Which is Better? Short Term or Long Term for SWFL House??

Question

Interested in hearing from others regarding the returns on a Short Term (Vacation) rental vs. a long term rental. I just purchased a SFR in Bonita Springs / Naples (SWFL) area and am contemplating whether to rent it as a short term vs a long term rental. It's about 1 mile from Barefoot Beach, so I would assume it would make a good vacation rental due to the proximity to the beach. Interested on the vacancy rates for on-season and off-season as a Short Term. I looked at VRBO and there seems to be alot of properties that have pretty full bookings for on-season, but not so much for off-season. Can anyone provide some further insight? Would I have a better ROI doing Short Term or Long Term?

James Carlson · Answer

@Jim CarsonCongrats on the purchase. It's always exciting to get another one in the portfolio. Others have already made most of the good points. Get on Airbnb and see what others are doing in your area. Check out AirDNA for a report on what the averages are in the area. I would disagree that you can't run a short-term rental from long-distance. I know of numerous people who are running them in Tennessee and in Galveston. Now, I'd probably want to get a short-term rental property management company. (Say, if you were doing Airbnb in Denver, you'd reach out to someone like @Tyler Work)

Craig Curelop · Answer

@Jim Carson - Being based in Denver, I am in a different market than you. I run both a short and long term rental. Both are profitable, but the short term rental is more lucrative. However, it's also a lot more work. So obviously you have that trade off. To see what you can get for short term rentals vs. long term rentals I would suggest you do the following. Go on Craiglist and inquire to a few people about long term leases, see what they charge you. Then go onto AirBnb and search for a 5 day stay at the times you are concerned about in a residence near yours. Multiply that by 4 or 5 (20 or 25 days occupied) to see what you could get for a month on AirBnb. That should give you a decent understanding as to whether you should do a long term or short term rental.

Tyler Work · Answer

Hi @Jim Carson I definitely echo what @Kristin Kiddy has to say about managing long distance. Unless you are experienced and have safeguards in place you will need a property manager. The going rate in Denver is about 20% but I've heard rates as high as 40% in hotter vacation markets. I can't speak to the Naples area but I know that Destin is one of the best short term markets in the country per a number of market reports I've read. Check data from websites like AirDNA and Everbooked and you'll get a good feel for what kind of revenue your property can generate. Having said that I have never heard of a short term rental in a hot area making less on the short term rental market vs. long term, even with seasonal swings. Good luck!

Kristin Kiddy · Answer

Are you long distance? I would caution against short term vacation rentals if you are more than a few hours from the property. My husband and I ran an (unintentional) Colorado vacation rental from 2000 miles away for 5 years and it was a challenge. (We wanted to sell when we moved out of the state, but couldn't until the market recovered) We made it work and it was successful enough to cover all our costs and mortgage, but we were not making any money. You have a lot more work with a vacation rental... coordinating the renters, the cleaning company, and there are more maintenance and repairs due to the high volume of people. If you use a property management company, you will pay 20% or more for the service. Also your monthly expenses are greater as you must cover all utilities and tv and internet services. In many areas you are also responsible for charging and paying lodging and sales taxes so be sure to investigate that. Finally, keep in mind how seasonal the market is. Do people rent year round? Or is the rental season very limited? What will your cash flow look like... you may need to hold incoming cash from busy months to cover costs in the slow months.

Nancy Bachety · Answer

@Jim CarsonCongratulations on your purchase - the location is fantastic for a SFR. What were your original thoughts on how you would use this when deciding to buy it? Was it for you to use now or down the road? Was it a great deal? Do you want a place to go to in the winter?What has changed that you are asking at this point?We own a LTR (condo) in Naples and STR in St. Augustine. We did seasonal rental in Naples condo the first winter but it wasn't enough to cover costs and I had zero interest in spending summers in Naples. So, we rented it annually ever since - about 4 years ago - and look at like a savings account. We wanted to buy a SFH in Naples Park but the prices are high compared to the seasonal rent and again, I don't want it empty in July and Aug. Unless you want to use it in the offseason and during peak season, if I were you I would probably choose a LTR. Plenty of wanna-be-residents rent at first. EIther way, congratulations- great location!

Dave Foster · Answer

@Jim Carson, Everyone's got a different perspective. And each property it's own story... but for what it's worth - We've done all three in Lee County (just north of there). You're in the perfect locale to make any of the three work.1. Long term rental is lowest expense and most stable. Of course, a great vacation rental house is probably not going to rent for annual at the best rates.2. Short term (seasonal) - worst of all worlds. You carry expenses all but 4 months. Rental for the 4 months doesn't equal an annual. But it's the easiest to rent. And the easiest to ramp up3. Short term vacation rental - Again, the market has changed I'm sure but we killed with this one. It took three years of ramp up and special properties (we were on water with both and put boats on lifts in the back yard and rented them as well). And it's labor intensive. But the demographic of cliental was awesome. the revenue/time period was phenomenal. and it was fun. The more I think about this the more critical the make up of the actual house is to the success of each of these.

Brian Schmelzlen · Answer

I haven’t done it myself, but from what I have heard of you have a desirable area and can cater specifically to the needs of your ideal tenants, you can get a much better ROI on a short-term rental. However, in my opinion that is much more of a business than a passive investment because there is a lot more day to day involvement (i.e. cleaning, advertising, changing rental rates based on day of the week/time of year).