AirBnb vs Long Term Rentals - Which is Better?

These are the pros and cons of long-term and short-term rentals and how to choose which is the best for you!

Ryan Pineda

November 22, 2021

We're going to be talking about Airbnb and long-term rentals and which one's better.

If you're subscribed to my channel, you've probably seen the Airbnb videos I've done on my properties in Big Bear, California. As far as my Airbnb portfolio goes, we have 8 rentals in Big Bear, California. I then have about 20 long-term rental units as well. So the question is why don't I rent all of them long-term or rent them all short term? What are the pros and cons? How do you decide which way to go? That's what we're going to talk about today. So let's go over the pros and cons of going long-term rental versus short-term rental.

On the pros for the long term side, you have less management, no furnishings, and more predictable income. You have less management because you have one tenant who pays once a month. They're probably on a year lease. There's not a ton to do with them. You're also not worrying about furnishing the property. Typically long-term rentals are going to be completely vacant. The tenant has to go put all their stuff in the only thing you normally would provide are appliances. Lastly, the income is very predictable. The monthly rent is whatever you guys said it is. It doesn't fluctuate. The only way it fluctuates is if they don't pay. But other than that, your rent is going to be the same every month. That makes it very easy for you to budget and to know when to expect your check. 

So those are the good things about going long-term. 

So let's talk about the good things about going short term. When I talk about short-term rentals, you guys can choose to rent it however you want. It can be on Airbnb. It could be on HomeAway. It could be on VRBO. The thing I have found with putting it on those sites is that each market has a different site. 

Some of the pros of Airbnb or short-term rental are:

  1. There's a higher income. 

It is almost certain that you will make more money on Airbnb. For example, on my big bear properties, if I were to rent them short term, I'd only be able to make about $1500 on average. I put them on Airbnb, I can make $5,000 on average. That is a huge gap. Now there are other costs that come with that. Now it's not like I'm making $3,500 extra. I have to pay the cleaners, the property managers, and Airbnb, state taxes. There are other costs that go into it.

But even once you factor in those costs, typically you're going to make a lot more on Airbnb. But that is assuming you're picking the right market. If you're picking a bad market for Airbnb, you might not.

  1. You have the ability to use it

All of my Airbnb's in Big Bear, I have the ability to go book it myself as if I was a tenant. If nobody else is using it, I can go up there and use it and get joy out of it. That's a big perk, especially if your Airbnbs are in another city that you really enjoy visiting. That's actually how we got started on Airbnbs and Big Bear because I just wanted a second home there. It's not like I've planned to build this portfolio. I was just buying a home that my wife and I could go visit. Then I saw the returns and it ended up becoming a business. 

  1. You have a diversified risk. 

What I mean by that is you're having different tenants every single month. So when you have different tenants every month, you're not worrying about whether this guy loses his job or not. You're not worried about evictions. They're only staying in their short term and you're having multiple people every single month. We've never had to kick anyone out of an Airbnb. We've never had to go try and get our money. 

Now, granted they can file complaints or cancel the reservation or things like that. No business is perfect, but as a whole, I think it's a little less risky because you're not dependent on one tenant making that one payment every month. 

So let's talk about the cons of each of them. 

The cons are essentially inverted from the pros of what the other one had. So the cons of long-term rentals would be evictions, not being able to use it, less revenue. If your tenant stops paying, you're kind of screwed. You got to go through the eviction process. You're not making money for months until you evict them. Then you better hope that they don't damage it. The eviction process with long-term rental sucks. 

The second thing is less revenue as we talked about before, Airbnb should make more on average than a long-term rental.

Third thing is no use. If I rent out all my Airbnbs in Big Bear long term, I can't go use them. Somebody lives there. So think about that with your long-term rentals. The majority of my long-term rentals are in Las Vegas and I'm okay with that because I’m not trying to go stay in another house in Las Vegas. If my big bear ones were long-term rentals and I couldn't go to big bear and use them. 

Let's go over the cons of Airbnb. 

  1. you have significantly more management. 

You've got to furnish it and you've got more laws and regulations. So managing your Airbnb is essentially a hotel. You get bookings every single day that you have to deal with. Your guests have questions and needs. You need to get the cleaners in there after they stay. You are running a legit hotel. 

  1. Furnishing it

I will be completely honest with you guys. I hate furnishing the cabin. That is my number one thing I dislike about the Airbnb model virtually. We have to buy all the furniture in Vegas, get a U haul, take it up to Big Bear, and furnish the place. It's very exhausting. Then you do have to replace them over time.

Just like a hotel. The furniture has a lifespan. It gets worn out. You're going to have to replace it and that means more money out of your pocket. 

  1. Local laws

So as I mentioned before, I've got to pay taxes on the Airbnb revenue. That's on top of the normal taxes I pay. I don't have to do that with long-term rentals. There are also all these rules and regulations that come with Airbnb and every city is completely different. But the point is you typically cannot just go and rent it without the city knowing about it. The city wants their piece and they want to make sure that it's up to their standard. Typically when we're dealing with the city, it's a pain in the butt, but it is what it is.

So now that we understand the pros and cons, how do you decide if you're going to do it or not? I think there are a few things that will help your decision. 

  1. Local laws and regulations

I think that's the very first and foremost thing you're going to look at. For instance, in the city of Las Vegas, it's pretty much illegal everywhere to have an Airbnb. Why is that? Because they want you to stay on the strips. It ain't rocket science. If you're staying off the strip, you're not gambling and spending money. They want you right there so they can get your money. Airbnb does not help the strip. 

So the local laws and regulations are going to play a huge role on whether you can go Airbnb or long-term. 

  1. ROI

I mentioned before that you've got to make sure the ROI is good enough to do it. If you have a difference, like I have in Big Bear where you're talking $1500 versus $5,000, the ROI is going to be there. If you're talking about $1500 versus $2,500 or $3,000, I would personally say, it's probably not worth it. You should either choose a different market or go long-term. The only way I would take that deal is if I just really wanted to vacation there and I was totally fine dealing with the headache and essentially making the same, but now being able to use it. That's the only way it really makes sense.

  1. Do you actually want to use it?

 I personally love using mine in Big Bear. If I was going to go pick a new market to do Airbnb again, I'd have to pick somewhere that has a good ROI, friendly state and local laws and if it's somewhere I like to visit. 

So I would be looking at Airbnb more on the investment side than the fulfillment side for the most part, because it does take work. You are running a business.

Those are how I choose one or the other. There's a lot of things that go into it, but I love both strategies.

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