The Good, Bad, and the Ugly – Airbnbs

Do you own an investment property that just isn’t doing well and you’re thinking making it a short-term rental would be more profitable? Maybe you just want to make your investment an Airbnb because you’ve heard you can make more money this way. Whatever the case, turning your investment property into a short-term rental may not be the best idea you’ve ever had. Here’s why.

What’s Good About Short-Term Investment Properties

First, yes, short-term investment properties do garner higher rents per day than long-term rentals. Because they are rented out on a short-term basis, usually less than a month at a time, a landlord can charge higher daily rent than he would with a long-term rental. 

Sounds good so far, doesn’t it?

The Bad Side of Owning a Short-Term Rental

As good as that sounds, there are some expenses many short-term investment property owners don’t realize, which can quickly put a dent in those higher daily rents. 

  • There are expenses that come with short-term rentals such as cleaning, booking fees, maintenance, management, and utilities.
  • Vacancies are common and lower rates during off-seasons are often the norm.
  • You are responsible for providing things like eating utensils, furniture, and other necessities, all of which can get damaged and need replacing. 
  • Economic disruptions (like COVID-19) can lessen demand and cause a decrease in revenue. 

With all that said, a well-managed short-term rental can make more money than a long-term rental, but in general, there are more risks and expenses. It’s not a given that you’ll make more money with a short-term rental just because you can charge higher rent. 

The Ugly Part of Owning Short-Term Rentals

Short-term rentals are a lot of work, plain and simple. Since you’re renting out for a few days, one week, two weeks at a time, you’ll spend a lot of time cleaning your rental between tenants. Furthermore, because you’re renting on such a short-term basis, you’ll also spend a great deal of time looking for and booking new renters. As such, it can be difficult to hold another job or have a life outside being a landlord. 

To make things easier, many short-term rental owners hire a property management company to do the dirty work. While this frees up your time, it also ties up your profits. 

At the end of the day, you must decide if the reward outweighs the risk when it comes to owning a short-term rental. You can certainly make a lot more money with a short-term rental than a long-term one if it’s managed right, but keep in mind that unforeseen circumstances (like the coronavirus) could stop the profits in their tracks regardless of how well your Airbnb is doing. 

If you’re thinking of investing in a short-term rental property, be sure you understand the risks completely so you can make an informed decision.