The Truth About Short Term vs Long Term Rentals (Real Numbers From a Property Owner)
Short term vs long term rentals gives property owners a tough choice to make. Short-term rentals can earn 30% more annually than long-term options, with average monthly earnings of $4,300. But this choice needs careful thought.
The global short-term rental industry keeps growing faster. Numbers show growth from $131.4 billion in 2024 to $341.9 billion by 2033. A property bringing in $2,500 monthly on a long-term lease could make $6,000 in just one month as a short-term rental. These numbers look great, yet there’s more to the story. Short-term rentals see occupancy rates between 50–70% based on season and location. Long-term rentals stay occupied 90%+ of the time. Short-term rentals also cost more to run because guests change often. This means extra money spent on cleaning, maintenance, and utilities.
In this piece, we’ll look at the real numbers behind both rental strategies and understand what makes each one profitable from a property owner’s point of view. You’ll learn about hybrid approaches that blend short, mid, and long-term rentals to boost returns year-round. If you’re stuck between choosing long-term or short-term rentals, this piece gives you solid data to help make that choice.
Short Term Rentals: Income, Pros, and Pitfalls
Managing short-term rentals can fill your bank account, but you just need to put in serious work. Let’s get into what property owners should know about this investment strategy.
Higher nightly rates and seasonal spikes
Short-term rentals typically generate 20-30% more income than long-term rentals. AirDNA data shows the average Airbnb property in the U.S. earns approximately $33,000 per year, and top performers make even more. A well-laid-out seasonal pricing strategy becomes significant because properties using dynamic pricing can earn up to 40% more annual revenue compared to static rate-setting.
Properties near events see remarkable price increases. Listings near Leeds Music Festival saw a 17.7% boost in nightly rates, while those near Ultra Music Festival in Miami showed increases that went beyond 110%. The Formula 1 Australian Grand Prix pushed prices to nearly triple their normal rates.
Frequent turnover and cleaning costs
All the same, your profit depends on how well you handle turnover expenses. Late 2022 data shows cleaning costs were $69.40 for one-bedroom properties, $93.01 for two-bedrooms, and $129.24 for three-bedrooms. These fees usually cover disinfection, linen changes, restocking essentials, and property preparation.
Your furnishings wear out faster with regular guest rotations. One property owner shared their experience: “There were many little things I didn’t budget for, such as new furniture every few years… I am constantly purchasing new bedding, blankets, duvet covers, sheets, pillows, and towels”.
Management intensity and guest communication
Short-term rentals need substantial time investment. Most owners dedicate about 5 hours weekly to manage operations. The common belief of passive income doesn’t hold true here. Guest communication becomes vital especially when you have guests expecting hotel-level service and 24/7 responses.
Local regulations and permit requirements
Local authorities have tightened their grip on this market. Most areas require:
- Business registration and licenses
- Transient Occupancy Tax (TOT) certificates
- Specific short-term rental permits
Running without permits can cost you heavily. Some areas charge $100 per day per violation, while Malibu takes either $100 per day or twice the daily rental rate, whichever is higher. On top of that, many areas don’t allow short-term rentals in residential zones or require owners to live there for a minimum period yearly.
Long Term Rentals: Stability and Simplicity
Short-term rentals might bring in more money, but long-term rentals give property owners a simpler way to operate with better stability. The steady income and easier management make this an attractive investment option for many owners.
Consistent monthly income and lower vacancy
Long-term rentals bring in predictable monthly income that creates financial stability for property owners. This steady cash flow helps cover property taxes, maintenance costs, and mortgage payments. The national rental vacancy rate sits at 7.0%, which shows strong occupancy rates across the country. This consistency helps owners plan their finances better and secure extra funding to grow their property portfolio.
Long-term agreements provide reliable income even during economic changes, unlike the seasonal ups and downs of short-term rentals. Property owners usually see lower vacancy rates with long-term tenants, and rural areas perform even better with just 5.8% vacancy.
Lower management effort and tenant turnover
Long-term rentals need less hands-on management, which is a huge plus. Over one-third of U.S. renters stay in their apartments for more than five years, which cuts down on turnover costs. The numbers show that 16.6% of renters lived in the same home for over 10 years as of 2022.
Major apartment REITs report their lowest-ever turnover rates. One Chicago-based company renewed 61% of its residents and kept 96.5% occupancy in early 2024. This stability means property owners spend less on marketing, tenant screening, and repairs between tenants.
Risks of non-payment and eviction processes
Long-term rentals have their risks despite the stability benefits. Evictions usually take 30-45 days or longer, and landlords must cover property expenses without any rental income during this time. The process needs proper paperwork, including formal notices before going to court.
New laws make things more complex. Starting January 2025, tenants get 10 business days to respond to unlawful detainer lawsuits. Landlords can expect to pay between $3,500-$7,000 for evictions, including legal fees, lost rent, and turnover costs. A full tenant screening remains the best way to avoid these risks.
Real Numbers: Comparing Profitability Metrics
Let’s get into the key metrics investors use to compare short-term and long-term rentals and find out which strategy performs better financially.
Gross Rent Multiplier (GRM)
GRM helps you quickly assess a property’s value compared to its income by dividing property price by annual gross rental income. A GRM between 4-7 shows strong performance. Lower values point to better investment potential. This original screening tool works best to compare similar properties in the same market.
Net Operating Income (NOI)
NOI shows the true profitability after subtracting operating expenses from total revenue. Short-term rentals earn about 30% more in gross income annually than long-term rentals. The higher operational costs mean this doesn’t always lead to better profits.
Cash-on-Cash Return
This metric shows your annual return on actual cash invested and gives a clear picture of investment performance. Real estate professionals call 8-12% a solid cash-on-cash return. Short-term rentals usually bring in 10-15%, while long-term options range from 4-10%.
Occupancy rate differences
Short-term rental occupancy rates should level off at 54.9% by 2025. The rates vary by region:
- North America: 51% occupancy
- Europe: 56% occupancy
- Coastal areas: Up to 70% during summer
Typical expense ratios: Short term vs Long term rentals
Operating expenses eat up about 50% of revenue for short-term rentals, compared to 35% for long-term rentals. Management fees also differ by a lot—15-25% for STRs (up to 30-40% in high-demand markets) while long-term rentals cost just 8-12%.
Hybrid and Seasonal Strategies
Property owners who stay flexible can boost their returns by mixing up their rental approaches throughout the year.
When to switch between short and long term
Smart property owners adjust their strategy based on seasonal demand fluctuations. Short-term rentals bring in higher profits during peak tourism seasons. Long-term or mid-term options keep occupancy steady in slower months. You should think over making the switch if you’re looking for stable income or feel overwhelmed by short-term rental management.
Using mid-term rentals during off-seasons
Mid-term rentals that last 1-6 months bridge the gap between traditional approaches. These rentals provide stability without long commitments. Properties with a hybrid strategy work great as short-term rentals in busy seasons and switch to mid-term stays when things slow down. This balanced approach connects with people who just need a place to stay for life events rather than tourism. Mid-term rentals are a great way to get predictable income and attract relocating professionals, traveling nurses, and digital nomads.
Tools for dynamic pricing and calendar blocking
Today’s rental management needs dynamic pricing tools that adjust rates based on market conditions. PriceLabs’ Hyper Local Pulse algorithm looks at supply, demand, and seasonal trends to set the best prices. Properties with flexible calendars get almost twice the bookings compared to less flexible ones. The best results come from:
- Letting guests check in any day
- Welcoming shorter stays (1-2 nights) in off-peak times
- Changing minimum stays with the seasons
Conclusion
Your choice between short-term and long-term rentals ends up depending on your property, location, and personal investment goals. Short-term rentals definitely offer attractive potential returns—up to 30% higher than long-term options. But they also need more management time and have higher operating costs. Many investors prefer long-term rentals for their stability and simplicity, especially those looking for passive income without daily involvement.
The numbers tell an interesting story. Cash-on-cash returns typically range from 10-15% for short-term rentals compared to 4-10% for long-term options. But these numbers need to be compared with occupancy rates, which hover around 55% for short-term rentals versus 90%+ for long-term arrangements.
Smart investors often succeed with hybrid approaches that match their property’s seasonal patterns. This flexibility lets property owners tap into peak-season rates while keeping steady income during slower periods. Your property’s location, local rules, and time constraints should shape these decisions.
The rental space changes faster than ever. You need to stay flexible with your strategy to succeed in the long run. Your choice of short-term, long-term, or hybrid model should come from understanding the real costs and time commitments. This helps set realistic expectations about your investment’s performance.
Remember, property investing isn’t one-size-fits-all. Analytical insights combined with a clear understanding of your investment goals will point you toward the most profitable strategy for your situation.
