help me with a smart decision ( short term rental VS long term)

[Baha El Far]

All,

I hope you are doing great.

I have an apartment 2bed/1 bath that I own and I am not sure if I should rent it out as a short-term rental/airbnb or long term. I heard the tax rates for short-term rentals are higher and more complicated. I am going to list a few details for both from a real estate agent that I trust and she will be my property manager. she has been in the short term rental market for over 8 years and is recommended by friends.


1) Short term rental income (1478$/month)

Furniture investment 6k$
90$/night
The average occupancy rate is 80% but could go as high as 98%.
the management fee is 20% of the income

Utilities and wifi fees are 250$

Income = 90 $/night x30 nights x 0.8 (occupancy rate) x 0.8 (management fees) – 250$ (utilities and wifi)

Income = 1478$/month


2. Long term rental (1000$ a month)

fairly high occupancy rate with a yearly lease/management fee is 5%

1000$/month



what do you recommend? can you highlight more on the tax of short term rental? any reference I could use to understand the tax benefits and how can I add deductible?

Thankss!!

[Alecia Loveless]

@Baha El Far After having owned two bed and breakfasts for 24 years I can tell you that you will have disposable costs each month with a STR. Things like toilet paper, soap, paper towels, shampoo, other amenities if you choose to stock them.

Things like towels and sheets will get destroyed and you’ll likely have to replace some at least every 2-3 months. Personally we found it easiest to buy like 2 dozens sets of all the same color towels and maybe 8 sets of the same color sheets so when one wash cloth got ruined or one flat sheet got stained we could immediately just bring in a new one and the problem was solved.

But just the basic amenities assuming 18 different sets of guests a month will cost $150 a month easily.

I prefer LTR because I have 7 buildings and 25 doors and I probably spend 3 hours a month total if it’s a busy month and that’s between dealing with tenants and going to the bank to deposit checks. If I knew how to do digital photo deposits I would likely only spend 1 hour a month. It’s just less time consuming than STRs.