Investing in rental properties can be a lucrative way to generate passive income, but choosing between a short-term rental (like Airbnb or VRBO) and a long-term lease is a major decision. Each strategy has its own set of benefits, risks, and profitability potential.
At Brennan Bynum Realty, we help real estate investors make informed decisions about their rental properties. In this guide, we’ll compare short-term vs. long-term rentals, breaking down the pros, cons, and profitability factors to help you determine the best option for your investment.
What is a Short-Term Rental? (Airbnb, VRBO, and Vacation Rentals)
A short-term rental (STR) is a furnished property rented out for a few nights, weeks, or even months at a time—commonly through platforms like Airbnb, VRBO, and Booking.com.
✅ Pros of Short-Term Rentals
✔ Higher Earning Potential – STRs often generate more revenue per night compared to long-term rentals.
✔ Flexibility for Owners – You can block off dates for personal use or adjust pricing based on demand.
✔ Frequent Guest Turnover – No long-term tenant issues like lease enforcement or evictions.
✔ Market Responsiveness – You can adjust nightly rates to take advantage of peak travel seasons.
✔ Furnished Property = Higher Value – Well-designed STRs can command premium rates.
❌ Cons of Short-Term Rentals
✘ High Vacancy Risk – Earnings fluctuate based on travel trends, seasonality, and local tourism.
✘ More Maintenance & Cleaning – Frequent guest turnover means higher wear and tear.
✘ Stricter Local Regulations – Many cities have restrictions, permit requirements, or taxes on STRs.
✘ Higher Operating Costs – Utilities, internet, furniture, cleaning fees, and platform service fees add up.
✘ Inconsistent Income – Unlike traditional leases, STR revenue isn’t guaranteed each month.
Best for Investors Who:
- Own a property in a high-tourism area or near event venues.
- Are comfortable with managing guest turnover or hiring a property manager.
- Want higher income potential and are okay with seasonal fluctuations.
What is a Long-Term Rental? (Traditional Leasing & Yearly Tenants)
A long-term rental (LTR) involves leasing a property to a tenant for 6 months or more, typically through an annual lease agreement.
✅ Pros of Long-Term Rentals
✔ Stable & Predictable Income – Monthly rent payments provide consistent cash flow.
✔ Less Hands-On Management – No need to worry about guest bookings, cleaning, or frequent turnovers.
✔ Lower Operating Costs – Tenants typically pay for utilities, and no frequent furnishing updates are needed.
✔ Fewer Regulations – Most areas allow long-term rentals with standard lease agreements.
✔ Easier Financing – Lenders prefer LTRs for mortgage approval, as they offer more financial stability.
❌ Cons of Long-Term Rentals
✘ Lower Earning Potential – Monthly rent is fixed, so there’s less flexibility to increase profits.
✘ Less Flexibility – Once a lease is signed, you can’t use the property for personal stays.
✘ Tenant Risk – If a tenant stops paying, you may face lengthy eviction processes.
✘ Limited Market Adjustments – You can’t quickly raise rents like STRs during peak seasons.
✘ Maintenance & Tenant Issues – Landlords are responsible for repairs, tenant disputes, and ongoing upkeep.
Best for Investors Who:
- Want consistent income and lower management responsibilities.
- Own a property in a residential area with strong rental demand.
- Prefer less risk and fewer operational expenses.
Profitability: Short-Term vs. Long-Term Rentals
| Factor | Short-Term Rental (STR) | Long-Term Rental (LTR) |
|---|---|---|
| Income Potential | High – More revenue per night, but fluctuates | Lower – Fixed monthly income, but consistent |
| Occupancy Risk | Higher – Vacancies depend on travel demand | Lower – Steady tenant lease agreement |
| Maintenance Costs | High – Frequent cleaning and repairs | Lower – Tenants responsible for minor upkeep |
| Management Effort | Higher – Requires bookings, guest communication, and turnover | Lower – Fewer tenant interactions once leased |
| Regulations & Restrictions | Varies – Some cities ban or limit STRs | Fewer restrictions in most areas |
| Flexibility for Owners | High – Can block off dates for personal use | Low – Tenants have legal rights to occupancy |
Which Option is More Profitable?
The profitability of short-term vs. long-term rentals depends on:
1. Location
- Best for Short-Term Rentals: Popular tourist cities, beachfront properties, event-driven areas, college towns.
- Best for Long-Term Rentals: Growing suburbs, urban centers, areas with high job growth.
2. Rental Demand & Local Laws
- Some cities strictly regulate STRs or require special permits and taxes.
- Long-term rentals are more widely accepted and have fewer legal hurdles.
3. Property Type & Size
- Vacation-friendly condos, cottages, and luxury homes tend to perform well as STRs.
- Single-family homes and apartments are often better suited for LTRs.
4. Your Involvement as an Owner
- If you prefer passive income, long-term rentals require less management.
- If you want higher earning potential and are willing to be hands-on, short-term rentals can be more profitable.
So, Which Is Right for You?
✔ Choose Short-Term Rentals if you want higher earning potential, flexibility, and don’t mind active management.
✔ Choose Long-Term Rentals if you prefer steady income, lower risk, and minimal day-to-day involvement.
If you’re looking to invest in rental properties, Brennan Bynum Realty can help you find the perfect property for short-term or long-term rental success!
