Long-term or short-term, what's the best option? Learn about the pros and cons of different rental strategies and find the approach that works for you.
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When it comes to property management, choosing between long-term and short-term rentals is a big decision, with each approach bringing its own advantages and disadvantages. Before deciding on which rental strategy is best for you and your property, take a quick look over the pros and cons of short-term versus long-term rentals.
Income Instability: Income from short-term rentals is subject to fluctuations in demand, with no guarantee of consistent earnings. This becomes even more important if an owner plans on investing in other properties, as banks will not take short-term rental income into consideration due to its unreliable nature.
Increased Maintenance and Operating Costs: Owners will be responsible for the cost of utilities, as well as furnishing the unit, housekeeping, lawn care, repairs, and maintaining any additional amenities (pools, hot tubs, etc.)
Municipal Restrictions: Municipal regulations are catching up to short-term rentals, and regulations are changing quickly; there is no guarantee that a property purchased to act as a short-term rental will be able to stay a short-term rental.
Less Control, Higher Risk: Changes in seasonal demand can result in extended periods of vacancy, increasing an owner’s out of pocket costs. Additionally, with short-term rentals owners have considerably less control over who rents their property, leaving owners open to noise complaints, parties, and other disruptions.
Dynamic Pricing: The ability to adjust prices easily allows property owners to capitalize on peak seasons and local events, commanding higher nightly rates and potentially increasing an owner’s short-term rental income
Flexibility: With a short-term rental owners can block out dates for personal use, making it convenient for those who may need the property occasionally. This can also be handy if an owner is planning on selling the unit in less than 12-months, as they have no legal obligation to a tenant.
Maintenance Awareness: Frequent turnovers mean owners will have plenty of opportunities to regularly clean and inspect their property, allowing owners to make prompt repairs and easily keep up on property maintenance.
Less Pricing Flexibility: Rental prices can only be adjusted when the lease is renewed, limiting an owner’s dynamic pricing opportunities to once a year.
Single Tenant Dependence: When an owner takes on a tenant, the tenant has a legal claim to tenancy at the property for the length of the lease. This means it is vital to find a high quality applicant who will care for your property - a good screening process is key to long-term rental success.
Regulatory Compliance: Landlords must be aware of, and comply with, their local tenancy laws. These laws can be complex, and it may be in an owner’s best interest to hire a property manager with a thorough understanding of how their local regulations impact their property, their tenant, and themselves.
Less Control Over the Property: The long-term nature of a lease limits an owner’s control over the property, and owners will be dependent on their tenant to report issues before they escalate. This is why it is so important to have a quick and easy process for tenants to report any concerns, and a system for addressing any issues as quickly as possible.
Consistent Income: Steady rental payments provide a consistent income that you can rely on, and which the bank will take into consideration as income should you decide to purchase an additional property. Long-term rental properties also offer owners various tax write-offs, making them a financially savvy investment and a great tool for building wealth.
Less Management Required: Tenants will be responsible for the day-to-day upkeep of the property, as well as utility payments, reducing the owners responsibilities and lowering their expenses compared to short-term rentals.
Security: Owners can also collect a security deposit at the time of signing, allowing them a reserve fund to cover any damages made to the property during the tenancy. Additionally, the lease itself gives owners more legal recourse to ensure their property is properly cared for.
Lower Vacancy Risk: With 12-month leases and a high rate of renewal, long-term rentals offer significantly less risk of an owner’s property sitting vacant and incurring additional costs. Calgary is Canada’s fastest growing city, and with more and more Canadians moving to the city every month the demand for long-term rentals is only going to increase.
Both long-term and short-term rentals offer unique benefits and challenges. However, for those seeking consistent income, reduced management responsibilities, lower vacancy risks, and looking to accelerate their wealth generation, long-term rentals are the more stable and financially rewarding option. Calgary’s growing, set yourself up to grow with it!
