When deciding between running a short- and long-term rental property, it’s important to take the time to understand the difference between the two. Your choice will have an impact on your financial returns and the day-to-day management of your property. In this article, we’ll explore the pros and cons of each option, helping you decide what is best for your rental properties.

Key Takeaways:

  • Short-term rentals can generate higher cash flow but also have higher operating costs and potential vacancies.
  • Long-term rentals provide consistent, predictable income and lower operating costs.
  • Short-term rentals require more hands-on management and upkeep, while long-term rentals generally involve less frequent tenant turnover and fewer maintenance issues.
  • Working with a property management company for your long-term rental is an affordable option to help run a successful rental.

Short-term vs. Long-term Rentals: What’s the Difference?

When you decide to invest in rental real estate, you’ll need to decide how you want to operate your properties. Most landlords choose to categorize their properties as their short-term or long-term rentals:

  • Short-term rentals are categorized as a property that is rented for a fee for less than 30 consecutive nights. Examples of short-term rentals include vacation properties, like those rented through platforms like Airbnb and VRBO.
  • Long-term rentals are generally rented to tenants for a period of 12 months at a time and have a signed lease agreement. Long-term rentals are also governed by landlord-tenant laws.

Understanding the difference between long and short-term rentals can help you make the most informed decision on which type of rental will be best for your investment portfolio. Let’s dig into the pros and cons of both types of rentals, so you have a better idea of what each rental set-up entails.

The Pros of Short-term Rentals

With the popularity of sites like Airbnb and VRBO, more people are considering renting properties as short-term rentals. There are some benefits to short-term rentals in Seattle that may make some investors consider this option.

Higher cash flow

When managed well, short-term rentals can bring in a substantially higher cash flow when compared to a traditional long-term rental. Even when you factor in the additional costs that come with a short-term rental and the seasonal nature of the vacation rental market, if you are on top of your management, you can still see an increase in revenue. But this tends to only be the case when the owner manages the property—adding in the cost of a short-term rental property manager may negatively impact cash flow enough that you won’t see much of a difference from the traditional long-term rental model.

Less legal disputes

When you have short-term renters in your property, there is less likelihood of having a legal issue with the tenants. Long-term relationships come with long-term rentals and these relationships can be tricky to manage. They may lead to disputes which may lead to legal battles. Short-term rentals are much less likely to have disputes that end in lengthy legal battles but there is still the potential for disputes from renters who are not happy with the property for one reason or another.

More flexibility

One of the biggest reasons property owners are drawn to short-term rentals is the flexibility. You can stop by your property when it’s vacant or even book into the property for your own use when needed. It’s also easier to stay on top of maintenance when you don’t have to worry about scheduling a time to visit with a tenant—instead you can plan around vacancies for things like inspecting the HVAC or replacing appliances.

The Cons of Short-term Rentals

While there are some aspects of short-term rentals that may seem enticing, there are also disadvantages that might make investors reconsider.

Potentially inconsistent income due to vacancies

One of the big draws for investors is the potential to generate a higher gross rental income. This potential is real, but there is also the risk that the property will sit vacant for an extended period of time. If your property is not rented, it will negatively impact your cash flow.

Cover higher operating costs

Short-term rentals can be expensive to run—they need to be fully furnished, well maintained, and consistently stocked with personal items like sheets, towels, toilet paper, and cooking supplies. Most renters will be using a short-term rental as an alternative to a hotel room, so you need to ensure that your property is held to a high standard. You’ll also have to factor costs like cleaning fees and the fees paid to platforms like Airbnb and VRBO into your operating costs.

More property maintenance

Because there will be a lot of people coming in and out of your property, furnishings like your flooring and furniture will be getting more significant usage than in a long-term rental. With guests coming and going with suitcases, for example, it’s highly likely that your walls might get bumped or floors might get scuffed. Or if there is a gathering of friends sharing wine, there is a higher risk of accidental spills on carpets or upholstery. To keep the property at the high standards of short-term rentals, you’ll need to be on top of repairing these minor issues.

Inability to properly screen tenants

The process of finding the right tenant for a long-term rental is an in-depth process that involves background checks, credit checks, and reference checks. A short-term rental gives you much less control over who ends up staying in your property. Of course, you can check their profile on third party sites. But you’re really putting your trust into renters without knowing too much about who they are and how they will treat your property.

Hands-on management

There is a general assumption that a short-term rental unit is an excellent way to make passive income. The reality is a little different. Running a successful short-term rental takes a considerable amount of time, effort, and energy. You have to be available to communicate with potential guests, answer any questions they may have, and help with the check-in and check-out processes. Whether you’re cleaning the property yourself or coordinating the cleaning team, you need to be on hand to manage the quick turnover process. If you want to hand over the reins of the day-to-day management, you’ll have to hire a short-term rental management company.

Seattle laws surrounding short-term rentals

Anyone looking to run a short-term rental in Seattle is subject to specific rules and regulations. Here are some of the key points you will need to know if you’re operating a short-term rental in Seattle, Washington:

The Pros of Long-term Rentals

Long-term rentals might seem more intimidating at first glance, but there are actually many benefits to renting your property for extended periods of time. After 15 years in the industry, we know that building relationships with long-term tenants can save you money and help keep your property in the best possible condition.

We’re sharing some of the benefits we see our clients experience every day as long-term rental property owners.

Income will be more predictable

Your rental income will be consistent throughout the entire year when your tenant is on a 12-month lease. Knowing how much money you can expect in your bank on the first of each month makes it easier to budget for everything from maintenance and repairs to your mortgage payments.

Lower operating costs

When a tenant signs a long-term lease, they move into the property and treat it as their own. They take care of the property in basic ways that short-term tenants may not—they clean the home, do yard work, and report issues when they arise. Properties are generally kept in a better state when they’re cared for by long-term tenants who treat it like their home instead of a hotel room. They may also pay their own utilities which can cut back on your operating costs.

Less tenant turnover

Short-term rentals can have new guests every few days and are always at risk of having high vacancy rates. With a long-term rental, tenants are locked in for a minimum of 12 months and many tenants renew their leases year after year. This ensures you have a consistent rental income every month and cuts back on the administrative tasks needed to find tenants for your property.

Affordable property management solutions

The cost of hiring a professional property management company for your long-term rental is typically between 8%-10% per month of your rental income. If you’re looking for a management company to help with your short-term rental property, the fees can be as high as 30% of the rent collected to account for the additional work involved in having a revolving door of guests throughout the month.

The Cons of Long-term Rentals

As with most things, there are challenges with owning a long-term rental. But when compared with the pros, long-term rentals are still a very enticing option for property investors.

Limited on raising the rent

While for many cities and states across the country there are rent control laws that control how much a landlord can raise the rent, Seattle does not have rent control regulations. The only law in Seattle states that landlords can only raise their rent once a year. However, that may change soon.

Risk leasing to a poor-fit tenant

Screening your tenants is critical for ensuring you have someone who pays on time and takes care of your property for the next 12 months. But, even with the best screening measures in place, you may still end up renting your property to a tenant who isn’t a good fit. Whether they pay late, make consistent complaints, or have constant noise complaints against them, it can be difficult to find yourself in a lease with a tenant who doesn’t respect your property. To end a lease early, you’ll find yourself faced with a potential eviction process that most people would prefer to skip.

Arranging maintenance can be difficult

It can be more difficult to plan, schedule, and execute maintenance when you have a long-term tenant. With less vacancies, you’ll need to schedule maintenance and repairs around your tenant’s schedule. If you have a positive relationship with your tenants, it should be easy to communicate with them and find a time that works for everyone for quarterly maintenance or semi-annual inspections.

Manage Your Long-term Rental with Ease

Managing a long-term rental property is a sound financial investment but can be a time-consuming and stressful process. But not with the team at SJA Property Management on your side. With over 15 years of industry experience, we know the ins and outs of successfully managing a property in Seattle.

Give us a call today to see how we can give you a smooth and easy rental property management solution.

Disclaimer:

Whether you’re a landlord or a tenant, staying informed is essential for a smooth and successful rental experience in Seattle. We are not providing legal advice, and for specific legal questions or concerns, we recommend consulting an attorney or reaching out to local housing authorities for expert guidance.

Long-term vs. Short-term Rentals FAQs

What are the rules for short-term rental in Seattle?

Short-term rentals in Seattle must be registered with the city, follow safety standards, and meet zoning regulations. Operators are also only allowed to have two units and must comply with occupancy rules.

What is long-term rent vs short-term rent?

Long-term rent typically refers to leaves that last a minimum of 6 months but more often 12 months. Alternatively, short-term rent is for stays that are under 30 days, and are offered through platforms like Airbnb and VRBO.

Are short-term rentals sustainable?

The impact of short-term rentals vary depending on the local regulations and market conditions. It is also said the short-term rentals impact housing shortages and negatively impact rental prices.