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Traditional Rentals to Vacation Rentals: What You Need to Know

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Have you thought about venturing into the world of real estate? One important question to consider for rental property owners is whether to rent out their property for long-term or short-term leases.

Long-term leases are what traditional rentals are mostly known for and can guarantee regular income and an opportunity to improve relationships with tenants. On the other hand, vacation rentals go for short-term rentals, known to have higher rates and a greater client turnover.

Both rental business models have different merits and demerits that affect your mode of investment. This guide seeks to assist landlords and investors in understanding the intricacies of rental property management in detail.

Keep on reading as we highlight certain important distinctions between the two, and go through the advantages and disadvantages to help you figure out which rental style will provide the most benefits. 

What are Traditional Rentals?

Traditional rentals deal with long-duration leases that usually run for a year or more, which allows landlords to have a reliable and steady stream of income. This model has its advantages, as it means an increase in tenant relations and a decrease in tenant turnover.

Because tenants stay longer, landlords would need to spend significantly less time (and money) on advertising, performing tenant vetting, and the logistics of frequently changing occupancy levels.

It’s also worth noting that a reliable property manager in Boston suggests that landlords in the city often prefer traditional rentals due to the steady flow of professionals and students seeking long-term housing.

What are Vacation Rentals?

As the term suggests, vacation rentals are also known as short-stay or furnished rentals, which are relatively rented for less than a month. These are primarily located near holiday destinations and have all the facilities expected in a house that prioritizes comfort.

Also, since some homeowners aren’t always at home, they list the property as a vacation rental. It is one of the more preferred options compared to hotels. This has become more popular in the last two decades. 

The introduction of Airbnb and Vrbo has transformed the market as it was, providing travel seekers with easier accommodations and giving homeowners a source of good revenue.

However, while short stays command higher rates than long-term stays, such vacation rentals are harder to maintain. This is due to the constant guest turnover and frequent management after they leave. 

Key Differences: Traditional Rentals vs. Vacation Rentals

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Deciding whether to list your house as a traditional or vacation rental depends on how well you understand both options. One way to do this is to understand the key factors that will significantly impact your investment strategy and management style.

These include:

Income Stability vs. Potential High Yield

Long-term leases with traditional rentals produce stable rents for the landlords each month. Because tenants usually do not move out at the end of the month, it means that there is a reliable inflow of cash for the landlords. Such certainty is useful if one is looking for steady, reliable cash inflows.

On the other hand, the most significant merit of vacation rentals is that they can be very profitable during the peak seasons as the prices can be drastically increased due to demand. Although the earnings can be large, they also tend to be quite erratic depending on how many bookings a person can get and the price of the lease.

Tenant Turnover: Predictable vs. Frequent

Long-term rentals have the advantage of having a regulated tenant turnover. As long as a tenant has taken a lease for a year or more, the hassle of looking for new renters is greatly reduced.

As for vacation rentals, tenants generally tend to stay for a few days to weeks and can leave afterward. Because of this frequent change of customers, there is more management required for bookings, interactions, and changing beddings. Running such an operation may be compared to running a mini hotel.

Maintenance: Regular vs. Intensive

In long-term rentals, maintenance is done routinely. With minimal changes in tenants, the overall wear of the unit decreases, meaning maintenance costs will be lower in the long run. In contrast, a vacation rental type of management is more active in nature.

Every guest wants the unit to be perfectly clean and all appliances to be working, thus requiring cleanings and inspections on a recurring basis. It is a more labor-intensive model, but it guarantees that the property remains in good shape.

Impact of External Factors

A significant distinction between traditional and vacation rentals is the influence of external factors. Factors like tourism trends or economic fluctuations have minimal effect on the performance of a traditional rental. 

In reality, long-term rental demand is supported by market employment and population growth, which usually results tend to play for short-term rentals.

Vacation rentals are totally dependent on external factors. Occupancy rates and rental income can be severely affected by tourism, restrictions on travel, local events, and even the economy.

For instance, in the best holidaying areas, the number of local tourists substantially affects the number of rental requests. As soon as a particular place gets a higher influx of holidays, there is a greater need for short-term rentals as well.

Pros and Cons of Traditional vs. Vacation Rentals

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If you’re interested in a more straightforward comparison between a traditional and vacation rental, here are the pros and cons.

Pros and Cons of Traditional Rentals

Pros:

  • The income is consistent and reliable, making it a great option for people seeking another income stream.
  • Less tenant turnover which equals fewer administrative tasks and reduced marketing costs.
  • Maintenance is less intensive, with normal wear and tear on fixtures and furniture.
  • Long-term tenants can create a sense of community and stability within the property.

Cons:

  • Rental income is typically lower than short-term rentals.
  • Long-term leases make it hard to adjust rental prices quickly as the market changes.
  • If a tenant moves out unexpectedly, it may take longer to find a new one.

Pros and Cons of Vacation Rentals

Pros:

  • Landlords can charge higher lease fees, especially during peak tourist seasons.
  • Property owners can use the vacation rental, too, when it is not booked.

Cons:

  • Requires constant management and communication with guests.
  • Income is irregular and depends on external factors like tourism trends, local events, and the economy.

Knowing these advantages and disadvantages in mind enables landlords and even investors to figure out which rental model is optimum for their case.

Choosing the Right Model Based on Location

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One of the main considerations when selecting between vacation rentals and traditional rentals is location. Central areas like Boston are ideal for traditional rentals. These regions are always experiencing an influx of professionals, students as well as families looking for permanent housing.

For instance, many property management firms in Boston point out that landlords prefer traditional rentals because of the regular flow of professionals and students looking for long-term housing. This kind of stability means that there is a steady level of demand, which also reduces the chances of prolonged vacancies and provides landlords with a reliable source of income.

Vocational locations, on the other hand, are more suitable for short-term vacation rentals. Tourist-friendly areas, like beach towns, ski resorts, or historic places, are in great demand due to the high volume of travelers who need places to stay, even if it’s temporary.

These areas can charge more and do business during the tourist peaks to earn more. Homeowners need to be prepared to deal with rapid demand changes because of peak seasons and tourism in the area. 

Final Thoughts

Deciding on whether to settle on a traditional rental or a vacation rental will depend on your goals, the location you are promoting, and how available you are to manage your property

Traditional rentals are already known to generate reliable income and do not need regular maintenance, which is suitable for city centers. On the other hand, vacation rentals allow for more yield but are more management-intensive, which makes them ideal for tourism areas.

If your preference is for long-term leases or flexibility with short-term rentals, it is crucial to position yourself with the market so as to have a rewarding experience with your investments.