Without having more facts, it is impossible to tell you which is the better deal. 4-5 years is extreme and I cannot imagine anywhere where that would be the case, EXCEPT for highly competitive markets with over regulated planning, design or environmental hurdles to deal with. 

We have had four vacation rentals and I can tell you that between the active management, the expenses, and the changing city regulations it just gets to a point where it isn't worth it, especially when you get a mid night phone call about the internet not working.As an owner of a property management company we get clients asking frequently if we will manage vacation rentals. 

But what it did was allow me to operate during the GFC thank God they made it through and went to bat for me with the regulators and kept some credit open for me. 

Being a buy and hold investor is not the same as forming a REIT.A REIT is a security offering, it comes with a lot of regulation and compliance overhead.

There may be incentives or regulations working in the background to cause this.It could also be that another offer looked stronger.

Is there a rule or regulation in each state?

Not only does that contribute to the mess, but the chances of damage are that much higher.5) You have to watch out for zoning regulations.

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I'm producing 12-15% fixed return on investors money, but it's a tough environment and you have to be good at dealing with the worst tenants on the planet...at least i feel that way. 

I have bailed many of them out over the years when some guru gave them a model that turned out to get them in deep kimchee with regulators.