Pros & Cons of 2 Rental Types
Comparing long-term rentals and Airbnbs.
What are the differences between long-term rentals and Airbnbs? This has been a hot topic this year because many people are investing in real estate due to low interest rates.
With Airbnbs, you typically purchase the home and then rent it out for short periods of time. But you also have to furnish the home, so there will be a little bit more of an upfront cost. For Airbnbs, you’ll want to pick an area that doesn’t have an HOA that will hinder you from doing a short-term rental. Hot vacation spots are ideal for Airbnb rentals, and so is any area that can get you a high return on your investment from the time that you buy the property and rent it out.
Long-term renting is more about having your tenants pay your mortgage over that time period. At fair market prices, you can get 75% of the income that you make on a rental, meaning you can qualify for it with lower overall debt income. Long-term rentals also hinge on the appreciation of the market. Real estate has typically gone up anywhere between 2% and 3% annually over the last 30 years.
"Airbnb homes must come furnished, whereas long-term rental homes can be vacant."
Also, consider the cash flow of long-term rentals. Suppose you’re making $500 for a rental house per month, and you do that over the span of 12 months. You get $6,000 back into your pocket, and you get to write it off on your taxes.
The last thing to think about when it comes to long-term rentals is equity. You already have someone paying off your mortgage, so if you owned that property alongside an Airbnb, you can use that extra income to pay off your properties.
Before you get into either option, talk to your Realtor about what you need to do to be ready. We do this kind of thing for our clients every day, and we’ve seen them run into all the common issues. If you have any questions or need any assistance, give me a call or send me an email.