Every rental property owner eventually faces this question: rent it long-term to a single tenant on a 12-month lease, or run it as a short-term rental (STR) on platforms like Airbnb and Vrbo? Both can be profitable — but they carry very different revenue patterns, expense structures, and workloads.
Revenue Comparison
Long-term rentals (LTR) produce a fixed, predictable monthly rent. Short-term rentals produce variable, often higher, revenue — but it swings with seasonality, local events, and platform demand.
In this example, the LTR actually nets more per month once STR operating costs are subtracted — a common outcome in markets with moderate tourism demand. In high-demand vacation or urban markets, STR net income frequently exceeds LTR by a wide margin.
Effort & Management
- LTR: Low ongoing effort. One tenant, one lease, occasional maintenance calls. A property manager typically charges 8–12% of rent.
- STR: High ongoing effort. Guest communication, turnover coordination, dynamic pricing, and review management. Full-service STR management runs 15–25% of revenue.
Vacancy & Income Stability
LTR vacancy is binary — the unit is either occupied (generating full rent) or vacant (generating nothing) for a stretch measured in weeks or months. STR "vacancy" is continuous and granular — you might book 20 of 30 nights, which feels different from tenant vacancy but has the same effect on cash flow. STR income is inherently more volatile month-to-month, especially in seasonal markets.
Regulatory & Financing Risk
Many cities restrict or ban STRs, and lenders sometimes underwrite STR-intended properties differently (some conventional loans require the borrower to disclose STR intent, and insurance needs differ). LTRs face far fewer regulatory hurdles and are easier to finance conventionally.
Key insight: STR tends to outperform LTR in high-tourism, high-demand markets with light regulation. LTR tends to win in markets with moderate tourism, STR restrictions, or where an investor values simplicity and predictable cash flow over maximum revenue.
How to Decide
Run both models side by side using realistic occupancy and expense assumptions, not best-case scenarios. Factor in your own time availability and risk tolerance — a slightly lower but predictable LTR return is often the better choice for a first rental property or a hands-off investor, while STR can outperform for owners in strong tourist markets willing to manage (or pay for) the added complexity.