Is Your Short-Term Rental Still Worth The Effort?
Why It Could Be Time to Convert Your Property to Long-Term Coliving
Short-term rentals have seen a huge uptick in popularity in the past several years. Younger generations— that don’t tend to stay in one place long— are attracted to their convenience, and owners are drawn by their potential to garner substantial income if done right. Short-term rentals come with their own set of risks, and new obstacles seem to be emerging in real-time.
New regulatory revisions and an oversaturation of rental properties from sites like VRBO and Airbnb can sink your returns almost overnight, depending on the city you operate in. Add to that the higher magnitude of repairs, maintenance, and wear and tear on your property that lead to more sunk investments down the road, and it becomes apparent that short-term rentals are often more trouble than they are worth.
But don’t despair over your short-term rental just yet. One way to reduce the risk involved with a short-term rental is to convert it into a long-term coliving home.
We’ll outline the main risks involved in short-term renting, and why converting your property into a coliving rental space can be the best way to avoid them, plus the basic Coliving “How-To’s”.
7 Drawbacks of Short-Term Renting & How To Avoid Them
1. Decreasing Demand for Short-Term Rentals
In an ideal world, your property would be booked solid with renters 365 days of the year, but the reality of short-term renting just doesn’t live up to these kinds of lofty ambitions. Rental demand can dry up in an instant, whether due to fluctuating trends, restricted travel, or even changes in local climate or weather patterns. Many unpredictable risks make it hard to lock down a steady stream of revenue and can severely lower your occupancy rate.
Long-term rentals, on the other hand, are largely resistant to such erratic shifts in demand. Record-breaking storms (or lack thereof), never-ending pandemics, or even viral TikTok videos have no bearing on whether your property becomes the next hot place to stay, or is left to sit empty from a sudden lack of interest. You can thank lease agreements for that: lease agreements are the easiest way to protect investments and maintain occupancy more efficiently.
2. Round-the-Clock Upkeep
Maintaining a short-term rental is a full-time commitment. A continuous stream of renters entering and leaving the property means constant upkeep and cleaning on your part to ensure a positive experience, and shorter stays create even higher expectations for tenants seeking the ‘perfect experience’.
Between washing linens, restocking toiletries, and cleaning from top to bottom, there’s a lot to be done before a new renter can stay in your property, and often not a lot of time to do any of it.
Hiring a property management company to handle all the upkeep can be one solution, but they often charge high fees that can quickly eat away at your profits.
After all the setup, maintenance, cleaning, and other fees, property management companies can take up to 30% of your monthly earnings.
Converting your home into a long-term property removes most of the hands-on aspect that makes short-term renting so time-consuming. Your main focus turns to keeping your property occupied, and that requirement usually only needs your attention every year or so, if that.
Sure, you’ll have to collect rent, maintain the property, and manage your relationship with your renters, but those can be easily delegated.
HomeRoom, for example, can handle marketing your property, placing tenants, collecting rent, and property maintenance—and charges less, meaning you keep 80% of your income.
3. Unreliable Cashflow
It’s true that short-term rentals are attractive due to their potential as big money-makers, but the money they bring in is far from guaranteed.
You can see a huge profit one month, and just as easily see a long stretch of time with no renters— and no cash— coming in the next, which turns paying the mortgage on your property into a nerve-wracking affair. With long-term rentals, that risk drops down significantly.
A long-term rental property provides dependable income so you know exactly what you’ll be earning each month, and can pay your own mortgage reliably.
The risk of vacancies is always there, but if you let HomeRoom handle your property, your chances of having an occupied property will increase exponentially.
4. High Utility Bills
With short-term rentals, you’re on the hook for all utility payments, and short-term renters often take advantage of this fact, running every appliance at once, taking hour-long showers, and maxing out internet bandwidth. If you switch to a long-term rental, you can pass those expenses on to tenants, who can take the heat themselves if they like to, well, run the heat all night long.
5. Prohibitive Rental Laws & Ordinances
Regulation of the short-term rental industry is rapidly expanding, with a growing number of cities and countries adopting new laws and regulations that can quickly throw a wrench into your proposed investments.
Some cities require that the host be the primary residence of a house, or that the host be present on the property while renting it out. Others need you to acquire a rental license or endorsement to rent out your property or limit the number of days that a house can be rented out per year.
The best way to avoid trouble is to do your research on the laws in your specific area, as regulations can vary widely depending on where your short-term rental is located.
6. Oversaturation In Short-Term Rental Market
It’s true that short-term rental marketplaces like Airbnb grew so quickly by bridging a long-present gap for anyone in need of overnight accommodations. Before short-term rentals, travelers either had to fork over the big bucks for a hotel or take a chance on a shared space like a hostel. By establishing an open marketplace, Airbnb and other similar companies now enable tourists and adventurers alike to choose the exact city and price range that works best for them, widely expanding travel and lodging options across the country.
Besides building a middle ground for renters to choose how and where they travel, this new marketplace also gave anyone with an extra property— or the desire to obtain one— a new avenue for making some extra income. Suddenly, that lakeside cabin that your grandfather only visits once a year can bring in new revenue that wasn’t possible before.
The drawback is that when everyone and their uncle flood the market with those extra properties, you’re often forced to lower your own prices to compete, and even that is no guarantee that you can maintain a steady vacancy, with so many other options available for renters to choose from.
The long-term rental market does not suffer the same fate when it comes to this oversaturation of properties. In fact, because the demand for long-term rental leases exceeds the supply, rent prices are actually going up. That makes this the perfect time to invest in real estate that can create passive income.
7. Uninvolved Tenants
When it comes to short-term renters, it’s a one-sided relationship. You’re in charge of every little detail, from cleaning, repair, and even making Instagram-worthy corners of your property to make sure temporary renters are happy. As soon as you make your space perfect, your renter is gone and you have to do it all again for the next one.
Long-term tenants don’t need some picture-perfect retreat, they just want a comfortable space where everything works. Since they’re the ones living in your property, the responsibility of detail cleaning and basic maintenance falls to them.
With long-term tenants taking care of the little things, like changing light bulbs, taking out the trash, and maintaining the yard, your income becomes more hands-off. Plus, fewer tenants constantly cycling in and out means less wear and tear, and an extended life for your appliances, saving you money on repairs and maintaining the value of your property.
How to Convert Your Short-Term Rental to a Long-Term Rental
Convinced a long-term rental is the right way to go? Here's how to make it happen…
Lease Your Property With HomeRoom
We know the idea of converting your short-term property can be a little overwhelming.
Lucky for you, HomeRoom can help every step of the way.
With HomeRoom, you get hands-on property management at a much lower rate. You heard that right! HomeRoom can help you make your property into the ideal coliving home, and find and place the perfect tenants. HomeRoom collects rent, manages the maintenance, and even takes care of tenant relationships and conflict resolution. That means you get that sweet passive income without all the stress of being a landlord.
Don’t have a property yet? HomeRoom can help with that, too. We can help you choose the perfect property, and will support you in every step of the home-buying process, from offer to close.
If you want a more in-depth look at the process of converting your property into a long-term rental, see how HomeRoom does it here.
If you’re looking for an easy way to earn passive income, average a higher ROI, and secure more financial stability for your property, converting your short-term rental into a long-term rental is the easiest way to go.