@Julieta Osuna
@John Farkas
Pretty much everywhere, property prices have increased much quicker than long-term rents. So, if you have to pay cash for a property, your ROI will be low.
In developed countries like the US or Canada, investing in long term rentals can be profitable because you can get a mortgage at a very low interest rate and your tenants will pay for your mortgage. Moreover, you can get your invested money back by refinancing. You can do that in Europe as well (although not necessarily the refinancing part) but I wouldn't want to be a foreign investor in a country that are laws favorable for the tenants.
In developing countries, while property prices are lower, long term rents are generally extremely low and the demand is low because of the lack of a large enough middle classes; the wealthy own their own property so they won't rent.
If I want to invest in short-term rentals however, I'll do it outside of the US and Canada. Why? To illustrate this, let's compare a short-term rental in Mexico vs the US:
1. An equivalent property is much cheaper in Mexico than in the US.
2. Yet, the potential rental income will be much higher in Mexico for the following reasons.
3. The nightly rate will be higher in Mexico as people are willing to pay more for a holiday in the sun.
4. The season will be much longer in Mexico, which will translate in a much higher occupancy.
5. The competition in Mexico is much less because there is less offer and more demand. There is less offer in Mexico because only the properties that have a western level of luxury can be rented will there is a massive influx of tourists in Mexico every year.
6. While Mexico encourages short-term rentals, they are (strictly) regulated if not outright banned in the most popular US destinations (that is when they are not already banned by the HOA).
To partly compensate for that, the US has the advantage of the mortgage. However, if, like me, you manage to get financing in places like Mexico, there is no contest!
Finally, long-term rentals have the advantage of full or almost full occupancy. However, in most places, short-term rents are so much higher than long-term rents that you'll almost always make more Monet if you choose the right property in the right place and execute the right marketing strategy.
For example, in Uruguay, there is an area where you can make a double-digit rental return by renting your beach house during only two months of the year (in high season obviously). So, you'd make more money renting over just two months than most long-term renters make over a whole year.
