When investing in real estate for rental purposes, owners have to decide what they want to do with their new home.
There are many factors that can help owners and managers weigh up whether they should opt for long or short-term rentals. Most of the time, this decision is made easily, and depends on the nature of your property itself and what you want to achieve. There are, however, a number of advantages and disadvantages to these two rental strategies.If you need help deciding whether short or long-term renting will suit your home best, you’re in safe hands. Sit tight while we outline the pros and cons of both types of rental strategy.
Advantages of daily rental
- Increasing demand for short-term rental
The industry is fueled by the advent of Airbnb and other booking platforms such as booking.com and HomeAway.
In a survey by TripAdvisor, 67% of travelers are keener of booking vacations rentals than traditional hotels as the former promises value with lower or same rates, but with comparable amenities to the latter. In renting out condo units for short-term, travelers enjoy bigger spaces, the facility to cook and eat in — something not offered by hotel rooms. Backpackers, families, ‘staycationists’, business travelers both local and foreign, corporate employees, expats or just about everyone — these are the market looking out for attractively furnished short-term apartments.
- Potentially higher rental incomes
While long-term rent is always preferred by unit owners, understandably because of the security of a one year, continuous monthly rent (minus the hassle of property and guest management), the truth is you can do both. There is an increasing market for condominium tenants, yet parallel to that is an even faster increase in the supply of units in urban side of Kuala Lumpur. While you wait for the right tenant with the right terms for your property, it would be good to fill the gap with short-term rentals.
However, short-term rental is not just a gap filler. On its own, short-term rent can potentially yield a higher rental income. In fact, we know of unit owners who continue to invest in buying condominiums and renting them all out on a short term basis.
- Flexibility to use your property anytime
One of the perks of putting your property on short-term rent is being able to enjoy it from time to time. You can use the property when it is not booked by guests. Or you may simple block the property for use by yourself, your family, relative or friends.
You can join the booming industry for short-term rentals or decide later. Either way, the industry is here to stay and has already shaped the way things are done now and in the future.
Points against daily
- More maintenance and upgrades
When your business is daily rentals, you need to maintain a great general upkeep of the property or you could receive some really negative reviews. Not only does this include things such as regular cleaning, maintenance such as drain unclogging and paint fixes, it also takes into account changing technologies and modern inventions. You’ll need to update your rental amenities every so often to include all the essentials and more for a pleasant stay – and this can come with a hefty price tag.
- Not guaranteed income
One frustration many daily rental owners face is the effect of seasonality on their business. While their high season is fully booked, off-peak bookings are scarce which can ultimately cause them to lose money.
While rates can be adjusted to compensate this seasonality (cheap deals off-peak and more expensive during peak times), income and bookings are not always guaranteed.
- Too many things to manage
While for some owners, daily rentals are a retirement hobby-turned-vocation, for others they’re a full-time job. There are plenty of tasks to keep you occupied throughout every guest’s stay.
From ensuring calendar availability is correct to facilitating a smooth booking process, plus a simple and easy check-in and check-out, and not to mention cleaners, gardeners and the rest – daily rentals can be hard work if you don’t have the right tools.
Verdict:
Ultimately, yearly or daily rental both works. The investor’s strategy is paramount in determining which one to opt for. There is no guarantees in an investment.