property management in the San Diego area contact GoldenWest Management today by calling us at (866) 545-5303 or click here to connect with us online.

Vacation Rental vs. Long Term Rental – Which One Is Better?

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By Goldenwest Management

Thanks to websites like airbnb & vrbo people around the world have taken to buying real estate with the goal of turning those properties into vacation rentals. But when taking a deeper look at the net figures as well as return on investment (ROI), vacation rentals often do not perform as well as long term rentals.

Vacation Rental vs. Short Term Rental

Over the last year short-term vacation rentals have been very popular especially in cities like San Diego, Las Vegas, and Phoenix. This follows the success of companies like Airbnb, VRBO and Homeaway in many cities around the world. These sites do a great job of connecting property owners with travelers from all over the world.

But there are problems, and not just with bottom line figures:

  • Screening: Every long-term rentals managed by a landlord or professional company will perform a tenant screening to include background, credit, and an eviction check. The average short term rental property doesn’t peform any checks. Many rely on the previous reviews of from the online vacation hosting site, and even less actually demand any form of ID.
  • Community PushBack: In spite of the popularity of short-term rentals, some cities are starting to ban rentals less than 30 days with many communities (HOAs) imposing 6 month or 1-year Heavy fines are being levied when neighbors turn in other neighbors for not following the community vacation rental policy. And lets be honest, it only takes one unruly guest to turn your neighbors into your biggest opposition.
  • Guest Experience: Short term rentals are expected to provide “Concierge Service” to would be hotel guests. This takes a lot of time and energy and has increased (which equals dollars) with ever growing competition. If you haven’t hired a third party firm, you are left on your own to do everything from checking the guests in and out; arranging cleaning, repairs, restocking and inspections. If you don’t have the best in wifi, upgraded cable, perfect pillows, or soft beds, you will hear about it online.

vacation rental san diego

What Is your “Real” Return On Investment With A Short Term Rental?

If you were to ask the owner of a typical short term rental property about their profits they may tell you that their gross revenue is high, and they are loving the profits, but their P&L statement will tell a different story and their net income will usually be equal to or less than long term rentals. Here’s why:

Management Costs – Property management companies specializing in short term rentals charge roughly 20% with fees ranging as high as 30 and 35 percent in some areas (Vail, Co for example). This is usually double to triple the fee that you would pay for Long-term management (7-10%).

Even if you self-manage, you still have to find “guests” using VR sites like HomeAway, VRBO, Airbnb. These sites now have base fees equal to at least 10% per booking with additional charges like credit card and international fees, etc.

Utility costs – Tenants in long term rentals normally pay all utilities, with the possible exception of Landscaping or Pool service. Vacation rentals not only have the landlord pay the basic utilities, to be competitive, Landlords must also force pay for the internet, phone and more than just the basic cable to be competitive. At $300 – $500 per month, this is another 4-6% of a rental that grosses $100k per year and 8-12% of one that grosses $50k.

Cleaning costs – For LTR, the Landlord pays to have their home get a detailed professional clean before the 1st Tenant moves in and then the Tenant normally covers this expense when they move out. But for vacation rentals, it can be anywhere from $75-$150 after EVERY rental. Sticking with the standard 50% occupancy rate (talk about that more in a second) that’s 26 times a year for a weekly rental…or roughly $3000. Even if you have the Short term rental guests cover the basic cleaning costs, most managers will tell you that you will need a “Deep” clean done at least once per quarter. This is above and beyond what you may push onto your guests and is something you wouldn’t do with long term rentals.

Restocking –  Vacation rental Landlords and management companies at a minimum provide Toilet paper, paper towels, laundry detergent, soap, coffee, paper cups, towels, and if you include annual repurchases of kitchenware (people break bowls and glasses all the time) you can spend another $50 per month on average ($600 per year). For higher end vacation rentals, there are other amenities provided including “welcome gifts” such as wine, champagne, food, flowers, car and maid service, shopping services, etc…

San Diego property manager

 Getting Down To Reality

 When focusing simply from a profit stand point, choosing to vacation or short term rental your home, whether that be by the beach in San Diego, near The Strip in Las Vegas, or near Old Towne in Scottsdale, may not always be the best course of action.

For example: let’s say that you own a short term rental property in San Diego and it brings in about $100k per year in gross revenue at 50% occupancy (at 26 weeks and average of just under $4k per week). Although the profit sounds exciting, you have to think about the cost and fees associated with this short-term rental property including:

  • 20% management fee = $20k
  • $5000 for utilities
  • $3500 in restocking and cleaning fees
    _____________________________

Net profit is rough $71,500.

Consider a conservative long term monthly rental at $6k per month, (usually 1.5 of the average weekly rent) is $72K gross, but you still have to think about your fees and other expenses which come with this rental property including:

  • $4000 management fee
  • 1 time cleaning $150

__________________________________

       Net income is $67,500

Notice that we use conservative numbers for the long term and the net difference without factoring in the cost to furnish the property or any local rules or prohibitive ordinances. There is a 4% difference.

If your VR rental occupancy figures dip or bring in less in rental income you can quickly see that 4% disappear. Example, year two your rental only brings in $90k, and your expenses don’t change, now you net $63,500, or 5% deficit to the long term.

This is all before the cost to “furnish” and maintain your residence that will undoubtedly absorb more in wear and tear via short term vs a long term rental.

Property Management San Diego

Owning a Long Term Rental Property Makes More Sense

Another reason to think twice before owning a short term rental property is volatility either in the economy or marketplace which could impact the profits you were enjoying from your rental property.

It’s also important to think about natural disasters and or terrorist events because either scenario could affect your long-term profits. What once was a profitable vacation rental could send your finances in the red, very fast.

Why own a vacation rental? Unless you and your family are going to spend more than 1 full month at the property per year, or the home is located in such an area where the gross vacation rental revenue beats the long term rental revenue by more than 35%, it makes no financial sense to choose short term/seasonal/vacation rental over the steady and stable long term option.

Learn More about Vacation Rental vs. Long Term Rentals

To learn more about vacation rentals vs. long term rentals, or to speak with us about our property management services, contact Goldenwest Management today by calling us at (866) 545-5303 or click here to connect with us online.

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