Short-Term vs. Long-Term Rentals: A Strategic Guide for Property Investors

Which type of rental actually makes you more money?

This is the million-dollar question every property investor tries to answer. And failing to find the right solution can mean thousands lost to missed revenue and completely avoidable frustration.

Here’s the deal…

They both work. But only one will work for you. And the right answer depends on your market, your investment goals, and your availability to manage day-to-day operations.

Here’s What You’ll Discover:

1. Short-Term vs Long-Term Rentals – What’s the Difference?
2. The Pros and Cons of Short-Term Rentals
3. The Pros and Cons of Long-Term Rentals
4. How to Pick the Right Strategy for Your Market
5. When to Work With a House Buying Company

Short-Term Rentals vs Long-Term Rentals – What’s the Difference?

Short-term rentals, referred to as STRs throughout, are properties rented out for periods of 30 days or less. Vacation rentals like Airbnb, VRBO, or privately-owned homes on the beach are common examples of STRs. Long-term rentals are fixed-term leases where a single tenant pays one monthly rent payment, usually $1,000 or more, for the duration of their stay (typically 12 months).

Each strategy can be extremely lucrative for real estate investors. But there are huge differences between the two in terms of daily operations.

As of 2024, the U.S. short-term vacation rental market size was valued at $68.64 billion. That number is projected to grow at a 7.4% compound annual growth rate from now until 2030. That’s an opportunity worth $90 BILLION in the next six years. But investors have to know how to position themselves to take advantage.

For property investors in Fort Worth and other markets throughout Texas, working with a trusted house buying company can help set you up for success. Whether the goal is finding the right property to flip for short-term rentals or buying properties outright to use as long-term rental income, making sure you have the right team in place is crucial.

The Pros and Cons of Short-Term Rentals

Short-term rentals are all the rage these days.

With startups like Airbnb democratizing access to the market, investors across the country are jumping in head-first and realizing sky-high profits in the hottest markets. Airbnb currently dominates the industry with over 7 million listings worldwide.

Here’s the reality, though:

• Rental income can exceed long-term rentals by 2 to 5x
• Revenue Per Available Rental is soaring. New York City saw a 19% jump in RevPAR in 2024 while Chicago wasn’t far behind at 18.2%
• Investors are scrambling to find lucrative properties

The potential is unlike anything seen in the industry.

But it’s not all sunshine and roses.

• Managing a short-term rental is a full-time job. Constant guest communication, cleaning, and upkeep can eat into profits if not managed carefully
• Seasonality impacts yearly ROI more than anything else. National occupancy rates for Airbnb currently sit at around 54%. During off-season, that number can plummet to 20% or less
• A handful of major cities are cracking down on allowing new STRs to operate within city limits. New York, New Orleans, and even Maui have imposed strict regulations that make it difficult (and in some cases impossible) to start an STR business
• Operating costs are significantly higher with short-term rentals. Cleaning fees alone can run $2,000 to $3,000 per month on a high-volume property

Think of a successful short-term rental operation as running a hotel with daily stay guests. Active involvement at every step is essential to ensure things run smoothly.

The Pros and Cons of Long-Term Rentals

Long-term rentals have been tried and true for as long as investors have been investing in rental properties.

While they won’t command the highest dollar figures on a monthly or nightly basis, long-term rentals are perfect for investors looking for stability and consistent income.

Some key advantages of investing in long-term rentals include:

• Predictable monthly payments with very little gap between tenants
• Much less day-to-day management required
• Overheads and expenses can be dramatically lower than a short-term strategy
• Building stable tenant relationships means fewer costly turnovers

The median monthly rent hit $1,373 nationwide at the end of 2024. While that isn’t going to wow you, rent increases have remained predictable over the last decade. Stable, reliable rent payments are what create wealth for real estate investors over a 10 or 20 year timeframe.

But long-term rentals don’t come without drawbacks.

• The ability to adjust rents with rising market conditions is limited
• Dealing with tenant issues like late payments, damage to property, and evictions can be lengthy and expensive
• Gross revenue potential pales in comparison to a well-established short-term property in a tourist-heavy market

That said, long-term rentals are ideal for investors who want a set-it-and-forget-it approach to rental income. Properties near major universities or businesses with stable employment growth are great indicators of long-term health.

How to Choose the Right Strategy for Your Market

Talk to anyone in the business and they’ll tell you…

Location is king.

A strategy in Fort Worth, Texas will differ from Miami Beach, FL or Nashville, TN. Supply and demand is unique to each market and attempting to dive in blind is how many investors get into trouble.

Consider investing in short-term rentals if:

• The property is located close to tourist attractions, airport hubs, or large businesses
• Local housing regulations allow for a non-owner occupied short-term rental
• Average STR occupancy percentages exceed 55% in the target market
• There is capital available to properly manage (or outsource) day-to-day operations

Long-term rentals may be the better route if:

• The market has shown stable or increasing population growth
• Rental regulations make it difficult (or expensive) to operate a short-term rental business
• A “set it and forget it” approach to rental income is preferred
• The property is located in an urban or residential area with little tourism

Knowing when to play both sides can also help maximize profitability. Some of the top landlords in the world only offer their properties as short-term rentals during high-season and opt for monthly leases during dead-periods. This allows them to collect the best of both worlds without increasing operating costs.

When to Work With a House Buying Company

Whether going the short-term route or the long, acquiring the right property comes first.

Failing to do the homework can lead to problems down the line. Whether it’s purchasing a property with structural damages or getting tied up in a lengthy repair process before rent collection can begin, there are certain risks every investor runs.

Partnering with a house buying company takes a lot of the risk out of the equation. Instead of spending weeks or months browsing MLS listings, attending open houses, and submitting offer after offer only to get beat out by investors with deeper pockets, buying companies can streamline the search.

House buying companies are focused on acquiring property as quickly as possible. Oftentimes, these companies have access to off-market deals that won’t be found anywhere else. For investors who have been struggling to find the right property to fit an investment strategy, working with a house buying company can provide the edge needed.

Wrapping Things Up

Neither short-term rentals nor long-term rentals are “better” for a portfolio. Each has its time and place depending on the market, goals, and available capital.

Let’s review:

• Understand the current market dynamics before jumping in with both feet
• Align the rental strategy with time availability, capital on hand, and income targets
• Work with a house buying company to find great deals faster than traditional methods
• Monitor local occupancy rates and pay attention to any regulatory changes regarding STRs
• Don’t be afraid to diversify a portfolio by playing both sides