Short vs long term rentals

[Kevin Reid]

Can anyone direct me to a good pro con list or advice article? 

So my wife and I are having a hard time deciding our direction in life. We know we want to invest in some kind of real estate in the next few years. We keep going back and forth on what to do. We don't really need the cash flow as we have decent enough careers, we are just looking to build equity to use towards a slightly earlier retirement. For context we live in Lakeland, FL.

Way We see it we have a few options.

#1 (safest) buy another home locally and rent ours out long term. We know our house, it is desirable, and know what we can get for it.

#2 (semi safe) stay in our home and add a pool. Then buy some local inexpensive property to rent long term. Again we know our area and what we can do more or less.

#3 (riskier?) Stay in our home, and use our money to get a small short term rental in a city in SW FL. We would use it for a week here and there in the slower months. This is the "get your feet wet" deal as we have no experience as landlords for STR.

#4 (riskiest?) Stay in our home and buy a nicer property, somewhere with water access in SW FL for a STR. We would still use it in slower months.

#3 & #4 worry us a bit as they are so dynamic. High and low months, cleaning......plus we have to furnish it....

Anyone have both LTR and STR? Which do you prefer? For STR do you go with a management company?

[Nathan Gesner]

Long term is my preference. People have pie-in-the-sky ideas about making $60,000 a year with a vacation rental but it isn't that easy. You have to buy in the right location, furnish it, market, deal with constant turnover, etc. It's a lot of extra work. Then you're paying for utilities, WiFi, landscaping, consumables, lodging tax, city/state fees, and more. In my experience short-term rentals typically don't make much more than a long-term rental and that's before you calculate the effort involved. Most people don't count the costs of answering calls, booking reservations, scheduling cleaners, etc. You could pass it on to a professional management company but that will eat up 1/4 - 1/3 of your income.

A long-term rental is much easier. Tenant handles the landscaping and pays utilities. Tenant furnishes it. All you have to do is ensure the house stays in working order. You can learn to manage on your own or hire a professional property manager to do it for you. I recommend a PM for the first year or two until you have some more knowledge.

If you really want easy, invest in a turn-key provider like Memphis Invest. They sell homes that are fully renovated and occupied. They have a strong reputation and they work in eight different states. Your return is lower than if you were to find the deal yourself, but it's far easier and safer.