Long-term rental properties, whether stand-alone houses, duplexes, or apartments, are the cornerstone of property ownership and focus on leasing to tenants for periods of typically six months to a year or more.
Such permanent leasing arrangements have advantages for investors, including:
- A stable and predictable income that you can rely on for the duration of that lease.
- Long-term rentals typically have lower vacancy rates compared with short-term, so you can minimise the risk of having periods of no rental income. The current average is as little as one week’s vacancy per annum.
- Long-term tenants often result in reduced turnover costs.
- Long-term leases give the opportunity for property owners to transfer utility costs to tenants.
- With a reliable long-term tenant in place, you will likely enjoy a more passive income stream with fewer operational demands than with a short-term rental.
- Long-term tenants are more likely to treat the property as their own and have a sense of responsibility and care, which can result in less wear and tear on your property.
- Long-term rentals are typically subject to fewer regulatory hurdles, providing a more straightforward and stable legal environment.
- Having qualified long-term tenants can lead to a more straightforward property management experience – for you and your property manager.
Short-term rentals have gained immense popularity in recent years, largely thanks to platforms like Airbnb and VRBO; however, the short-term accommodation landscape is changing.
Regulatory changes appear to be on the increase, as cities and regions worldwide are imposing stricter short-term rental regulations to address housing shortages and matters such as noise complaints.
Property owners with short-term rentals, especially in popular tourist destinations, might need to navigate complex compliance requirements, with factors such as location, zoning, and individual property specifications playing a crucial role.
Local councils on the Sunshine Coast, for example, are taking measures to regulate and increase rates for this accommodation sector, and non-complying holiday rentals are being closely monitored.
Short-term rentals are popular because properties can generate significantly higher revenue compared to traditional leases, especially in tourist hotspots or business hubs.
However, with inflation and fluctuating interest rates, many investors are leaning towards long-term rentals for stability, particularly in suburban and secondary markets where housing remains affordable.
Short-term rentals are also more subject to seasonal variability, and income can fluctuate based on the time of year, location, and local events.
Both short-term rentals and long-term investments offer unique advantages and challenges, so, as an investor, stay on top of current trends, evaluate your own goals, and make informed decisions.