After being handed the keys to their property, the next step for an investor is to start capitalising on it. Although long-term rentals have been traditionally looked upon as a favourable option, the introduction of Airbnb and other industry-disrupting business models have allowed homeowners to choose between the two.
Short-term rentals refer to the letting of property for a rental period that is typically under 6 months. Rental guests have varying profiles, ranging from tourists looking to get the ‘local’ experience’ to local homeowners needing a short-term accommodation during home renovations.
Long-term rentals, on the other hand, usually involve rental contracts from 6 to 12 months. These properties are usually near amenities such as shopping malls and schools - important features that residential home owners find attractive.
In this article, we list down four major factors that homeowners should consider when choosing a suitable option for their property.
Potential Rental Yield
One of the first and most important factors to consider when renting a property out is the rental yield, i.e. how much rental income can be earned. Short-term rentals are known to bring in almost 30% higher rates, sometimes more than twice the amount of rental income compared to long-term rentals, especially during seasonal periods.
Stability of Income
Though short-term rentals can bring in higher income, it might not always be consistent. Long-term rentals ensure a steady stream of revenue, so homeowners are able to estimate how much they can earn annually and adjust their plans accordingly. Short-term rentals on the other hand, are lucrative only if high occupancy rates are guaranteed. There could be periods of time when the property is vacant, either due to last-minute cancellations or low demand, which does not maximise the use of the property.
Maintenance & Management
Managing a short-term rental tenant requires much more effort and time than managing a long-term property.Furnishing, cleaning, maintenance, replenishing essential supplies are some of the property management tasks that are left to the homeowners themselves when they choose to rent out their apartments under the short-term rental model. This can get especially challenging for those who live in a different country from their investment property, though there are apps like Hostmaker, which can effectively help to manage short-term rental guests more easily. Those who choose the long-term rental model can live hassle-free as basic maintenance can be left to the tenant, with homeowners rarely needing to step in. Property management companies like Plus Property also offer end-to-end services like facilities, tenant and sales management.
Regulations
Regulations for short-term rentals can also vary even between cities. Thailand’s stand on Airbnb, an example of the short-term rental model, is in somewhat of a grey area. As per the law, independent short-term letting of homes or rooms is illegal. According to reports, this could be due to the fact that short-stay lodging companies like Airbnb have been disrupting the hotel industry on a large scale. However, short-term rentals are still tolerated because of the unclear and contradictory regulations, especially between the Hotel and the Condominium Acts. This grey area then points to the fact that, though frowned upon by some, short-term letting is not an obvious violation of the law.
The choice between short-term and long-term rental needs to be made after carefully considering both the needs and the current capacity of the homeowner. Members of the Sansiri Family are encouraged to approach our Plus Property agents to seek assistance and advice on their Sansiri properties.