When it comes to real estate, there are a number of different ways to earn money and grow your net worth over time, but two primary strategies dominate the discussion: short-term rentals vs. long-term rentals. Each approach has its own set of benefits, challenges, and financial outcomes. For investors, this question often boils down to which model delivers the best return on investment (ROI).
Short-term rentals, like vacation homes or properties listed on platforms such as Airbnb or VRBO, typically rent for higher nightly rates. However, they come with added responsibilities, such as frequent turnover, cleaning, guest communication, and maintaining high approval ratings. On the other hand, long-term rentals provide stability, predictable cash flow, and lower operational demands.
In this article, I’ll share my first-hand experience and tell you what I found to be the best way to balance income generation with quality of life.
Short-term Rental Vs. Long-term Rentals
I have a lot of thoughts on this topic because my wife and I own a portfolio of long-term rentals. We love them because they are low maintenance and profitable investments. My wife and I also have one AirbnB, a beach house, that is always an enormous amount of work and headaches. We also invest in other asset types, but we will save that for another conversation.
Of course, having been raised by an attorney (my mom), we always protect our assets with limited liability companies and insurance. If you get in the game, you should plan to do this too.
The short answer on which I prefer is that I strongly recommend long-term rentals over short-term rentals, unless you’re only going to own one property, you absolutely need to maximize your income, and you badly want a new part-time job.
The reason for this is that running a short-term rental (an AirBnb or VRBO property) is truly a hospitality business where guests have very high expectations, and even if you use a property manager, you’re going to spend a ton of time making sure it is run safely and well.
I’ve realized over time that most people have an idealized version in their mind of what running an Airbnb or VRBO rentals looks like. So here’s the truth from someone who operates both types of businesses.
Challenges of Short-Term Rentals
Running a short-term rental, like an Airbnb or VRBO property, involves:
Up-Front Furnishings
When you operate a short-term rental, you’re usually going to have to spend $10K or so up-front to furnish it with beds, mattresses, couches, chairs, rugs, wall decor, and other needed items. Of course, you could buy a furnished property like we did, but you’ll pay for that in your purchase price, so it’s not a free approach either. Rather, it’s just a different way of financing this cost.
Navigating Platform Changes
The policies, ranking algorithms, cancellation rules, and hosting requirements on platforms like Airbnb or VRBO frequently change. This can be both challenging and frustrating, as how you used the platform last month, might not be how you use it this month. This can also mean you’ll spend time updating your listing, reading support articles, or calling AirBnb/VRBO support.
Maintaining a High Star Rating
With short-term rentals, you have to constantly try to maintain a high 5-star ranking so your visibility doesn’t drop. Missing a fork? You can expect to receive a 4-star rating on your next stay. Have a coffee maker that makes too much noise while it brews? That could be a 3-star rating. Have a slotted spatula that the last guest broke? That could be 2-star rating, because your current guests couldn’t make the chocolate chip pancakes they were so excited about having on vacation.
Some guests are ruthless when it comes to ratings, so you’ll constantly be replacing and buying new things to try to meet their expectations. As always, this takes time and cuts into your profit.
Airbnb Punishes Anything But Perfection
Unfortunately, AirBnb is not forgiving about reviews and will punish your listing with reduced visibility anytime you get less than 5-stars across all categories (yes, they consider 4-stars to be a failure). The only thing that makes this bearable is that all hosts are dealing with the same challenge here.
Managing Guest Communications
With short-term rentals, someone (either you or a Property Manager) will be responsible for handling guest communications at all hours of the day, including questions about their stay, what you provide (coffee, tea, towels, etc.), suggestions for fun to-do’s, and that late night message about how to use the remote.
Of course, there will also be last-minute changes, date adjustments, and special requests, all of which takes time to process.
Often, you’ll have to call AirBnB or VRBO support to get their help or spend hours reading platform instructions on how to do it yourself.
Of course, you could hire a Property Manager to be on call for you 24-7, but they won’t be incentivized to answer communications late at night, early in the morning, or when they have problems to solve at other properties.
Coordinating Cleaning Services
Cleaners need to be scheduled between every guest stay, and finding reliable cleaners can be difficult as turnover in this job is high. Most cleaners will attempt to do their very best work, but cleaning an entire house to perfection (according to any given guest’s standards) is a very hard task.
Have a covered porch or deck? This will likely cost extra to clean. Have a grill? You can ask your guests to keep it clean, but you’d better plan to have your cleaners double-check this between each stay.
Restocking Essentials
With short-term rentals, you have to regularly replenish items such as toilet paper, paper towels, coffee, tea, soap, sponges, and detergents. This also requires a secure storage solution, like a locked room or shed, for cleaners to access. Of course, stocking essentials is expensive. With the recent spikes in costs (inflation), paying for all of these items can really eat into your net profit.
Of course, someone will also have to let you know every time you’re low on needed items and not all cleaners or property managers will notice the moment this happens, as they already have a lot of their plate to manage.
Expirations
Of course, any coffee, tea, and snacks you provide can expire, which means you’ll have to throw them out and replenish them every few weeks. As an example, open coffee is only good for 2–4 weeks at peak freshness, even if stored in an airtight container.
Want to offer some welcome snacks you’re cleaners can put out for each set of guests? These will expire on you as well, so you’d better have a system for managing this.
Maintaining Furnishings
Because short-term rentals are provided as furnished properties, your will be required to regularly replace items like sheets, pillows, comforters, rugs, door mats, and shower curtains, especially at the end of busy seasons.
The cost of constantly replacing these items really adds up and can total thousands of dollars per year.
Managing Electronics and Subscriptions
With short-term rentals, guests deserve to have access to TVs and they will usually prefer for streaming services like Netflix and Amazon Prime to be available. This means you’re responsible for the tech support and the costs.
Covering Utilities
Unlike long-term rentals, with short-term rentals, you are responsible for paying for the electricity, water, gas, propane, trash removal, and Wi-Fi.
Understandably, guests may use these resources liberally (like the AC in the summer and the heating in the winter) since they’re not footing the bill. Of course, if the Wifi or power ever goes out, you can expect a low guest rating, even if it wasn’t your fault.
Several times, we’ve had windows left open after a guest checked out (despite clear instructions to close them), with the central heat or cooling working to overcome this.
As you’d expect when it comes to the human beings, some people are tremendously thoughtful and some people are not.
Handling Repairs
With short-term rentals, repairs are usually a crisis. You’ll be expected to immediately address issues like broken appliances or plumbing to avoid dissatisfaction or cancellations. However, most repair technicians book their schedule as full as possible and need a few days to schedule you in, so scheduling quick repairs can be very challenging to accomplish.
Sometimes you’ll find out about a needed repair right before a guest is about to check-in and will have to write them with the unfortunate news.
Other times, repairs will come up during a guest’s stay and you’ll have to do your best to apologize and get in touch with an emergency service that can get out there the same-day. Of course, no matter how fast you get a repair technician to the property, a part may need to be ordered, slowing down the repair timetable (and likely disappointing your guest).
Yard Maintenance
With short-term rentals, you are responsible for keeping the yard in perfect condition, including being mowed, weeded, mulched, trimmed, and carrying away yard waste. You can hire companies to do these things, but yet again, someone needs to put eyes on the property, decide what needs to be done, coordinate the work, and submit payment.
Yard care can really add up as an annual expense, often costing hundreds if not thousands of dollars annually.
Of course, if you rent the property in the winter, you’ll need to anticipate shoveling and plowing away snow as well. Often, companies will plow but they won’t shovel. So, you’ll likely need two service providers when those beautiful white flakes come down.
Pest Control
Next, you’ll be responsible for pest control and some guests are ruthless if they see an ant, a cockroach, or signs of a mouse. Even with professional pest control services, nature exists and an occasional critter will get into your home.
Also, most pest control companies only treat quarterly, so you’ll have to get on the horn with them if you need more urgent service, and in my experience, these service visits often can’t be booked until 2-3 weeks out.
If your guest is upset about seeing an ant today, this isn’t going to appease them.
Occupancy or Lodging Taxes
In addition to federal income tax, most jurisdictions require short-term rental hosts to collect and submit occupancy taxes (similar to hotel taxes). These taxes are typically based on your total (gross) income from the property and are in addition to your federal tax obligations.
This is unusual because most business taxes are applied to your net income, that is, what is left after your expenses are removed.
What’s more, these taxes are usually levied at the local, state, and county level. As an example, for our AirBnb, we are required to pay short-term rental taxes to three different jurisdictions on our total (gross) income.
These occupancy or lodging taxes typically do not apply to long-term rentals, which means that the tax burden for short-term rentals is generally much higher than it is for long-term rentals.
Monthly Tax Reporting
Unlike long-term rentals, where taxes are paid annually, short-term rental taxes must be reported and paid monthly. Services (like Avalara, for example) do assist, but they come with additional costs, and in my experience, are a bit confusing to set up. If you’re going to process your monthly taxes yourself, then plan to study the tax law carefully and block time for this into your calendar each month.
Also, AirBnb with typically withhold some (but often not all) of the taxes, which can make it even more confusing. Plus, the taxes they withhold can change year-over-year and they can vary based on where you are located.
Higher Insurance Costs
Finally, short-term rental insurance is 2–3 times more expensive than standard homeowner’s insurance. This means that if the annual homeowner’s insurance on your primary residence is $1000 per year, you might have to pay $2000 to $3000 annually to insure a similar property that you rent out on Airbnb.
If you don’t carry short-term rental insurance and an Airbnb guest damages your home through fire, water, or accident, you won’t have coverage.
Benefits of Long-Term Rentals
In contrast, I love long-term rentals because they are simple and straight-forward to operate! If you run your long-term rental well, your tenants will often stay for years.
Most leases give the long-term tenant responsibility for both the utilities and the yard care, although of course, this depends on this lease you are using. You also won’t have to furnish the property, maintain furnishings, or stock supplies.
In general, it has been my experience that long-term tenants take better care of the property compared to short-term guests, as they treat the space as their home rather than a temporary stay. This can result in lower maintenance costs.
Another significant strength of long-term rentals is the reduced time and effort required for management. Unlike short-term rentals, which demand constant marketing, guest communication, and cleaning between stays, long-term rentals typically require less hands-on involvement. Once a tenant is secured, your responsibilities will be limited to addressing occasional maintenance requests and ensuring lease compliance.
Of course, you won’t have to pay short-term rental taxes and you will only be taxed on your net profit from the property, after expenses. This is huge when it comes to profitability over time.
Another overlooked benefit of long-term rentals is that you have someone actively keeping an eye on your property whose interests are, overall, aligned with yours. Meaning, if there’s a leak that happens, you are more likely to be notified quickly. In contrast, if a leak happens at your short-term rental in-between guest stays, you might not find out about it until substantial damage has been incurred.
Finally, long-term rentals offer several tax advantages, including the ability to deduct expenses related to property management, maintenance, and mortgage interest, which can reduce taxable income. This can significantly increase your profitability, which is the goal, after all.
Conclusions: Short-Term vs Long-Term Rentals
In short, I wouldn’t recommend that you AirBnB/VRBO a property unless you genuinely want to take on another part-time job. The reason you would do this would be to maximize your income.
If you do decide to make this decision, I could certainly understand it, but please make sure you’re accounting for your opportunity cost— which is the value you forgo when you can’t do something else with your time.
Put simply, running an AirbnB property can absolutely and unquestionably produce good income, but personally, I don’t think it’s worth the amount of time and complexity that requires.
What are your thoughts on short-term versus long-term rentals? Share them in comments below.
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*Disclaimer: This information is provided for entertainment purposes only. Nothing on this site should be considered financial advice. Before making any financial decisions, you should consult with a qualified professional adviser.