We often get asked about the differences when it comes to short-term rentals vs. long-term rentals. Many condo owners are attracted to the idea of short-term rentals, and the numbers don’t lie.
Short-term rentals have skyrocketed in popularity between 2012 and 2017, and continue to rise as we enter the final months of 2019. Airbnb and the gig economy are the main reason why this has happened, and people have quickly jumped on board.
But are they a good idea?
For renters, platforms like Airbnb offers the opportunity for homeowners to rent their property out for more money with less effort. The nightly rate is often higher for short-term rentals, and they have taken precedence over finding one party that wants to rent for two weeks or more.
While you can make more money through short-term rentals, they do come with increased risks. If you’re considering using Airbnb for your property, there are some things you need to consider when comparing short-term rentals vs. long-term rentals.
Short-term Rentals vs. Long-term Rentals—What’s the Difference?
Let’s start with a definition. What is a short-term rental?
Ultra-short-term rentals are rentals of one to four nights. Before the 2010s, these types of rentals were scarce outside of hotels, motels, and private cottages. But now, property owners can rent their place out one night at a time.
Long-term rentals are anything longer than one month and also include when tenants rent a property for months at a time. For example, apartments for rent are considered long-term rentals.
However, there are grey-areas where you may rent an entire unit for a single month. These types of short-term rentals do exist, but are safer because the renter must commit for a longer period of time.
Why Have Short-Term Rentals Become So Popular?
Modern mobile phone technology and the gig economy have changed everything.
Airbnb was founded in 2008, and just ten years later, it’s a $31 billion company. They have 3 million property listings on their platform and are available in 191 countries.
In 2011, less than one million guests used Airbnb to find a place to stay. In 2017, that number is now 100 million people.
There are many reasons why people love Airbnb so much and prefer it over traditional hotels and motels:
- Feels more like home when you rent someone’s apartment, condo, or house.
- Many Airbnb properties offer a luxurious place to stay when on vacation.
- Easy to book, easy to pay.
- Hotel and motel prices have gone up as Airbnb became popular, making many Airbnb options cheaper.
People love using platforms like Uber, Skip the Dishes, and Airbnb that takes a modern look at traditional industries. Airbnb was one of the first platforms in this space and is still one of the most used, especially for short-term rentals.
These platforms might be convenient, but it doesn’t answer the question of what is better for a property owner: short-term rentals vs. long-term rentals.
What Have Short-Term Rentals Done to The Market?
Rental prices have skyrocketed, and the rise of short-term rentals has complicated things even for property owners. People looking for quality long-term leases are finding it difficult to find competitively-priced units in attractive locations.
Long-term rental options are now harder to find and higher-priced. Many cities are now stepping in and fighting back against the overuse of Airbnb. These cities have introduced new bylaws that have to be followed.
This is no different in a city like Toronto, where a major housing crisis exists. Residents have pushed back, and they want their local governments to step in and regulate things. Airbnb is squeezing Toronto’s housing market, and the city’s residents are suffering because of it.
Big cities are not the only locations that are affected. Tourist destinations like Prince Edward Island also have a housing crisis of their own happening right now that has been brought on by short-term rentals.
Property owners have recognized that they can charge more per night for short-term rentals and are now prioritizing short-term rentals.
But this model is far from sustainable, and short-term rentals are facing pressure from all directions. Beyond disrupting the rental market, homeowners face even more risks when it comes to short-term rentals.
What Are The Risks?
1. Increased Risk Of Having Your Property Rented for All the Wrong Reasons
Many short-term renters are typically renting a property on Airbnb for an event, a party, or something along those lines.
Some short-term renters may use your property for huge parties or as a place for illicit activities. There are many Airbnb horror stories that might make you reconsider listing your property on Airbnb.
Remember, a short-term renter has no attachment to your property beyond their stay. They are less likely to take care of your property while staying at it.
2. The Possibility of Major Damage
An ultra-short-term renter cares less about your property and the items inside. There is an increased risk of your property being damaged, things being stolen, and other issues.
For example, this Toronto family went south for Christmas and decided to make some extra money by renting out their house on Airbnb. While they were away, they received messages telling them that their tenants had used their home for a party that had hundreds of guests.
What did that cost them? More than $35,000.
3. Tracking Revenue Becomes Tougher
Keeping track of revenue is hard when it’s flowing in from different sources and at an accelerated rate. If you need to track payment every two or three days, you’re going to waste even more time on bookkeeping.
You need to treat your rental like a business, and you need to provide adequate records to the CRA. This is a lot harder to keep track of with constant turnover.
4. Following Your Condominium Associations Rules
Your condominium might have a specific set of rules set up that you need to follow when renting out your property. Most condo associations keep a close eye on incoming traffic, and short-term rentals are now a hot button issue with associations in Toronto and across the Greater Toronto Area.
If you’re not breaking the rules set out by condo associations, you might be upsetting them, and that isn’t beneficial to you.
5. Upsetting Your Neighbours
Another common issue is the frequent complaints you may receive from neighbors and other residents in a building. A condo is a community, and you must be respectful of other people’s right to privacy and peace and quiet in their own home.
If your neighbors complain to the police or the condo association, you will have to face the repercussions. In extreme cases, you could get sued and even be forced to sell your property.
6. You Can’t Judge the Character of Short-term Renters
When you rent your property out long-term, there is an intricate screening process for the tenants—especially if you use a condominium management company.
But when you take in new tenants through Airbnb every few days, the screening process is ineffective. You have no idea who is renting your place, how many people will be there, and why they are renting it out.
Even by scrolling through someone’s Airbnb profile, you can’t be sure as to who will be staying at our home and sleeping in your bed.
You have to trust that a complete stranger is going to take care of your property. And in Toronto—that property is likely worth more than $500,000.
7. No Guarantee Of Income
Keeping your home occupied with renters is difficult when using Airbnb. Schedules don’t always line up, and your unit may sit unoccupied for long stretches.
And remember—you’re losing money for every night that your unit isn’t occupied.
Long-term rentals practically guarantee occupancy, and that’s valuable in itself. You can always guarantee that you’ll collect a consistent rent check at the start of every month for as long as the lease is in place.
8. Insurance May Not Cover Short-Term Rentals
Not all insurance companies will cover short-term rentals, and you could be left stranded when you try to make a claim. If you’re looking into short-term rentals, you have to dive deep into what insurance companies cover and what they’ll do if something happens when renting to someone off of Airbnb.
There’s a risk involved that could leave you paying for damages made by tenants out of your pocket.
9. Short-term Rentals Are Not Allowed Everywhere
A lot of places around discourage or have outright outlawed Airbnb rentals.
If your city allows it right now, who knows what may happen in the near and distant future. Many locations are cracking down on short-term rentals because of what it’s doing to the rental market.
While it may seem profitable now, one bad ruling could leave you with a vacant property.
10. Additional Services
There are many extra costs associated with renting your property out short-term because of the constant turnover.
You’ll have to look into having a cleaning service come in every few days, and this alone can eat into the profit margins for your rental property. When renting long-term, your tenant is expected to clean their own unit. Your property management company may perform inspections and light repairs, but the majority of the work falls on the tenant’s shoulders.
Along with all of the other things on top of additional cleaning services, these extra costs are just another reason that there are more things to think about for short-term rentals.
Have Questions About Renting Out Your Property Long-term?
You now know more about the difference between short-term rentals vs. long-term rentals. While you may be able to charge more per night, there are many risks associated with short-term rentals.
Long-term rentals are very hands-off, especially if you’re located in Toronto and can hire a great property management company like Del Condominium Rentals.
We offer a variety of services that are designed to simplify the landlord experience. Our company will handle every detail of being a landlord, from rent collection, carrying out essential repairs, and possible evictions.
Don’t become another homeowner that was left unprotected because they decided to try ultra-short-term rentals. Let us show you why long-term rentals are the safest and best way to protect your investment.
Are you interested in learning more? Please contact us at 647-952-3644 or email firstname.lastname@example.org to get started on your long-term rental today.