Some landlords swear by short term rentals as the best way to let their investment property, whilst others will not be swayed from a long term rental strategy.
Of course, both have their pros and cons. Which one should you choose for your investment property?
Short term rentals
Many landlords are attracted to a short term rental strategy by the promise of higher rental rates. A well-managed and maintained property in a desirable location can command a higher weekly or nightly fee than a traditional long term rental. The rent can be adjusted during peak seasons, which isn’t possible with a long term lease.
What’s involved in letting your property as a short term rental?
You might be able to charge more rent, but a short term rental does come with a lot of extra management and additional maintenance. Short term rental landlords need to provide everything necessary for guests to have a comfortable stay, from furniture to bed linen, wi-fi to cookware. The property needs to be cleaned after every booking, and the high turnover of guests can mean increased wear and tear on the property and furnishings. We’ve all heard the horror stories of short term rental properties being used as party houses, resulting in extensive property damage and unhappy neighbours. And of course, there’s the daily administration and guest communication to take care of.
One of the primary risks of a short term rental is the possibility of long-vacant periods. Whilst your property might be booked out during peak season, a quiet off-season could lead to significant financial strain.
With short term rentals, there is no guarantee of occupancy, and therefore no surefire reliable income. Many landlords, like our client Chris, discovered this when COVID-19 hit last year. Tourism disappeared overnight and with it the supply of short term renters. Chris decided to switch his Fremantle townhouse from Airbnb to a long term rental. We soon found a tenant who moved in on a 12-month lease, giving Chris reliable and regular income and priceless peace of mind at a time of great uncertainty.
Long term rentals
Stability is the main reason why many landlords choose a traditional long term leasing strategy for their investment property. A long term lease ensures the property is generating consistent rent throughout the year, with no vacant periods or off-season to contend with. Long term rentals often generate fewer upfront costs for the landlord too – they don’t require furnishing or regular advertising, and unlike a short term rental, the utility bills are usually paid for by the tenant. A good property manager will take care of the day-to-day management of a long term rental, so the landlord can sit back and relax.
A short term rental strategy is one way to generate revenue from your investment property, and it can allow you to charge higher rent. However, a property usually needs to be located in a high demand area for a short term rental strategy to be successful. A short term rental strategy comes with high overheads and the ever-present risk of extended or multiple periods of vacancy.
On the other hand, long term rentals generate landlords a regular and reliable income. A long term rental strategy is suitable for all types of properties, from units to freestanding homes, in all areas of Perth. Outgoings are often lower for properties let for the long term, and as we’ve seen during the COVID-19 pandemic, a long term lease can help to protect landlords against volatility.
For the majority of Perth landlord investors, a long term rental strategy is the safe and prudent choice.
WA law and short term rentals
Short term rentals are governed by their own set of rules and regulations, and in WA short term rentals are subject to local council bylaws. A 2019 Parliamentary inquiry found that the policy governing short term rentals needed to be updated, and so the state government is now considering a registration scheme for short term accommodation providers. Also being considered are updates to strata title guidance to include powers and processes available to strata companies to manage short term rentals. Subject to approval, the changes will be enacted this year.
If you’re looking for a friendly and professional property management service for your investment property, contact our expert team today.