Airbnb vs Long-Term Rental: My Honest Decision Checklist - Part 1

Airbnb vs Long-Term Rental: My Decision Checklist

If you're trying to decide between an Airbnb and a long-term rental, there isn't one answer that works for every property.

From my experience managing short-term rentals for my clients, I've found that the right choice depends on much more than simply asking, “Which one makes more money?”

You need to consider the property, the local demand, the costs involved, your expectations as an owner, and—perhaps most importantly—how much work you're prepared to take on.

Here is the checklist I would work through before deciding between an Airbnb and a traditional long-term rental.

1. Look at the Property

It might sound obvious, but straight away start with the property itself.

Ask yourself:

• Is the location desirable to visitors?

• Is there a reason someone would want to stay there for a few nights or weeks?

• Is the property suitable for short stays?

• Does it have features that make it stand out?

• Is there parking?

• Is there outdoor space?

• Are there good transport links?

• Are there attractions, businesses, airports or other reasons people might visit the area?

  
  

A property doesn't automatically become a good Airbnb simply because it is a nice house.

Location and demand are crucial.

For example, the property I currently manage is in Essex, not only does it have excellent transport links, very popular for weddings, it's also fairly near Stansted Airport (which I added this into the listing on the heading, and a couple of times max in the listing. Not only this, it's near other attractions, which again have been mentioned. And understanding who might want to stay there and why is an important part of deciding how to market it.

If there is strong short-term demand in an area, an Airbnb can potentially generate considerably more revenue than a long-term tenancy. But if demand is weak, a property could spend too much time sitting empty.

That is why I wouldn't make the decision based on the nightly rate alone.

2. Understand the local demand

Before choosing an Airbnb over a long-term rental, look at what is actually happening in the local market.

Consider:

• What occupancy rates are comparable short-term rentals achieving?

• Are there busy and quiet seasons?

• Are there local events that create additional demand?

• Is the area popular with tourists?

• Are there local businesses that attract workers or contractors?

• Is there demand from families, couples or larger groups?

• Are there transport links that make the property convenient?

In my own experience, I've seen 90%+ occupancy each month, but I also know that this isn't something you should simply assume will continue throughout the year. As we went live just before the summer holidays, and for the first few bookings on each platform we had a new property discount to entice people in which obtained us a fair few reviews to establish us in the rental space.

Seasonality matters.

A property can perform extremely well during a busy period and then need a completely different pricing strategy when demand changes.

That's one reason I use dynamic pricing and market data rather than simply deciding on one nightly price and leaving it there. This is where PriceLabs comes in, as it knows when an event is on, and what you should be charging, as it's ADR (Average Day Rate)

I also know that for the quieter months, I will be looking at more longer term bookings/contractors in.

3. Do the maths properly

This is probably the most important part of the checklist.

When comparing an Airbnb with a long-term rental, don't compare:

Airbnb nightly rate × 30 days

with

monthly rent.

The real calculation is much more complicated.

With a short-term rental, you need to consider:

• Expected nightly rate

• Expected occupancy

• Cleaning and turnover costs

• Utilities

• Insurance

• Maintenance

• Management fees

• Consumables

• Furnishing and replacement costs

• Other operating expenses

For example, the property I manage currently has a turnover cost of around £108. That includes cleaning, security checks and looking after the hot tub.

That cost makes a big difference to the economics of short stays.

A one-night booking might look attractive because you're generating a night's revenue, but after paying for a full turnover, there may not be much profit left.

This is one reason I'm increasingly interested in securing longer bookings.

I recently obtained a 32-night booking at approximately £139 per night during the summer holidays. That's around £4,448 in gross booking revenue, but the appeal wasn't simply just the revenue, however it did help especially as it was a direct booking.

A longer booking also meant fewer turnovers, less cleaning, less disruption and less management work.

That's an important lesson when considering Airbnb profitability: sometimes the booking that looks best isn't necessarily the booking with the highest nightly rate. The overall economics matter.

4. Think about what you want as the owner

The best rental strategy isn't necessarily the one that produces the highest potential income.

Think about what you actually want from the property.

Do you:

• Want predictable monthly income?

• Want to use the property yourself?

• Want access to the property throughout the year?

• Want the potential for higher income?

• Want as little involvement as possible?

• Feel comfortable with income fluctuating?

• Have the patience to deal with seasonal demand?

This is one area where Airbnb can have a major advantage.

The clients I work with like the fact that a short-term rental gives them the opportunity to access their own property rather than committing it to a long-term tenant.

For someone who wants a property that can also function as a holiday home, that flexibility can be extremely valuable.

On the other hand, if your priority is simply receiving predictable rent every month with minimal involvement, a long-term rental may be a better fit.

ABOUT THE AUTHOR

Adam Daniels-Smith is a Property Manager Agent, in the short-term rental space, whether this be through a trusted online travel agent, or directly booked through this website.

Genuine & Respectful, Adam delivers a personal, yet fun approach when dealing with his guests, or clients from the landlord side of things. To learn more click here