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Expert view on short term rentals

Florida Investment Rental Property : Long Term Rental vs Airbnb

So, you’ve finally decided to invest Florida rental real estate property but can’t decide whether or not Long-Term Rentals or Airbnb rentals are right for you?  If so, you’ve come to the right place.  In this article we are going to go over some of the pros and cons of Long-Term Rentals and Airbnb rentals so you can make an informed decision. 

Some factors you should consider when making your decision:

Market Demand:

  • Long-term Rentals: Florida has experienced consistent population growth over the years, resulting in a steady demand for Long-Term rentals.  The state is very appealing to retirees due to its favorable climate and appealing to workers strong job market.  The increase in remote work options has encouraged some works to live in Florida for its lifestyle and climate while working remotely.
  • Airbnb:  Florida is a world class tourist destination that attracts millions of visitors each year to visit its beautiful beaches, theme parks, and natural attractions.  Tourist hotspots in Florida, such as Miami, Fort Lauderdale, Palm Beach, Orlando, and Tampa, offer high demand for short-term rentals due to the influx of vacationers.

Income Potential:

  • Long-term Rentals: Typically provide a stable, predictable income stream. However, rental rates are usually lower compared to short-term rentals.
  • Airbnb: Can potentially generate higher rental rates per night, especially during peak seasons, and special events.  Affluent tourists from major cities are willing to pay more to enjoy the Florida weather.  However, there may be more variability in occupancy if you don’t manage and market your property well.

Regulations:

  • Long-term Rentals: Generally have fewer regulatory challenges compared to short-term rentals. Zoning laws and rental regulations are often more straightforward.
  • Airbnb: Florida is generally a regulation friendly state for Airbnb property investors, but careful compliance with local regulations is crucial for a successful short term investment property.  Check local regulations and homeowners’ association rules, as some areas may have restrictions on short-term rentals.

Management and Maintenance:

  • Long-term Rentals: Typically, less hands-on management is required for a long-term rental because of lower turnover.  Maintenance costs may be more predictable, but because the property is constantly occupied and being used, long-term properties can actually have more wear and tear than short-term ones.
  • Airbnb: Requires more active management, including cleaning, restocking amenities, and managing guest communications. Higher turnover may result in more frequent maintenance and repairs to maintain the quality of the property for the next guest.  Managing Airbnb rental properties can easily turn into a full-time job if you do it yourself.

Seasonality:

  • Long-term Rentals: Less affected by seasonal fluctuations, providing a more stable income throughout the year.
  • Airbnb: Income may vary seasonally, with peak tourist seasons bringing higher rates and occupancy.  In order to be profitable, it is essential for an Airbnb owner to know how to maximize their profitability / occupancy during both peak and low seasons.

Tenant Relationships:

  • Long-term Rentals: Establishing long-term relationships with tenants can lead to stability and reduced turnover.
  • Airbnb: Involves dealing with short-term guests, which may require more frequent interaction and more time and effort.  Vacationers visiting Florida often have very high expectations as they have taken time off of work and spent time and money traveling to visit the sunshine state.  Mismanaging tenant relationships can lead to vocal disgruntled guests who post negative reviews about their experience to Airbnb.  It is essential that you are responsive to your Airbnb guests and provide them with the best experience possible.

Risk Tolerance:

  • Long-term Rentals: Tend to be more stable and less affected by short-term economic fluctuations.
  • Airbnb: Income can be more volatile, and the business may be more sensitive to changes in tourism and economic conditions. 

Initial Investment and Furnishing:

  • Long-term Rentals: Typically involve less initial investment and lower ongoing costs for furnishings and amenities.
  • Airbnb: Requires furnishing the property to meet guest expectations, which may involve a higher upfront investment.  The most competitive Airbnb rentals offer amenities that guests expect when on vacation.

In conclusion, the decision between long-term rentals and Airbnb in Florida depends on your investment goals, risk tolerance, and the specific characteristics of the local real estate market.  Florida long term rentals may require less effort but they also offer lower investment returns.  Airbnb rental property can offer much higher returns, but requires a lot more time, effort, and knowledge to successfully run. 

The good news is that you can have the best of both worlds.  Many of the headaches associated with managing Airbnb rental property can be mitigated by hiring an experienced property manager to oversee and manage the day-to-day operations.  A good manager can ensure that the property is well maintained, attracts guests, and provides a positive experience for visitors with minimal effort on your part.

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Airbnb stands for “Air bed and breakfast,” it is the most popular online marketplace for short-term rentals.  It connects “Hosts” (Property owners) with who list their property with potential “Guests” (Short-Term Renters).  Guests create a free Airbnb account and book accommodations ranging from a private room in a shared house to booking a private stay in a mansion.

Listing property through the Airbnb platform has many advantages.  Some of the main advantages to using Airbnb are:

1.  Market Share – Airbnb is by far the most popular, built out, and well-known platform for short-term rental accommodations.  Airbnb operates in over 220 countries and has more than 200 million active users worldwide that have booked almost two billion stays since its inception in 2008.  Because Airbnb is so popular you will significantly increase your property’s exposure by listing it there.

2.  User reviews and ratings – Airbnb allows guests to leave reviews for properties that they have completed stays at.  This helps distinguish your property from others by providing a superior experience, which in turn increases the demand for your property.  Airbnb has a “Superhost program which give special recognition and exposure to hosts who achieve a certain rating and host enough stays.  Becoming a Superhost can greatly increase your occupancy rates.  Conversely, having negative reviews will dissuade guests from booking a stay at your property. 

Hosts can also leave reviews for guests, helping you to make an informed decision about who you allow to stay at your property.

3.  Host Guarantee Program – Airbnb has a “Host Guarantee” Program that reimburses hosts for certain types of damages and losses caused by guests.  In order to be covered Hosts must go through the claims process which involves providing evidence of any damages.  Ultimately it is up to Airbnb’s discretion whether or not damages will be covered.

4.  Types of Rentals – Unlike many other rental platforms, Airbnb allows hosts to rent out their entire property or individual rooms.  This gives you more flexibility and can potentially allow you to maximize your earnings and increase occupancy rates.  Airbnb tends to have more unique listings as well, such as camper rentals and even treehouses.  Other platforms tend to stick to more traditional lodging options.

Renting your property through Airbnb can be lucrative but it also has its share of disadvantages:

  1. More time and effort – Because you are dealing with a constant stream of Guests, there is much more time and effort involved with responding to inquiries, coordinating check-ins and check-outs, and dealing with guest communication and issues.  More time is spent on cleaning, restocking, and managing guest turnovers.                 
  2. Fluctuating income and occupancy challenges – If you aren’t experienced with managing Airbnb rental property and you aren’t employing effective marketing and optimal pricing strategies, your profitability could suffer.  A lack of knowledge or experience could result in lower occupancy rates or renting your property for way less than it’s worth when demand is high.
  3. Deferred maintenance comes at a higher cost – There are a lot of things that can potentially go wrong when renting out property. Things will inevitably break and need to be repaired as soon as possible.  If something essential like the air conditioner or water heater breaks in your Airbnb, you won’t be able to rent the place out until it gets fixed.  In a long-term rental, your renters are still paying you as long as you make the necessary repairs in a reasonable amount of time.  In order to minimize your rental downtime and repair costs, it is essential that you perform regular maintenance to prevent costly problems.  You will also need a reliable network of local service providers at your disposal that you trust to get the job done as quickly as possible, while minimizing your costs.  Using unvetted service providers to repair your property can not only be more expensive, but you don’t know the quality of their work.                           
  4. Lower profitability from bad reviews – Guests most commonly seek short-term rental accommodations from online marketplaces like Airbnb and Vrbo.  These platforms allow guests to leave reviews about your property that everyone can see.  If you don’t live up to your guests’ expectations and provide a satisfactory experience they could leave a bad review, which could damage the reputation of your property and result in lower occupancy.  Having a clear and accurate listing, responding to guests in a prompt and friendly manner, and having a well-maintained property will help you get positive reviews which will lead to higher occupancy rates.

Investors primarily buy rental real estate for the rental income, tax benefits, and potential for long-term appreciation, not to become full-time property managers themselves.  Managing Airbnb rental property by yourself can be difficult and time consuming.  Most property owners simply don’t have the time, knowledge, or resources required to efficiently manage short-term rental property.  An Airbnb management company can save you time by eliminating the day-to-day tasks required while allowing you to focus on other aspects of your life or business.  Not only this, but a professional Airbnb management company will often save owners money in the long run by optimizing pricing, reducing vacancies, and minimizing maintenance cost.

No, although Airbnb is one of the best platforms out there for short-term rentals, we believe listing your short-term rental on multiple channels is the best way to gain the most exposure and maximize your occupancy rate.  Some of the other platforms we use besides Airbnb are VRBO, Booking.com, TripAdvisor, and Expedia.  Each platform has its own strengths and limitations, with some working better than others depending on your specific needs and preferences.  We can help you figure out which platforms make the most sense for you.