One of the benefits to owning rental property in Florida is that you have so many options when you’re deciding what to do with it. You can always rent it out for the long term. A residential lease agreement lasting for a year or more provides plenty of stability and a known annual income. And, there are plenty of good tenants in southwest Florida cities and communities looking for a rental home.
Our market also provides the benefit of a vacation rental, too. You can rent your home out to tourists and guests who are in town for a few nights or a few months. The tourism numbers in our part of Florida are consistently growing. It’s no wonder: we have beaches and baseball and plenty of shopping, dining, golf, and outdoor recreation.
So, assuming you have a property that you’re not living in yourself, or you’ve purchased an investment property with the purpose of renting it out, should you make it a long-term rental, or should you make that property a vacation rental?
Decisions.
This is not a bad problem to have. And, Florida is a unique rental market because it attracts people looking for both long-term and short-term housing. So, you have two solid options.
While long term leases are often seen as the best option for investors, this is a vacation-friendly area with a lot of people who come and go throughout the year. There’s no down season when we’re talking about Florida vacationers! The demand for vacation housing has grown. People want to stay in something more personal. They want the space and the privacy that a home can provide. It’s a better experience, overall, than a hotel.
Because we manage both vacation properties and long-term rentals, we want to spend some time looking at the pros and cons of each property type to help you decide whether you should rent your Florida investment property out for the short or long term. In the end, you’ll have to do a comparison that fits the unique position of your own rental property.
The best decision for you will depend on your property type and whether or not you plan to use the home for your own purposes from time to time. It will also depend on what you need or want to earn and how you can handle certain risks like vacancy and turnover.
Vacation Rentals: Why They’re Great, and Why They’re Risky
When you provide a vacation rental, you’re renting out a home for the short-term. It has to be turn-key furnished. It can be a single-family home, a condo, a cottage, or even an apartment.
Over the last decade, digital platforms have grown in popularity to help homeowners rent out their properties on a temporary or short-term basis. Some homeowners have even used these platforms to rent out rooms in their homes. Brands like VRBO, HomeAway, and Airbnb are extremely popular among hosts and guests. These make it possible for people to make their properties available to vacationers.
As a property owner, you might decide to rent out a home or a unit as a vacation property to earn income when the home is not being used. If your Florida property is a second home that you do use yourself from time to time, you can still stay there when you schedule yourself. Outside of those times, it can bring in some money while your asset appreciates in value.
Here are some of the benefits to renting your property out as a vacation home:
- Flexibility
You enjoy scheduling flexibility. You don’t have to give up the property for a full year or longer. There’s no obligation to fulfill a long-term tenancy when you’re renting out a vacation property. Instead, you can decide when to make the home available and when to keep it unavailable to renters. You can structure rental periods seasonally or in ways that work best for you. There’s a lot more freedom than you’ll find with a long-term rental.
- Per-Night Earnings
You charge more on a per-night basis with vacation rentals than you do with long-term rentals. This can generate some great cash flow. A lot of landlords do really well renting their property out as seasonal rentals or short term stays and they earn enough income to make up for any vacancies that they experience during slower periods. The nightly or weekly rate you charge on a vacation rental property is often double or even triple what you’d charge per-night on a long term rental.
- Guest Experiences
You get to meet a lot of diverse people from different places. If you want to. Some property owners enjoy meeting their guests at the home and showing them around. Others will allow guests to enter with a keypad and never be seen unless something is needed. The point is, with a vacation rental, you’re providing a fantastic experience for a diverse population of guests. That can feel pretty good.
It’s not all perfection, of course. There are also some drawbacks which need to be pointed out. Some of the challenges to your vacation rental strategy include:
- Time and Effort
Expect to spend more time managing your vacation rental property. You’ll have to keep up with frequently changing guests, and you’ll have to locate new customers and convince them to choose your property over all the others. There will be accounting that moves quickly, and a lot of logistics such as maintenance and cleaning. There are a lot of turnovers in the vacation property industry. If you cannot commit to the intense ongoing maintenance and care of your property, a vacation property might not be best.
- Vacancies Risk
Vacancies will happen, and you’ll need to expect them. Even in Florida, the property won’t always be occupied, so you’ll need to constantly look for guests. When you take all that vacancy you’re incurring over the long haul, it will add up to a lot of money that you would have saved had you locked someone in for a 12-month term.
- Upfront Expenses
Vacation rentals come with a lot of upfront expenditures. You’ll need to provide furniture as well as linens, pots and pans, cooking utensils, and creature comforts that guests are looking for. Wi-Fi will need to be good, smoke and carbon monoxide detectors must work, and you’ll have to have safety precautions in place. Guests will expect hotel-grade furnishings and décor, and you cannot disappoint them.
Long-Term Rental Homes in Florida: Stability and Sacrifice
Let’s talk about long-term rentals, which historically have been a great way for investors to earn passive income, especially when their properties are professionally managed. Your long-term lease is typically for a period of a year.
Your property will be rented unfurnished (furnished is possible too, but not necessary), because tenants will typically move in their own personal belongings and furniture. That significantly reduces the upfront costs. You’ll provide appliances, however. Tenants are typically expected to set up and maintain their own utility accounts. There’s a lot less turnover throughout the year; you’re renting to one specific tenant or group of tenants.
Here are the benefits:
- Financial Upside of Long-Term Rentals
On the positive side, renting your Florida property long-term often results in higher annual rental income. With consistent monthly rent payments, lower management fees, and tenants typically covering their own utility costs, you can enjoy a steady and predictable cash flow. This financial stability makes long-term rentals an appealing option for property owners looking to maximize their investment.
- Stability and Planning
Vacancies are typically less of a concern. Long-term tenants provide stability for your property, and that often provides owners with peace of mind. There’s less cleaning that needs to be done and the wear and tear usually isn’t as intense because instead of a revolving door of guests, you have consistent people in place for a year or longer.
Those are the benefits. Here are the challenges to your long-term rental:
- Long Term Lease Agreements
You’re locked into the lease. Once a lease is in place, the property is no longer available for spontaneous getaways, hosting family vacations, or offering a retreat for friends. This lack of flexibility can be a downside for owners who value having the property at their disposal for personal enjoyment.
Property Management for Vacation and Long-Term Rentals
Property management helps in either scenario.
With vacation rentals, your property manager can help with keeping guests happy. Generating positive reviews will be the lifeblood of your vacation home. Your property manager will also handle the marketing, the signing of the contract, the collection of the fees, and the general cleaning and maintenance that needs to happen between guests.
With a long-term rental, you’ll rely on your property manager to lease, manage, and maintain the home. That includes protecting the condition of your investment, responding to tenant needs, and keeping you compliant with all those laws we mentioned.
Let’s talk about how your property fits into the rental market in southwest Florida. We can lead you towards the best, and most profitable, decision. Contact us at Realty Group of Southwest Florida.
