Real estate investing is a great way to make money regardless of the economic and financial situation. And the Coronavirus pandemic proved that. For instance, even when a large drop in home sales happened at the beginning of the pandemic it quickly recovered in Spring and moving toward summer it already reached the pre-pandemic levels.
However, with the rise of the short-term rental industry, investors have faced a major dilemma: Should they go for traditional rental properties or Airbnb rentals?
While investing in vacation rentals sounds like an attractive opportunity sweeping US markets, investing in long-term rental properties comes with many important benefits. Here are the most significant ones.
Stable Rental Demand
The most important advantage of investing in long-term rentals is the steady demand for rental homes. Statistica reported that approximately 43 million housing units are occupied by renters in the United States” — and growing at a steady pace since 1975.
This is a huge number to bank on when considering getting into real estate investing. The same report attributes the unaffordability of homeownership as the primary reason for the rising demand for rental homes.
In contrast, the spread of the Coronavirus pandemic in the US created mandatory travel restrictions that hugely impacted the Airbnb business as a whole. With guests canceling their reservations and not making new ones, short-term rentals become vacant for too long.
Data from the real estate data analytics company Mashvisor shows massive drops in Airbnb occupancy rates in major US cities as a result of COVID-19. New York City, regarded as a travel magnet, also experienced a 23% decline in occupancy rate as of March 2020 according to the same report.
Since traditional investment properties are rented out on a monthly, or sometimes yearly basis, the turnover is significantly less than with short-term rentals. This is a major benefit for investors as it brings about income predictability and a sense of stability.
Once landlords manage to get their property rented, they can keep the same tenants for months or even years as long as they guarantee habitability on the property.
Reliable Source of Income
Traditional long-term rental property investment is an excellent source of passive income without the need to worry about low rental seasons and subsequent fluctuations in rental demand. Airbnb properties, on the other hand, experience huge swings between high demand and low vacancy rates, making earnings quite unpredictable.
Because of such income predictability, investors of long-term rental properties can easily plan to scale their business.
No Need to Adjust Pricing
Landlords of long-term rental properties only have to set up the rental property pricing once with the help of rental comps or a professional property management company, with no need to change it for several months or even a couple of years.
On the other hand, Airbnb hosts have to be flexible and adjust their pricing strategy on a weekly or even daily basis to optimize the occupancy rate and the rental income of their property.
Airbnb guests are notorious for the amount of damage they are known to frequently cause to vacation home rentals. This is a particularly challenging obstacle for hosts in major leisure destinations such as Las Vegas, Miami Beach, NYC, Los Angeles, San Francisco, and others.
With traditional rental properties, landlords conduct a thorough screening process to help them choose the most ideal renter that will treat the property as their own. With only one tenant to deal with for months or years to come, there is less risk of damage to property.
Likewise, depending on the provisions in the lease contract, some renters cover for minor repairs on their rental home and leave the major repairs for the landlords to settle. This scenario significantly reduces the cost of home maintenance for the landlord, hence a more positive cash flow.
No Need to Pay Utilities
In a rental property, utilities are one of the most sizable recurring monthly expenses that can fluctuate from one month to another depending on several factors. But In most cases, tenants – not landlords – are the party responsible for paying the utility bills.
With this expense factor out of the way, it would now be easier to make an investment property analysis or cash flow projection, especially if there are plans of scaling the business to multiple home units.
Overall, a long-term rental property is easier to manage than short-term ones. Once you have found the right renter, the rest of the work is highly manageable such as checking on your property for any maintenance requirements and collecting rent.
In situations where you prefer to partner with a property manager, choose one that values your property as much as you do, as well as provides you with a seamless and convenient end-to-end rental process. So you could do more with your time and everything else that’s important to you.