Aspiring real estate investors or current property owners looking to earn passive income have two compelling options when renting out their condos. They can either turn it into an Airbnb rental room or choose a long-term investment. Both options have advantages and disadvantages. Explained below are key differences you need to understand to know which option suits your situation the best.

The Basics: Airbnb and Long-term Rental Explained

Airbnb’s have been rising in popularity for the past few years. From its looks, it will continue in favor for the upcoming years-after it recovers from the pandemic’s impact on the industry. In 2008, two roommates in New York founded Airbnb, an online platform that connects guests looking for places to stay to house owners willing to share a room for rent.

Airbnb rentals offer guests different rooms, such as the host’s extra room, a guest house, or the entire house. The pricing significantly differs on the rental’s location, size, accommodations, and amenities. Airbnb rentals are often considered short-term leases since the most extended term a guest can book is 28 days.

On the other hand, a long-term rental is a traditional form of renting, where a real estate investor buys a condo and rents it out for a set period discussed in an official rental agreement. The lessee then pays the lessor a fixed amount stated on the contract. Both the tenant and owner are protected by provisions set by the state or country.

Critical Differences Between Airbnb and Long-term Rental to Consider

Demand

Recently, the demand for Airbnb rentals has gone down. The pandemic has put a hamper on Airbnb rentals and reduced profit from the tourism industry’s fall. Usually, Airbnb profits soar during peak season, particularly properties near tourist spots. If your condo near the beach or tourist destinations, it would benefit from Airbnb rentals more compared to long-term rentals.

On the other hand, the pandemic has caused long-term rentals to rise. For example, in Dublin, rental properties saw a 64% increase during the coronavirus crisis. Furthermore, the housing market has grown, and house prices increased alongside it. By offering long-term rentals of your properties, you gain additional income and contribute supplies to the market simultaneously.

Pricing and Operational Costs

Both Airbnb and long-term rental have ongoing expenses you need to take into account. Since computing for your ROI requires you to take operational costs into account, you need to consider both options to know which real estate investment is beneficial for your property.

Airbnb’s operational costs mostly revolve around cleaning, maintaining, and repairing rooms in your condo when guests finish using them. Alongside this, Airbnb rentals pay a set commission fee to the Airbnb company. The main benefit Airbnb offers is its high earning potential. Since prices adjust per season, you can gain more during peak seasons, particularly condos near beaches or tourist destinations.

Long-term rentals, on the other hand, can cost both your time and money. Since you need to spend money and time to market the property, find suitable individuals for your home, property management, petrol for traveling, and property agency costs. However, long-term rentals benefit by not paying monthly electric, water, or association bills since the tenant will shoulder all of it. Furthermore, long-term rentals provide steady, predictable income to you. Depending on the lease, you can expect constant income for the upcoming years.

Lessee Assessment

Airbnb and long-term rentals hugely differ themselves during the screening process. Airbnb uses its proprietary online platform that utilizes a review system to check both the host and the guest. Both parties review each other regarding their experiences, such as writing recommendations or discouragement for others to see. One benefit Airbnb offers are host/guest relationships that foster during the guest’s stay. Through the review system, both parties can positively impact each other’s booking process. By offering services through their app or website, hosts and guests experience fewer long-term risks that can occur during long-term rentals.

On the other hand, long-term rental requires a meticulous process of screening the tenant. Lessors will have to manually review each tenant application and gather references from their friends and families. After all, the owner needs to check if the tenant can take care of the property in the long run. Finding the perfect tenant and building relationships with them takes a lot of time and effort. However, there are property managers that search lessees for the owners.

What Fits Your Condo Best

Choosing either Airbnb or long-term rental is situational. If you own a condo on a beach, Airbnb is the route for you. However, if you’re looking to start a family or use your condo as a rest house in a couple of years, long-term rentals aren’t for you. All in all, you don’t have to stick to one strategy. You can try using your condo as an Airbnb for a year and check if it’s profitable enough. Afterward, you’re free to use it for long-term rentals or continue your Airbnb business.


Greg Kononenko
Greg Kononenko

My name is Greg Kononenko and I am a full-time online blogger and owner of Dad's Hustle. I'm a dad, and my passion is to help other mums and dads to start their own "hustle" and improve the financial future of their families.

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