Based on your results from our Real Estate Investor Quiz, we believe Short or Long Term Rentals in a Condo or House may be the right investment options for you.
Buying an investment property to rent out is a common way to get started in real estate. There are different rental strategies available to you based on the amount of time and energy you want to put into managing the property. Analyze your investment property before you buy using our extensive toolkit.
Short Term Rental
A short term rental (STR) is a property or part of a property leased out on a short term platform, like Airbnb or VRBO. Short term rental stays are 30 days or fewer. It is much more management intensive than a long term rental but can earn considerably more income. Property managers and management companies specialize in this area, which can make it less labor-intensive.
Some short term rental owners opt to rent out a room or suite in their house while still living in the property. Watch this video to see how a Denver investor converted his basement suite into a short term rental, and subscribe to our YouTube channel for more content.
Pros and Cons of a Short Term Rental
Pros of a Short Term Rental
- You can hire property managers to lessen the time commitment. Learn more about how these companies work by reading our interviews with AirSimplicity and iTrip Vacations Denver.
- Short term rentals generally produce stronger return than traditional long term rentals
Cons of a Short Term Rentals
- If you choose to self-manage, you will need to commit 10-20 hours per week.
- STRs require more equity than long term rentals because they need to be furnished and stocked with toiletries and other household goods.
- Some condo building HOAs may have rules against short term rentals.
- Some localities have restrictions that prevent homes from being used as STRs unless they are the primary residence of the owner.
Long Term Rental
This is the purchase of a residential property to be rented out to tenants, usually on a 12-month lease term. This is how most new landlords get started. You may hire out all of the property management functions, but in many cases, you will do many of them on your own.
There are smaller down payment requirements for homes and condos than for larger rental buildings. The purchase process and financing process is very similar to what you experienced buying the home you live in now. It’s a great way for beginners to start investing in real estate.
Pros and Cons of Long Term Rentals
Long term rentals are a good starting point for investors who want to get into real estate. While less work than a short term rental, they still require a time investment, especially to get started.
Pros of Long Term Rentals
- In a strong rental market, it will be relatively easy to keep the property occupied.
- Rents are consistently increasing, which will boost your cashflow.
- If you’ve purchased a home before, the acquisition process will already be familiar to you.
Cons of Long Term Rentals
- You will need to invest at least 40 hours to find the right property and go through the inspection and closing process.
- If you choose to self-manage, you will need to commit up to three hours a week to provide maintenance for the property.
Learn more about how to effectively manage a short term or long term property with our exclusive online courses. These courses are currently on sale for a limited time.
Find out how to set up, advertise, and manage your short term rental with Step by Step Short Term Rentals.
Get all of the tips and tools to run implement a long term rental strategy with How to Self-Manage Your Rental on Autopilot.
Analyze your rental portfolio using our Property Llama software. Find out how much money you need to start investing, see how you can build your portfolio, and get real time analysis on your properties. Sign up for your free account to get started.