Short-term vs. Long-term Renting: Advantages and Disadvantages For Apartment Owners
Let’s say that you have an apartment or you want to buy an apartment in Kyiv to rent it out. The first question that should pop into your head is whether you want a long-term rental or a short-term one, and it would be best to think about this before starting any renovation (read here on how to make an efficient renovation for rentals).
We have two main types of residential rental property here in Kyiv, Ukraine – short-term and long-term. These two types are totally different, and both have their pros and cons. In this article, we will review the most common things to help you figure out which suits you and your expectations the best.
Let’s start with short-term rentals. The name speaks for itself, so let’s go straight to the point.
Who might be interested in renting an apartment on a daily basis in Kyiv? Much depends on the budget and location of the apartment. Flats are often rented as a cheaper alternative to a hotel for people who come to Kyiv for work purposes. They have a kitchen, and the choice of locations is much more comprehensive, which is critical for some people who need to be close to a conference or exhibition venue. These are often 1- or 2-room apartments in different parts of the city, mainly in the center, but they can also be bigger apartments that are rented by groups (friends, a family…) who want to celebrate something. In these cases, there could be a lot of noise or even damage, and neighbors might not be happy with you at all. Below are all the pros and cons of renting out an apartment short term.
Advantages of short-term rentals:
It’s easy to get started
Launching a short-term rental is as easy as snapping a few photos, writing a listing description, and adding it to Airbnb, Booking.com, or TripAdvisor. You don’t need a real estate agent, there are no leases or contracts involved, and you can get started right away. Compared to long-term rentals, the entry barrier is relatively low.
You’re usually paid upfront
Most short-term rental platforms require users to pay upfront or book the place with a prepayment, so there’s no risk of non-payment or skipping out on the bill. They often include cleaning fees and other costs, as well. Best of all, the funds are usually transferred quickly. On Airbnb, for example, hosts get their payments about 24 hours after the guest’s check-in time.
Ability to adjust pricing
Short-term rentals can make more money, plain and simple – especially in a popular vacation area. In addition to the higher income potential, owners of short-term rentals have the additional luxury of being able to adjust pricing as they see fit. If the demand is high or there is a tourist site nearby, an owner can raise the rent to maximize profits.
Disadvantages of short-term rentals:
The income isn’t as stable
Different factors like seasonality, the number of tourists and city visitors, etc., impact your income potential. While the high season may be fully booked, off-peak bookings are scarce, which can ultimately cause loss of money. Last-minute cancellations are also frequent. However, as many people found out during the COVID-19 pandemic, the travel market can be unpredictable.
It requires more cleaning and regular maintenance
You have to be pretty much always aware of what is going on in your rental property, as the turnover of people is much greater than in long-term rentals. The home needs to be cleaned, restocked, and essentially reset every time a guest checks out. If you’re running a busy property, this can mean serious time or costs if you’re outsourcing the work. And maintenance needs tend to be higher because short-term rentals are typically furnished, and everything is up to the property owner.
You’re in charge of everything
Short-term guests don’t pay the bills for electricity, gas, or any other utility, so you have to take these into account when setting the price and add in some additional costs. In addition, there could be damage to furnishings and equipment. Platforms do little to nothing to discourage damage by the renter. With longer-term tenants, you have leases, security deposits, and other measures in place to encourage better care of the property.
As you can see, you can earn quite good money on daily rentals, but this goes along with increased risks that may be associated with seasonality, foreign policy situation, and other things. We think that this kind of business is suitable primarily for gamblers and those who like to be fully involved in their business.
Advantages of long-term rentals:
You get consistent, stable income
The biggest benefit of long-term rentals is knowing that you have a monthly rental income that you can rely on. You know how much you’re getting paid and when, and there’s no uncertainty about the returns you’re able to make on the property. There is no seasonal variance or off-seasons that would make it difficult to rent your property.
Whether you choose to hire a property manager or manage the property yourself, it will require less time than a short-term rental. You don’t need to do check-ins, check-outs, and key handovers; you aren’t responsible for utility payments, cleaning, light bulbs, and the other little details. Also, there is no worry about advertising the apartment or cancellations.
There may be no need to furnish
Some but not all long-term guests could come with their own furniture. You have to do all the dirty work: paint the walls, install quality pipelines and electricity interchanges, and equip the kitchen and bath. But you don’t need to think about stylish decor, up-to-date furnishing, etc.
Disadvantages of long-term rent:
Lengthy process to find the right tenant
It’s one thing to find a guest for a night or two, but finding a tenant for a year can be much harder. Remember the Vestor.Estate design tip that you have to make the apartment as neutral as possible so that it can suit a wider range of potential tenants.
Less control over the property
Most of the time, nothing goes wrong during a rental stay. There is, however, a major difference between short-term and long-term rentals: you can’t just visit and check your investment. Despite this, there is less to worry about, as you could take a security deposit and not worry about what issues there might be.
You can’t change pricing as easily
When you’re renting long-term, you don’t get this flexibility; but, in contrast, you don’t have periods when the apartment is waiting for tenants for weeks or months in low seasons. It fits well for people that don’t want to rush, and want to be less involved in the processes and have a stable income.
It’s up to you to choose what fits for you, renting out short-term or long-term. However, our statistics show that all Vestor.Estate investors and clients choose long-term renting, as it requires less involvement and the ROI is relatively high and stable. We have about 30 apartments that are under our management, and we continue sending rental income to our clients from their apartments, even during the pandemic. Maybe it’s a bit less than before, but they have it.
If you want to invest in residential real estate in Kyiv, contact us, and we will gladly help you!