Short vs Long Term Rental Recurring Costs Summarized

[James Ross]

Hello Bigger Pockets!  In keeping with my habit of “do some research, write a post,” I’ve been looking into short and mid-term rentals as compared with a more “normal” long term rental.  Specifically I’ve been trying to identify any additional expenses that a short term rental might include to use in property analysis. 

As is my wont, I’m writing this post partly to share what I’ve learned with other newbies, but mainly to see if anyone would be kind enough to give feedback on anything I might have missed or anything I have wrong.  I do not claim expertise in any form of real estate investing.  I am trying to learn, however! 

Ok, with that disclaimer out of the way, let’s dive in!

First, here is what I've found to be the common expenses associated with a long term, buy and hold rental. This is not a complete list of everything you might find out there, and I'm focusing on recurring expenses rather than renovation costs and other important but one-time expenses. These include mortgage principle and interest, taxes, insurance, property management, HOA fees, vacancy, capital expenditures, and any other financing methods (hard money lender, HELOC, etc). Each of these must be weighed against the potential rent to determine if the property is worth investing in.

A short term rental (STR), on the other hand, has all of these and more. You'll have some of the same expenses you incur as a homeowner as well as unique STR expenses piled on. Host fees (if listing with Airbnb, VRBO, etc), regular advertising fees, STR permit fees, utilities, cleaning, TV/Cable/entertainment, internet, basic toilet/cooking supplies, wear and tear on furniture, a security system, landscaping/lawn care, snow removal, trash removal, pool/hot tub care, propane for gilling/fire pits, and others depending on what amenities you may want to offer. You need to really dig into everything you want to include and what expenses may be associated with that.

It is also worth noting that vacancy and property management costs are both likely to be higher, and vary month to month as income fluctuates with the season (you can charge more for an STR at Christmas than some random Tuesday in March). Insurance costs will be different as well since insurance companies assess STR coverage differently from standard rental properties.

While STRs can certainly generate more income if done correctly, they also come with significantly increased costs that must be taken into account when determining if a property would make a good STR.