Long Term Rentals Vs. Short Term Rentals in Florida
There are real estate investors of all kinds, using many methods to analyze and procure a good deal. Investors considering tapping into the Florida rental market often debate long term rentals vs. short term rentals. The following are our thoughts based specifically on Florida real estate market knowledge, our experience, and education we’ve pursued within our profession.
Pro's of Short Term Rentals
The benefit of short term rentals in Florida is the potential for higher revenue, compared to long term rentals. When hosting guests for a short term, you’re able to charge a higher nightly rate than a long term tenant.
Secondly, the short term rental market offers an abundance of different booking platforms and marketing methods these days. You can leverage each platform to generate multiple streams of income for your property.
Further, Short term rentals are turned over pretty frequently, which could be a positive if you have bad guests.
Next, with a STR you’re more likely to pay off your loan sooner, because of the higher cash flow. You may own the property out right in a shorter amount of time, or be able to invest in your next project sooner.
Con's of Short Term Rentals
Laslty, If you choose the right location, the short term rental market in Florida could be extremely lucrative. We have people from all over coming for sunshine, beach vacations, Disney World, and snowbirds running from the cold!
The downside of short term rentals could be high turnover. A short term rental will have a higher vacancy rate than a long term rental. Meaning, there may be some months your property sits empty.
Further, high turnover may also mean more wear and tear on your property. Short term rental guests tend to not care for their accommodations as much as a long term tenant might.
Lastly, short term rentals can be a bit more time consuming as you deal with new bookings weekly and guest inquiries during their stay. However, there are many platforms and strategies you can use to help automate this con.
Summary
Short term rentals can be an extremely lucrative investment if you’re strategic about it. We know a short term rental investor who purchased a home in Largo and just had a booking come through for $23,000. He’s a hands off investor providing about 8% to a co-host for management.
Another investor just purchased a cabin in the mountains and is self managing his short term rental from Florida. He paid $700 for the year for a self management software that linked up all his booking platforms. Also, he hired a local cleaner who’s calendar is synced to the booking calendar. This cleaner automatically knows when to go clean, empty and refill the hot tub, leave clean towels and sheets, and has contacts for maintenance and lawn services he uses as well!
Although short term rentals might be riskier, there are solutions and strategies we can help you implement to raise vacancy rates and manage the time consumption.
Pro's of long Term Rentals
The major benefit of long term rentals is they’re consistent. Investors for LTR have low turnover as they’re usually renting out their unit or home to a tenant for 6-12 months.
Long term rentals, for the most part, are easier to maintain and hands off. Many long term rental investors just look forward to collecting a check each month.
Con's of long Term Rentals
The main disadvantage of a long term rental is you’re not making as much return on your investment. Lower risk means lower income potential. So although your cash flow is consistent, it may not be as lucrative as a STR.
Lastly, in our current market, it may not make sense to purchase a property for a long term rental investment unless your main interest is to buy and hold for future equity. Mainly due to interest rates being where they’re at. Depending on the type of loan you obtain, your monthly mortgage payments pay be higher than the current rental market rates.
Summary
Long term rentals can be a very safe rental investment, especially in the Tampa Bay area. However, you will need several to get close to the income potential of a short term rental. Although a long term rental may be a less stressful asset (usually), they’re slower to build profit.
Many clients of ours, including myself, manage LTR properties on their own, not considering a management team until owning 5 or more. Self management provides the owner with more cash flow and control over the property and who’s leasing it.
Best Locations for Short Term Rentals In Florida
Best Locations for long Term Rentals In Florida
For long term rentals, choosing the location should be based on popular locations where people are moving or want to be.
Additionally, you’ll want to consider the interests of your ideal tenant when choosing a long term rental location. Are you wanting to provide housing for college students? Young professionals? Retired folks?
The Channel District in Tampa
Water Street Tampa
Riverside Heights near Armature Works
Westshore Marina District
Housing near University of Tampa
Downtown St Petersburg
Treasure Island
Clearwater
Historic Kenwood
Sarasota
The location of your short term rental is pivotal to your success. Working with an experienced realtor is highly recommended as many locations in Florida have restrictions on where short term rentals are allowed.
When choosing your short term rental, consider destination locations people who are traveling from out of state would be interested in.
Ideas include, beaches along the Golf Coast, Downtown St Petersburg, Orlando near Disney, nature areas, the popular art districts, etc.
Next, consider the demographic you’re wanting to host. What location would your ideal tenant want to visit. Are they retirees? College age or Young Adults? Do they want a quiet and serene location or a spot close to bars and nightlife?
In conclusion..
In conclusion, what are your main priorities and long term goals for your Florida Real Estate investment?
Both options, or a mix of both, can be lucrative opportunities both for short term cash and long term gains.
Remember, investing looks different for everyone. We’d be happy to discuss what you’re thinking it should look like for you!
Our expertise is in providing you with the numbers and calculations so that you can make the best decision for you, based on the info.
We are here to guide you so that your risk has a better chance for reward!