Long-Term Or Short-Term - Differences In Rental Management Approaches

With the growth of vacation rental-focused platforms in recent years, more real estate investors have shifted from more traditional properties – either residential or commercial – to short-term rentals, due to the profit potential.

From the perspective of management, however, is there a meaningful difference between these property subsets? Even just focusing on short- versus long-term residential properties, it quickly becomes clear that there are some important distinctions in management practices, and in monetary matters.

IMAGE: PEXELS

Management Intensity

One of the primary differences between long-term and short-term rental properties is that they require very different types of management, and on a day-to-day basis, the intensity of that management can be very different.

For example, when managing an AirBnB or other short-term rental, you’ll have to handle a lot more discrete communications, essentially sharing similar information for each booking, answering questions about what’s offered, providing introductory tours, and managing post-visit reviews. Managing a residential property, on the other hand, can have longer lulls and then periods of high intensity when tenants have a serious maintenance problem or complaint.

Because these issues are more likely to require working around permanent tenants’ schedules or mitigating conflicts between tenants, the situation is very different from addressing the basic questions you’re likely to encounter from short-term visitors.

Profit Possibilities

One of the major reasons that more investors are increasingly interested in taking on short-term rental properties is that it’s usually pretty easy to make a profit on these properties. That’s because they’re more like hotel rooms, because owners can tack on added fees based on their own observations and needs, and can change the pricing between rentals, among other factors. To make sure you’re going to turn a profit on a long-term rental, on the other hand, investors and managers have to make sense of a much more nuanced set of calculations.

For example, using a capitalization calculator can help investors understand how much they need to rent their units based on management costs, taxes, and standard maintenance, but when unexpected costs arise, like an urgently needed roof repair or if a tenant breaks their lease, and it takes time to fill the empty unit, profit margins can grow quite thin.

Tenant Vetting

Both long-term and short-term rental properties require tenant vetting, but the approach to this is very different. For long-term rentals, tenants must submit proof of income, undergo background checks, and submit references, whereas for short-term rentals, unless someone has received complaints directly to the rental platform, the situation is largely a “pay to play” – if you can afford the rental, it’s yours. As a result, short-term rental managers typically do different types of administrative work, relative to their long-term management counterparts.

A Field In Flux

Regardless of your management specialty, the industry is currently going through a lot of changes, particularly in terms of automation. With more tasks happening in the background, including automated messaging, immediate screening based on digital applications, and other tech-drive tools, property managers are freed up to work on those tasks that really require a human touch.

It’s a change, certainly, but a positive one, because there are tasks computers, can replicate quite well, but, more importantly, there are roles human managers fill that will never fall under the purview of computers.