When deciding between short-term and long-term rentals,, there are several factors to consider. Here’s a breakdown to help you determine which might be right for you:
Income Potential
Short-Term Rentals (STRs):
- Short-term rentals, such as those listed on platforms like Airbnb, generally have the potential to earn higher rental income per night compared to long-term rentals. This is especially true in tourist-heavy areas or cities like Toronto, Ottawa, or cottage country regions.
- However, income can be unpredictable, as it fluctuates depending on demand, seasons, and local events.
Long-Term Rentals:
- Long-term rentals provide more predictable and stable income, as tenants typically sign 12-month leases, ensuring a consistent cash flow.
- Rent is typically lower per month compared to the nightly rate of an STR, but you’re guaranteed income over a longer period.
Management and Maintenance
Short-Term Rentals:
- Managing STRs involves more frequent turnover, meaning you’ll need to clean the property, restock essentials, and maintain the space more often. This can be time-consuming and costly, especially if you need a property manager to assist with guest communications, bookings, and turnovers.
- There’s also the added responsibility of handling guest concerns or complaints.
Long-Term Rentals:
- With long-term tenants, there’s less turnover and fewer management duties. Once the lease is signed, the tenant is responsible for the property, and you only need to address issues as they arise.
- Maintenance is typically less frequent, though you’ll still need to ensure the property is well-maintained.
Legal and Regulatory Considerations
Short-Term Rentals:
- Ontario municipalities, especially Toronto and Ottawa, have begun implementing stricter regulations for short-term rentals.
- STRs may be subject to higher taxes or additional permits.
Long-Term Rentals:
- Long-term rentals have fewer legal restrictions, though landlords must comply with the Ontario Residential Tenancies Act, which governs rent control, eviction procedures, and tenant rights.
- Rent increases are also limited by the province’s guidelines, and evictions can be difficult, especially with long-term tenants.
Location
Short-Term Rentals:
- STRs perform better in areas with high tourist demand or areas that attract business travelers, such as Toronto, Niagara Falls, or near lakes and cottages.
- Properties in less busy or more residential areas may struggle to attract consistent guests.
Long-Term Rentals:
- Long-term rentals can be successful in most locations, especially in areas with a steady population, such as near universities, hospitals, or employment hubs.
- Renters are usually looking for convenience and stability, so areas close to transit or with desirable amenities are prime.
Risk and Flexibility
Short-Term Rentals:
- Short-term rentals are more susceptible to market changes (such as economic downturns, pandemics, or travel restrictions). During such times, occupancy rates can drop significantly.
- However, short-term rentals provide more flexibility. You can choose when to rent out your property or even take it off the market temporarily.
Long-Term Rentals:
- With long-term rentals, you’re locked into a lease for a set period (typically 12 months), but the income is stable.
- There’s less flexibility in terms of usage of the property, and it may be harder to make adjustments if rental income is low.
Costs and Fees
Short-Term Rentals:
- In addition to maintenance costs, short-term rental hosts often have to pay listing fees and a percentage of the booking fee to platforms like Airbnb.
- Utilities and services like internet, cable, and cleaning are often included, further increasing costs.
Long-Term Rentals:
- Typically, tenants are responsible for utilities and services, reducing your expenses.
- You may incur some costs for property management, repairs, and periodic upgrades, but these are more predictable than with short-term rentals.
Choose Short-Term Rentals if you want the potential for higher income and are willing to invest time in managing the property, dealing with turnover, and adhering to local regulations. STRs are ideal in high-demand tourist areas or if you have a second home or vacation property that you don’t use year-round.
Choose Long-Term Rentals if you prefer stability, a more hands-off approach, and consistent income with lower management responsibilities. Long-term rentals are a good option for less transient areas or if you want to avoid the volatility that can come with short-term rental markets.
Ultimately, the right choice depends on your goals, location, and willingness to manage the property actively.
If you have any questions or need guidance in purchasing an investment property, get in touch! I am here to help.