source: fool.com

Long or Short Term Rentals? Where is the Money At?

Rentals in Real Estate

One of the best ways to make money at real estate investing is to take advantage of rentals. With rental properties, you can earn a steady income over a certain amount of time. There are two types of lease income when you participate in lease real estate investing.

These include short term and long term rentals. Both of these options have distinct advantages as well as their drawbacks. Whenever you are looking to invest in rental real estate, you will need to assess your goals and objectives before deciding which option to go with. You can also refer to this comprehensive guide from The Kay-Grant Group.

Long Term Rentals

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With this type, you acquire a property and rent it out to tenants for one year or longer. This allows you to make a steady income over a span of several years. It provides you with more financial security as it allows you to earn money over a long period of time.

They are ideal for those who are looking to acquire a large commercial office building or an apartment complex. They can also benefit investors who are looking to rent out houses over the course of several years as well. If you are looking for long term income over the course of many years then long term rentals are the better option as an investor.

Short Term Rentals

This type is when you rent out a property for a period of time that is usually less than one year. Many of these short types last for six months, three months or one month. Many of these are month to month agreements as well.

Most investors who use short term rentals own properties such as storage units, hotels, Airbnb and rooms in a house. Using this type of lease can provide you with a temporary source of income while you wait for a property to appreciate in value. You can also read this comprehensive guide from iGMS about Airbnb properties’ profitability.

Once it attains the desired value, you can then sell the property for a high profit. Therefore short term rentals are ideal if you are looking to earn money while you improve a property and then sell it within one year.

Investor Goals

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Whenever you are looking to decide on short term or long term rentals, you will first need to assess your goals. Depending on what you want to accomplish as an investor, you will want to choose the lease option that will enable you to achieve the particular goals that you have in mind. For example, if you are looking to keep a property for several years and earn an income at the same time, then long term rentals are a more ideal option. However, if you are looking to make an income for six months and then sell a property for a high profit, then you will want to use a short term rental.

Location

There are a number of factors to consider when investing in rental real estate. One of these factors is the location. It is very important for an investor to make sure that they acquire lease property that is located in a location where people want to live in or visit often. In certain markets such as Scottsdale, there are many properties that are nearby attractions such as art galleries, restaurants, bars, and shopping centers. With all of these amenities, Scottsdale real estate has proven to be one of the best places to invest in short term and long term rental real estate.

Market Trends

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Another important factor to consider when deciding on a long term or short term rental is the local real estate market trends. In areas such as Scottsdale, property prices are appreciating steadily and are also more affordable compared to other desirable cities in the region. Along with appreciating property values, Scottsdale real estate is also quite attainable due to an increase in the available inventory. As a result, investors can find plenty of properties to acquire for either short term or long term rentals. Therefore, positive trends in the local real estate market are detrimental to deciding on whether to invest in rental real estate.

Rental Affordability

When choosing between short or long term rentals, the affordability of units is a major factor. It will be important to focus on the average rent for a particular housing or commercial unit and see if they are affordable for most tenants. Whether you are looking to get a short or long term rental, it is important to make sure that both individual and business tenants can afford a certain lease rate on a consistent basis.

If you are looking to have residential long term rentals, then it is important to ensure that tenants are financially stable and are able to commit to at least a one year lease. For short term rentals, it is important to ensure that a temporary tenant has the cash reserves or income to pay the local lease rates with ease.

Competitive Rental Rates

source: fool.com

Another one of the most important factors to consider where the best economic opportunities are with rentals is offering competitive lease rates. Whether you offer a long or a short term rental, it is important to offer lease rates that are at or below the average rate for a particular area.

If you own an apartment complex and are looking to have long term residential income, you will need to offer rental rates that most tenants in the area can afford. For short term rentals, you will need to offer rates that visitors and tourists can pay quite easily. As long as you offer competitive lease rates, you will be able to make a substantial amount of money with either long or short term rental units.

Long Term Income

As an investor one of your goals may be to earn a steady income over time with a rental property. If this is your main goal as an investor, then long term rentals are the better option to go with. Since they provide an income on a long term basis, you will be able to enjoy financial security for many years. Long term rental income allows you to establish a steady source of income and support your lifestyle. If you are looking for financial independence and long term security, then a long term rental is the option that you should choose as an investor.

Quick Sales

For those who are looking to make a quick sale or sell a property within a matter of months, short term rentals are more beneficial. With a short term rental, an investor can earn a stable income while they hold the property.

Within six months to one year, they sell the property and then earn a lot more money. This is very good for investors who are looking to fix and flip homes or take advantage of the high appreciation in a given market. For those looking to get rid of property within several months to one year, a short term rental is a more financially beneficial option.

Conclusion

Investing in real estate is one of the very best ways to build wealth and establish financial security. When investing in real estate, one of the most common strategies is to buy and hold property. With this strategy, you will be able to use either short term or long term rentals. These two options will benefit you depending on what your goals are. For those that are looking to maximize profits, using short term rentals and selling properties within one year is the best option to go with.

For those looking to earn a stable income for many years, long term rentals are what will allow you to achieve your investment goals. Whether you use short term or long term rentals, your financial situation will greatly improve as an investor in real estate.

About Suzana Kovacevic