To Airbnb or not to Airbnb – (Airbnb or rent)

 

To Airbnb or not to Airbnb – (Airbnb or rent)

This blog post is for people who already have a suite, a room, or a space and are not sure if they should rent (LRT) it out or do Airbnb (STR). 

 

In this blog, I will share the similarities and differences between the two. I will also why we chose to do Airbnb over long term rental. I am certain you will be well informed to make a decision after reading. Enjoy! Please share comments and feedback below!

 

Before we dig into it, let’s explain some concepts:

STR (Short Term Rental) – based on where I live, it’s when you rent out your space for 28 days or less. 

MTR (Medium Term Rental) – when you rent your place for 30 days and six months.

LTR (Long Term Rental) – when you rent your place for a year and more.

 

So now let’s go into the similarities.

 

Similarities

Rental:  

STR and LTR are all rentals. You are giving your space to someone to rent it. 

Guests:

With both STRs and LTR, you will have people in your space. You will rent your space to guests. 

 

Money:

With the two, STR and LTR, you make money from renting your space out. 

Wear and Tear

There are wear and tear with both rentals. Over a period of time, you will need to do repairs, replace some items or renovate the place. 

Horror stories: 

Both of them have horror stories. Yes, you can have squatters in your LTR as well as in your STRs. To know more about squatters, please watch “worst roommates” on Netflix.

 

A squatter is someone who rents your place then refuses to leave or pay rent. In some countries like Canada and the US, the law tend to support renters. For example, I know a property owner who had to wait 6 months to evict a tenant from their house. The tenant did not pay rent throughout this period but the property owner had to pay mortgage and property tax.

 

Some people have the notion that, squatters happens only in LTR. It can happen in STRs too. There have been STRs who had tenants, who refused to leave after their stay. It's easier to have the police kick out squatters in STRs which is not the same with LTR. With LTRs, you have to go through the courts. But yes, there are people who overstay and have to be kicked out.

 

You can have your renters damage both your LTR and your STR. There have been stories where renters trashed their LTR before they were evicted. Property owners had to spend lots of money to repair and renovate their rental. This happens with STRs too, I had a guest damage my Airbnb. 

 

Overall, the damage and squatters are less with STRs. This is because Aircover will be able to support with all or portion of the cost to repair the damages. Also, police can help you kick out squatters with STRs.

 

Payments

As discussed above under squatters, some LTRs tenants can decide not to pay rent. And you will have to use force or go to the courts to evict them. With regards to LTR payments, the property manager/owner takes the money themselves. There could be some months that the tenant can decide not to pay.

On the other hand, with regards to payment under Airbnb, Airbnb handles payment. They take the money on behalf of the property owner before the guest/renter moves in and then they pay the host/property owner. Thus, the property owner does not handle payment.

 

Regardless of Airbnb handling payments, there have been issues where guests will leave at your Airbnb and use 

a.     fake credit cards

b.     charge back their credit cards or

c.     audio payments  

 

Thus, there have been payments issues with Airbnb where hosts did not get payment because of the aforementioned.

Caution: If you use Airbnb, please do not take payment outside the platform. That could result in fraud issues and you having squatters.

  

Property Managers

With both LTRs and STRs, you can give your property to property managers to manage at a fee. It’s much cheaper with LTR since there is less work involved. You can be charged 10% per month's rent for LTRs.

 

For STRs, you can be charged either per booking or per month. Many property owners are charged per month which can be anywhere from 20% to 33% per month on the income you made. For example if you make $4,500 a month in your STR, the managers can take between $900- $1485 for managing your place.

Differences 

Now to the differences.

 

Set up: 

Furnishing:

Most long-term rentals don’t require you to furnish the place. You advertise the space and the tenants move in with their stuff. For Airbnb, you will need to furnish the place. You will need to buy beds, sofa, cooking utensils, toiletries and everything that will make your guests' stay comfortable.  Thus, set up is easier with LTRs.

 

Utilities 

For most LTRs, tenants pay for their own utilities. You rent the space to them and they take care of their utilities. On the other hand, when you run an STR, you have to provide utilities (water, heat, electricity, internet) for your guests. 

 

Capital intensive 

Based on the above, running an STR is capital intensive. You need money at hand to furnish the place, pay utilities and set it up. Whereas you don’t need that much money for long term rental.

  

Stability of income 

Long rental has more stable income you can budget with. For example, if you rent out your space for $1000 a month on a fixed term lease, you know that for sure you will get $1000 from your rental and you are able to make plans with it. 

Unless, you have 100% occupancy, it’s unlikely to budget with STRs. There are usually two main seasons with STRs. There is the low season (Fall/Winter) and high season (Spring/Summer) and this is location and weather dependent. 

There is less traveling during the low season and more travelling during the high season. Most STRs are fully booked during the high season and under booked during the low season. 

Hence, if you live in a location that the low and high seasons are evident, you do not get a stable income from Airbnb. And you may be empty during the low seasons. 

Don’t worry, I will share some tips later on how to survive during the low seasons. I survived and I made some decent money during those times. 

This is a plus for LTR.

 

More money with STRs 

People claim to make enough money during Airbnb’s high season to pay off their mortgage for the whole year. Thus, the low seasons do not bother them. 

 

Depending on the location of your Airbnb, how it’s staged and how you host your guests. You are able to make so much money during the year as compared to renting long term.

 

From personal experience and from talking to other hosts, you make more money from Airbnb than if you rent your space out. 

But don’t forget the Airbnb is capital intensive, so all things being equal you may make more money with LTR than with STR.

 

This is a plus for STR.

 

Saturation 

The STRs market is currently saturated. Almost everyone is joining because you make more money with STRs. 

Thus, guests have a wide range of options to choose from. There have been complaints from several Airbnb owners of how they can go weeks and months without any bookings. There are several reasons why this can be the case but market saturation is one of them.

 

There are people that are always looking for LTR for themselves and their families. No matter how saturated the market is, people will always want homes to rent. Not everyone can afford to buy a home and not everyone wants to buy a home. This is a plus for LTR, you will always find a renter to rent your home.

Bed Bugs

I have seen guests complain about bed bugs with STRs. Bed bugs are mostly common with STRs because hosts provides the bed, sofa and the bedding which is where you find the bed bugs.

Bed bugs are not common with LTR because you mostly do not provide bed, bedding or any type of funriture.

Insurance 

Insurance is cheaper if you are using your home for LTR. It will be a few dollars more.  On the other hand, insurance is expensive for STRs. Some insurance companies charge per stay and its can be quite expensive. Airbnb has aircover but it has its own issues and limitations. I recently made a claim under aircover and Airbnb paid me less than what I claimed for.

This is a plus for LTR.

  

Flexibility of the use of your space: 

With STR, you can have access to your place anytime and every time. If you have visitors coming to town or you want to use the place yourself, you just need to block the dates on your calendar so no one can book it. 

 

You cannot do this with LTR. The tenants usually rent your place for a fixed term and you cannot use the space whiles they are still there. You can only have access to your space when they are out of there. 

This is a plus for STR.

 

Cleaning and Management 

It’s much easier to manage long term rentals as compared to STR. With LTR, most of the work is done at the beginning when you are doing the background checks. After wards, it’s a bit chill than STRs.

With LTR cleaning, you clean once the tenant has left your home which could be after a year, so you don’t have to clean often.

 

With STRs, you will need to manage and communicate with each guest’s booking and that can be a lot of work depending on how many bookings you get with in a year.

 

You have to clean after each guest leaves your space. You are able to charge a cleaning fee and have cleaners do it for you or you can also clean yourself. Thus, it makes it more complex to manage an STR.

You can always have people manage both.

This is a plus for LTR.

Reviews

LTRs do not have renters reviewing your space. Your renters leave after they are evicted or their lease has ended. On the other hand, with STR, your guests get to review you.

These reviews can make or unmake your business. There are people that will never give a 5 stars because they do not believe in perfection. And they are others that will retaliate towards you by giving you a negative review.

There are host that have closed down their STRs because of negative reviews.

This is a plus for LTRs.

Conclusion

Before you make your choice, please check for the following:

Regulations around rental especially for STRs in your city, community, condo, estate etc. 

Additionally, what does your Home Owner Association (HOA) say? Most communities have HOA that do not support STRs. Please check in with your HOA before you invest.

Also, consider condo fees. For some condominium, condo fess goes up if you decided to have an STR. Also, some condos don’t accept STRs.

Furthermore, there are many platforms you can put your STRs on. You can put it on Airbnb, VRBO, booking.com etc. Please research on these places before you list your STR. 

Finally, there are some who do a combination of Airbnb and rent. As I mentioned earlier, there are high and low seasons on Airbnb. Some people put their place on Airbnb for the Airbnb high seasons (Spring/Summer) and then rent their place during the airbnb low seasons (Fall/Winter).

 

Have you made a decision yet? 

We decided on Airbnb because of the flexibility it gives us for our space. We are able to block our calendar whenever we have a guest visiting so that they can use the space. We can also block the space when we want to use it for ourselves. That flexibility made us choose to do STR over LTR with our space.

This is not fixed in stone and we can change it anytime.

What are you thinking? Please share with me in the comments.

 
Need support with Airbnb? 

If you are a new host, you can make up to $100 if you use my airbnb link. I am a superhost, so you can make more money using my link.  Link is https://abnb.me/e/GZS7LfoYzyb

Please reach out if you want to use my link as a new host.

*All terms and conditions apply. 

If you are thinking of starting and have no idea about set up, connect with us at this email and we will be able to help you.

We are also here to help if you want someone to co-host or manage your property at a good rate. We are Superhosts for a reason!