Short term vs long term rental
OK, you’re ready to buy your first investment property and you have to decide on the strategy. The goal is clear: to maximize your return while ensuring the asset is well maintained (which means good returns for a long time).
If you’re like most people, you have probably heard about making great money on short term rentals (STR), or “Airbnb”. You have also heard how much work it is. So, what should you do with your new investment property?
What would you do?
Well, I cannot tell you what you should do, but I can tell you what I do…
I hold both types of properties in my portfolio. I have some great long term rentals with great tenants, they literally treat my house as their own and allow me to focus my energy on other aspects.
I also own short term rental places, and in Kelowna BC where I live, summer rentals are a great way to maximize your return. These “Airbnb” properties are actually a combination of student rentals during the school year and vacation rentals during the summer months.
The transition between school year to summer and back to school does create quite a bit of work for my team, plus there is a lot more involvement during the summer. I would not categorize this strategy as purely passive. While it takes much less time than a regular 9 to 5, it does consume more resources than my long term rentals.
A few things to consider if you’re thinking doing STR with your investment property:
Furniture and set up costs
Upkeep of the asset, inside and out
Airbnb or other platform costs and set up
Cleaning costs, or time if you do it yourself (I do not recommend that you do)
Supplies (coffee, tea, treats, extra towels, bikes, etc)
Costs of STR licence (if that applies to your city)
Time (and as you know time is money)
I am sure there are other details that need consideration but these are a few to help you decide.
In exchange for all this effort and additional costs I have found that a property running on this model can generate about 2-3X the revenue compared to the same asset running strictly on a long term rental approach.
The decision is only yours, you decide if you are willing to work and invest extra to maximize your return or if you want to keep it as passive as possible.
Please feel free to message me with any questions and I’ll do my best as always to share my two cents wth you.
Mucho amor,
Abe
