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SHORT-TERM vs LONG-TERM RENTAL

Do you have an investment property that you wish to rent out and considering whether you will choose short-term vs long-term rental? What benefits and risks will each option give you?


Defining Short-term & Long-term Rental

Short-term rentals are usually defined as a furnished, self-contained space or a property that can be rented for as short as a day, up to as long as a few months. This rental type mainly attracts tourists, or short-term visitors such as for people on a business trip or family & relatives visiting from interstate or overseas.


Long-term rentals on another hand are usually unfurnished properties where its main purpose is to serve a home to people for at least 6 months or more. This rental type is mainly suitable for permanent residents/citizens of Australia, or international visitors on longer visas such as a student visa or a working visa.


Rental Demand in 2023

With Australia’s warm weather and iconic coastal scenery, big number of tourists visit the country per year. Although tourist numbers have dropped significantly during the pandemic, it is fast picking up with a total of 600,710 short-term trips recorded in February 2023. Overseas Bureau of Statistics records that this figure is an increase of 510,250 nationally, compared with the corresponding month of the previous year in 2022. In Queensland alone, there were 100,040 short-term visitor arrivals which was an increase of 85,180 compared with the corresponding month of the previous year.


This increase in short-term visitor numbers will have a huge impact on the demand of short-term rental (Air BnB or similar), giving the property owners a great opportunity to maximise rental income especially during peak seasons.


Similarly for the long term rental market, the demand is higher than ever. The country’s rental market has been out of balance since the pandemic, with limited supply of homes due to economic inflation as well as high immigration rates just to name a few.


Specifically for Brisbane, the number of properties available for rent has halved since the start of the pandemic, and that the city’s vacancy rate was marked the lowest on record at 1.3% - falling dramatically from 55% in March 2020 (Source: PropTrack).


Flexibility

If you plan to stay in your property during certain periods of the year, short-term rental would be the right option for you. Short-term rental will give you the flexibility of renting out the property during the days of the month you wish to. This also means that if your circumstances change and you need to sell your property quick, you won’t need to wait for a long-term tenant to vacate.


Long-term rental on the other hand may not give you the flexibility you desire. Long-term rental will usually be at a minimum term of 6 months, and during this time you will not be able to access or visit the property for your own needs.


Rental Income

If you are after a higher rental yield over a short period of time, short-term rental would be the right choice for you. Short-term rental will allow you to charge different rates depending on the season. For example, if there is an event nearby to your property, this gives you the perfect opportunity to charge higher rates as the demand of accommodation will be very high. However, the downturn would be that you cannot expect regular income every week. What you may receive this week will most likely differ to what you get next week. Your income will highly rely on its demand week by week, and your income will fluctuate season to season.


Long-term rental on another hand will give you income stability. You will receive regular payments either weekly, fortnightly or monthly for the duration of the agreed contract period. This however means that what you will receive over the rent period will always be the same amount, and your income will not grow week by week or month by month. You also cannot take advantage of the events around your suburb as you cannot increase your rent until the contract date ends.


Maintenance

For short-term rental properties, they are cleaned after every check-out, meaning you can visually monitor the wear & tear as you go to fix the areas that possibly need repairing. This will avoid a small issue becoming a major problem, which will often save you from spending a huge expense at a later date. In saying this, your furniture items or carpeted rooms may need to be updated more often due to high traffic / volume of users. Utility payments such as water, electricity and Wi-Fi will also need to be covered by the owner.


Additionally, if something does go wrong during the visitor’s stay, the short-term tenants to an extent are harder to hold accountable for as they may be either interstate or international visitors.


For long-term rentals, the tenant will generally be in charge of doing regular maintenance works such as pest control & gardening. There are also no utility payments and furnishing costs by the landlord, as they are usually covered by the tenant.


A major downturn for long-term rentals though would be that the landlord won’t be able to monitor the property week by week, and you will have to rely on your agent’s routine inspections every 3-6 months to oversee the conditions of the property. This can often link to findings that require more costs to fix at a later date.


Management

There are companies that specialise in short-term rental property management, and if you agree to hire them, their services will ease your management needs. However, it will cost extra to hire an end-to-end management company to look after the property on your behalf.

You may also receive negative reviews despite how hard you try to look after the property, and these negative reviews will impact future visitors.


Long-term rentals will be much simpler to manage and there are less steps involved in managing the property. Landlords won’t need to worry about guest check-ins, check-outs, daily cleaning etc, although they still need to be attentive to the tenant’s requests that come in through the property managers here and there.

 

Which One To Choose?

Both short-term and long-term rentals come with pros and cons that require certain responsibilities if you are a landlord.


If you are considering a short-term rental market, it would be best to first check if your investment property is suitably located where the demand is, as its target market will prefer accommodations near public transport and other landmarks within the city. Also, it will be important to check if there are any by-laws that you need to be aware of if a body-corporate is present.


Most property types will qualify for a long-term rental although properties located near schools and groceries will be favoured by the rent seekers. It would relatively be a simpler process to put the property on the market also, although your rental income may not be as high as what you would receive on a night-by-night basis as for the short-term rentals.


In order to decide which rental option to go with, it would be best to map out what you value the most, i.e. is it the rental income, or is it the flexibility etc? If you find it hard to decide for yourself, it would be ideal to seek assistance from a licensed agent to get their thoughts.


If you need advice now, please contact Fiona Tan on 0402 889 188, or our Property Manager on 0416 946 176.


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