Done well, managing long term (6 month + lease terms) rentals can be something less than a full time job, depending on how many doors you’re renting. Still, the time commitment is a lot of hassle. If you’ve got a property manager doing a good job for you, then props to you – you’re probably paying around 10% for a single family residence and a little bit less for multi-family. That’s a reflection of the amount of time and energy required to manage the property.
In a short term rental (AirBnB/VRBO) you’re going to find that managing just one property is nearly a full time job. With short term rentals, it’s all about availability. If you pay someone to manage (host) your AirBnB rental, you’ll pay more like 20 or 25% to the property manager, and you’ll find that nobody you pay will work as hard to keep those five star ratings as you will. I’d recommend building an incentive plan for a paid host around ratings and occupancy and you’ll likely end up paying a lot for really good hosting.
The magic is in income. A long term rental in my market (travel destination) that rents for $1500/month on a 12 month lease could easily rent for $200/night as a short term rental. You can do the math, but you’ve only got to have 25% occupancy to match the income that you’d receive as a long term rental. In a destination market, it’s not hard to keep an attractive property well over 50% occupancy, so short term rentals are much, much more lucrative in my market <shameless plug> Fairhope Fruit and Nut District | Urban Property
With AirBnB, there’s actually less wear and tear on the property. While you have many, many more “turns”, short term rentals don’t get the floors and doors scuffed when a tenant moves in their washer and dryer, and a short term tenant will let you know when there’s a water leak, rather than just ignoring it for nine months and you discover $5k in damage after they move out. Short term renters don’t let their 12 year old paint their bedroom black. Short term rentals have some advantages that are counter-intuitive.
TLDR: Should you convert from LTR to STR? It’s up to you – it’s a lot more lucrative, but it’s a lot more work.
Shameless plug: Here’s a Short Term Rental property listed for sale:
To learn about Fairhope’s Short Term Rental Regulations, check out https://movetobaldwincounty.com/fairhope-short-term-rental-regulations/
what is your opinion of renting a house in Daphne compared to Fairhope? Would you say that was a destination market? If i rented a house for $200 a night in Daphne, do you think it could rent for 50% of the time or more like 25%? my house in in Old Towne Daphne but i didn’t know if that was considered a destination spot. I am looking to rent it out for 150 nights plus at $200 a night. Does the seem reasonable? I currently have a property in Colorado that does well, it rents about 250-300 nights a year but its a small place for $100/night so its easier to rent and right in the city. this is a little different so i am trying to consider short term vs long term. the more work is not a problem if the money is there
Hi Torrie – I think that there’s a lot of opportunity in Daphne and Montrose for short term rentals. The first thing to consider is the Daphne land use ordinances. You can operate a bed and breakfast in Daphne in property zoned R1, R2, and R3, but there’s an approval process and some odd requirements (500sf per guest room, for example). You can see the ordinance for yourself here, refer to section 31-4 BED & BREAKFAST ESTABLISHMENTS: http://www.daphneal.com/DocumentCenter/View/861/Appendix-B-Ordinance-2011-54-Daphne-LUDO
As far as pricing and occupancy, in my opinion you’d need your property to be visually stunning to get a lot of interest at $200/night. At that price point, you’re competing with the places like the Grand Hotel, Lucia Blue (https://www.luciableu.com/), and Little Point Clear (https://www.littlepointclear.com) as well as others and there are a lot of STR properties in our area that are priced below $100/night. This property in Fairhope rents each unit for $200/night and it’s pretty high end: 614nichols.com .
If you want to give it a try with your Olde Town Daphne property, I’d suggest starting out with a low rate until you’ve got several really great reviews, then bump the price up. If you decide that you’re not able to get the rate you’d like at the occupancy you need to make it work, you have the option of taking the property off the STR market and find a tenant in need of a 12 month lease.