ReCasa Financial Blog

Our friends will be moving this summer from Ohio to New York. They move every few years due to the husband’s career, so moving is nothing new to them. They have planned to take a week in the next month or so to go out to New York to house shop. While they are there, they will need somewhere to stay. They started looking at hotels, but were shocked by the price, so they started looking into short-term rentals, or vacation rentals, instead. They realized that vacation rental properties were about the same price as staying in a hotel for the week, and some properties were even cheaper!

Renting a whole house compared to a hotel room, is a big deal for a family of 5. This will give them more room, as well as a full kitchen where they can save more money by eating in. 

As a real estate rehab investor, you know that at the end of the renovations you will either need to sell or rent your property. For those real estate investors who want to rent, they need to decide if it will be a vacation rental like Airbnb and VRBO or a long-term rental. Vacation rentals in touristy areas like Outer Banks and Hilton Head tend to be more expensive for renters compared to somewhere like New Hartford, NY.  

According to Earnest.com, the average vacation rental host profits $924 a month. This is usually a bigger monthly profit compared to long-term rentals.  However, it is important to remember this varies depending on the property location and property type. Vacation rentals tend to be more work, and run a risk of not being rented for weeks or months. On the positive side, it can also be used as a vacation home for you and your family. Vacation rentals usually require more communication between the owner and the renters and the owners will need to clean the entire property between the renters.  Unlike long-term rentals, owners do not run background checks on renters, which has its own pros and cons. It allows easier and quicker bookings, but also runs the chance that the rental could be damaged, but that is why most of these rentals require a down payment for incidentals.

Long-term rentals give the owners a chance to pick who they will rent to. Usually, the owners will run background checks on their renters. This gives owners the peace of knowing that their property should be taken care of and that they will get their rent payments. With long-term rentals, you know that the tenant will be there for a long period which usually means they require less work and have a consistent income, but the monthly income is reported to be about 30% lower than if it was a vacation rental.  With long-term rentals, owners can also require that the renters take care of the property, such as caring for the lawns and flower beds, which takes work away from the owners.  

While it seems that vacation rentals are a bigger risk, they tend to be more profitable. Is the risk worth it for you? As always, do your research when deciding which rental type is best for you.