Hello, property and potential property owners! Welcome to the RPM Distinguished Care blog, where we provide practical advice about property management! If you’re a return visitor, welcome back. We sincerely appreciate your support! RPM Distinguished Care specializes in managing successful rental properties in and around the Charleston area. We’re here to make your lives easier by giving you the resources you need to maximize profitability and have a successful rental property. We provide comprehensive property management services at every conceivable level. From advertising and marketing, to responding to applications, to inspecting and maintaining properties—there’s nothing we do not do. Further, we ensure tenant compliance, handle necessary evictions, and report directly back to you about revenue and profit potentials. We aim to make owning rental property as easy for you as possible, for as little money as possible. Check out the rest of our site to meet our team and discover what makes RPM Distinguished Care the best property management company in Charleston!
Our last article dealt with crafting long-term goals for your rental property—a topic not too far removed from what we’ll be delving into today. The success of a rental property shouldn’t always be judged on a month-by-month or even a yearly basis. Instead, the success of a rental property should be based upon how far the property has propelled you towards your financial goals. Therefore, it’s essential your goals are clearly conceptualized, concrete, and actionable. We discussed monthly cash flow versus long-term appreciation in terms of how each provides return on investment. We also dedicated an entire section to drafting a business plan for your rental property—why it’s important and what should be included. Finally, we gave a brief overview of why strategy is essential for reaching goals and how various goals require different strategies altogether. Our last article provides the tentative basis for transforming your rental property from a means of supplemental income into its own business. If you’re interested in learning more, we recommend heading over after you’re done here!
Today, we’re exploring the major and minor differences between short-term rentals and long-term rentals. Each type of rental has its own pros and cons, risks and rewards, preconceived notions and inherent truths. With the popularity of AirBnB and other short-term rental sites, more and more rental owners are intrigued by an idea which might’ve once seemed implausible to landlords of the past. If you’re on the fence about which type of rental is best suited for you and your property, look no further! We’ll lay out everything you need to know in the simplest terms, enabling you to make the best decision for your future!
About Long-Term Rentals
Long term rentals are the traditional kind of rental and, generally, the safest. Technically, long-term rentals are predicated upon leases which cover anything over a month. Which means, technically, a long-term rental could offer three-month stays, six-month stays, one year or even multi-year leases. Why are long-term rentals the safest kind of rental? Well, long-term rentals offer the owner a sense of security, since they can reasonably expect the rental income from the property to be provided each month for a set period of time. This allows owners to plan accordingly for the end of the lease term and focus their energies elsewhere.
Long-term rentals are also considered easy to manage, whether personally or with a property management company. Since one-year leases are the most common sort—that’s an entire year without needing to market, advertise, prepare the property for renting. Let’s just say owning three long-term rental properties is much easier than owning three short-term rental properties. Concerning utilities, long-term renters often take care of paying for their own water, gas, and electricity. This lessens the financial burden on the owner and frees up a portion of the monthly income. Likewise, long-term tenants do not expect their place to come fully stocked with toilet paper, clean linens or continuous grounds maintenance which is generally the responsibility of the tenants.
That’s really the main difference between long-term and short-term rentals. While tenants expect the first to become their home for a time, the tenants in the latter are usually just passing through. This fundamental difference in philosophy alters the expectations placed on the owner and, thus, the expectations placed on the property. It’s important to note this difference because you would not market a long-term rental in the same manner you would market a short-term rental. Short-term renters are looking for something completely different.
The major positives of owning a long-term rental property are the ease of management, low turnover rate, predictability, and cost efficiency. The major negatives of owning a long-term rental property are the higher rates of eviction and lack of flexibility. Leases must be honored, barring circumstances which warrant an eviction, meaning you’ll have to put up with troublesome tenants until the end of the lease.Likewise, if you have an opportunity to sell, you might have to hold off. Especially if the new owner doesn’t intend to use the property as a rental. In comparison, short-term rentals can be quickly sold, as there are no tenants or long-term contracts involved.
About Short-Term Rentals
Short-term rentals have been around for a long time, but have recently drifted into the forefront of our collective imagination. With rental apps, individuals can rent out homes for as little as one night, something which used to be reserved for hotels. The traditional short-term lease has been month-to-month. While this sort of rental has been commonly associated with instability and unpredictability, there are too many positives for short-term rentals to be dismissed entirely. For example, certain short-term rentals possess a higher income potential than long-term rentals. Consider a home by the Charleston coast. While this home might garner $1700 in monthly rent as a long-term rental, the same home could garner more than three times this amount in a month as a vacation rental. The greater profit potential of short-term rentals is a major draw for investors, however this profit potential is somewhat off-set by higher maintenance costs. As of 2021, the average daily rate for short-term rentals in Charleston is $263 (with a high of $301 set in July and a low of $225 set in January). The median monthly revenue earned by short term rentals in Charleston this year is $4.4k (with a high of $6.2k set in July and a low of $2.1k set in January). These revenue figures do not include taxes, service fees, and additional guest fees. The higher profit potential of short-term rental properties serve to off-set the higher maintenance costs.
Yes, you’ll definitely want to invest in property management services for short-term rentals. Why? Because of the high turnover rates associated with these properties, they need to be marketed almost nonstop. As well, unlike long-term tenants, vacationers expect their rental to come fully stocked with everything they might need to enjoy their stay. They’ll need near-constant communication and handling. Similarly, once one renter is gone, the property will need to be prepared for the next tenant. This monthly process is not only time consuming, but also tedious. If you’re a solo investor bent on managing your own short-term rental property, it’s certainly possible, but you won’t have time for much else.
There’s a certain flexibility inherent to short-term rentals. While rents for long-term rentals are locked in at the time of the lease being signed, the rent of short-term rentals can change every month. This allows the owner to adjust, as they see fit, to evolving levels of supply and demand. If you enter a particularly busy season, increasing the price of the property can yield stellar profits. Likewise, lowering the price of the property during a slow season can help keep the place occupied. If you are looking to invest in a Charleston vacation rental, it’s important to know the vacancy rates here so you can manage your expectations and budget accordingly. From 2009 to 2019, the vacancy rate for Charleston rentals decreased from 13.7% to 8.94%, denoting a trend of increasing rental demand in the city. The vacancy rate for Charleston is still well-above the national average of 5.8%, however.
Which is better for me?
The first and most important question to ask yourself is: Am I allowed to rent my property short-term? Certain areas have codes and regulations which disallow short-term rentals. Certain areas allow short-term rentals, but only for those who have a transient license. The price of these licenses vary and may play into your ultimate decision of whether or not to rent out your property short-term. In other places, you may only have to register your property with a government agency, or pay a small fee. We’ll be writing a post about the ordinances in play here in Charleston for short-term rentals. If you’re interested, be sure to check back into the RPM Distinguished Care blog soon! Simply put, a well-rounded property portfolio will probably have both long-term and short-term rentals. It’s up to you to decide what’s important to you. Use what we’ve shared here today to streamline your decision!
We hope this article served to clarify the unique attributes of long-term and short-term rental properties. In future articles, we’ll look at those ordinances previously discussed, as well as how to build a property portfolio. At RPM Distinguished Care, we work alongside our clients for however long it takes to reach their unique goals. We levy every asset at our disposal, including over thirty years of experience and a dedicated team of individuals, to be of assistance. From tenant screening to leasing to inspections to marketing—there’s nothing we do not do. We believe in full-service and comprehensive property management. That’s why we take the time to understand each of our clients and help identify their most closely-held goals. Use our website to request your free assessment and meet with our expert team! Thank you for taking the time to read this article and we hope to hear from you soon!
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