Getting into the rental industry can definitely be confusing and overwhelming at times! One of the biggest decisions you’ll need to make is whether you’d prefer short-term rentals vs. long-term rentals. This decision must be made whether you are renting out entire property or simply a room within your home. For either case, one can compare Airbnb vs. renting to see which income producing model is right for you. In this article, we’ll give you all the tools you need to make the right choice for you and your lifestyle! We’ll go over exactly how these rentals work, all of their pros and cons of short-term rentals vs. long-term rentals, and the potential income for each option when reviewing Airbnb vs. roommate possibilities.
How does an Airbnb rental work?
The Airbnb website allows you to list your property or spare room for free to millions of prospective renters. Typically, these renters book short-term listings and may stay for a night or two. Depending on your location, it may also be common for your guests to book for up to a month and in some rarer cases even longer. The number of nights a guest books lies completely under your control as the host. You set the minimum and maximum restrictions as discussed in Airbnb Host Step 3 – Get Ready for Guests!. With the flexibility of time frames, this puts Airbnb under the short-term rental category.
How does Traditional Renting work?
In contrast, traditional renting involves renting your property or spare room for a longer period of time. Typically, renters will stay for six months or more. As the landlord, you decide if you wish to allow month-to-month renting or if a lease of 6 or 12 months works best for you. Because the objective is for the renter to live in your property, traditional renting is considered a long-term rental.
Airbnb vs. Renting
Both short-term rentals and long term-rentals have their distinct sets of advantages and disadvantages. Make sure to keep these high and low points in mind as you decide between Airbnb vs. long-term rentals! As the host/landlord, you have ultimate control of which way you choose to earn additional income. Read below to learn about the pros and cons for both hosting an Airbnb and renting out your property or room in the traditional manner.
Airbnb – Pros; Where Airbnb Wins
Income Potential of an Airbnb
When you host an Airbnb, you’re able to adjust the price of your listing as often as you’d like. Whether you are renting out a single room or an entire house, you have complete freedom to decide on your price point. This is a major advantage and allows you to typically earn much more than you would if you were renting out your accommodation to a tenant. The flexibility of adjusting your price during tourist season is a major advantage that cannot be denied. Oftentimes, hosts choose to increase nightly rates during weekends. This change in flow allows your profits to greatly increase.
Additionally, when business isn’t as steady you can lower the price to bring guests in. As soon as you notice business picking back up, you have not made any commitments to continue with this low price. You may adjust accordingly.
The Privacy Factor
If you are renting out a room within your property, or even separate unit that is on the same lot, it’s time to consider which you prefer when it comes to Airbnb vs. roommate. With a long-term rental, you’ll be living with a roommate or neighbor/tenant all the time. You’ll share common areas, and their belongings will likely be spread throughout your house or your property depending on your situation.
On the other hand, when you rent your spare room through Airbnb, your guests aren’t living in your space. They most likely will only be there to sleep. Plus, since they’re guests, they’re not likely to leave a huge mess in your space. This is a very important factor to consider. Roommates assume a level of possession. Airbnb guests typically will continue to act as guests. Should you tend to be more particular about your living environment, an Airbnb setup may better suit you.
This also holds true for those renting out separate units on their own property. Long-term tenants come with their things, their visitors, their noise load, etc. When you acquire a tenant, it is for the good and the bad. When this person is a stranger, it is very difficult to understand what you are getting yourself involved in beforehand.
Lastly, it is important to note that should you want your home or property completely to yourself during a certain period, you have the freedom to block off any dates you’d like! This is not possible in a tenant/roommate situation.
Less Damage when Airbnb Hosting
Although this might seem counterintuitive, renting out a spare room through Airbnb more often than not will result in less wear and tear on your property. This is because Airbnb guests are just that–guests. They aren’t roommates who live in your house. As guests, they’ll most likely be pretty respectful to your home and leave you with less of a mess.
It is expected that guests will leave your home clean. Guests and hosts are rated on their level of cleanliness. Everyone on the Airbnb platform has a profile. Most guests wish to keep their profile reviews positive. This results in the majority of people renting from you to be model guests. No one wants their profile to have anecdotal complaints of dirty past stays.
Furthermore, many hosts include cleaning instructions upon checkout. You can actually request for guests to do things such as load the dishwasher or take out the trash. It is up to you as the host to decide which household items you would like them to attend to.
The Airbnb Review System
As mentioned above, not only does Airbnb allow guests to leave reviews on properties and hosts, but hosts can also leave reviews regarding guests! This way, when someone wants to book your spare room, you can click onto their profile and read through reviews other hosts have left them. This is a really handy tool that allows you to easily vet your guests! As discussed in Airbnb Host Step 3 – Get Ready for Guests!, you can even require guests to have at least 1 positive review before booking your property.
Airbnb – Airbnb’s Downside
Airbnb Guest Interaction
As an Airbnb host, you will need to maintain great communication with all guests via the Airbnb platform. When you list your spare room on Airbnb, you’ll need to talk with each new guest and welcome them into your home. They may have lots of questions about the area and tourist attractions. You will be graded on your communication within your profile after each guest so it is important that you are open to having a dialogue with all that you encounter in person. If you love socializing, this could actually be a pro for you! In the article, 5 Favorite things about hosting an Airbnb, the people you will meet as a host is one of the best parts of the hosting gig!
Upkeep and Cleaning as an Airbnb Host
You’ll also need to keep your home clean and tidy. Remember, as a host you are always on. If you have opened up your doors within your own home, this means keeping your place spic and span at all times for guests. Surprisingly enough, the cleaning requirement is also seen as a positive aspect to some and written about in 5 Favorite things about hosting an Airbnb.
To learn more about the frequency and type of cleaning that is required when hosting, you can refer to How to Clean your Airbnb. This article discusses all areas that must be cleaned when you are a host. The level of cleanliness is an area to keep in mind when you are considering hosting. You must be honest with yourself about your level of cleanliness. Also note that cleaning services can be hired out for a fee if this is an area you truly do not want to partake in. With the onset of COVID, cleaning has become even more vital to the success of running an Airbnb.
Inconsistent Schedule for Airbnb Hosts
One thing to keep in mind is that you’ll likely have a busy season and a slow season. The amount of guests that book your listing depends on a variety of factors. These include location, weather, events going on near you, and more. It can be difficult to predict what your schedule will be like and if you can count on a consistent income from your Airbnb rental.
Moreover, guests will check-in and check-out at different times. Every check-in and check-out requires some level of communication and, depending on your types of locks, may also require logistical planning. Smart locks reduce the logistical headache some hosts encounter when giving guests access to their properties. If you are curious to learn more about smart locks, you may check out Airbnb Essentials: The Best Smart Lock for Airbnb.
Laws and Regulations when Airbnb Hosting
In addition, you’ll need to take a close look at your local laws and regulations relating to short-term rentals. Some areas don’t allow them at all, while others have specific rules you must follow. If you forget to check them over before starting up your Airbnb rental, you could run into some serious problems! For more information, check out our article about the legal challenges facing Airbnb owners.
Increased Insurance Costs
Liability insurance and homeowner’s or renter’s insurance should all be considered. Since people will be coming in and out of your home frequently, it’s very important to look at your options and see what is right for you. Be sure to read Does Airbnb provide insurance for Hosts? before getting started.
Airbnb Startup Costs
Whether you are renting out an entire property or a room in your home, you will need to furnish the area that you have on the Airbnb platform. For those renting out a room within their own homes, the expenses will be minimal. You will need to provide a bed as well as other items, but for those on a budget everything can be found at a local thrift store if need be.
When you are renting out an entire property, you must have it completely furnished. This not only includes furniture, but all of your other household “innards”. A host’s kitchen should be fully stacked. You will need dishes, silverware, pots, pans, etc. just to name a few. Remember, an Airbnb is about comfort. The reason they are booking your home is because the want a warmer feel than a hotel. They are also looking to get away from the chain feel. Additionally they are looking for a fully functioning accommodation. This includes a living room to relax and a kitchen to cook and eat in.
Renting Pros – Where Traditional Renting Wins
Consistent Rental Income
To start off, a traditional long-term rental will typically provide you with consistent income. You don’t have to rely on new guests constantly booking your room. Instead, you’ll have a long-term tenant or roommate who will pay rent on a monthly basis. To answer the question of Airbnb vs. roommate, you’ll need to consider the reliable stream of cash you’ll receive from a roommate, along with other factors.
Lowered Expenses and Tax Benefits
With a long-term rental, your tenant or roommate will typically pick up at least part of the utility and cable or internet bills. Of course this is all up to how you structure your agreement. This can potentially cut some of your bills in half! Plus, you’ll actually get tax benefits for traditional and residential rentals.
No Need to Furnish
There’s no need to buy tons of furniture and decorations for your tenants or roommate’s accommodation. For most long-term rentals, your renter will want to furnish the place they are renting with their own personal items. Since they’ll be living there for an extended period of time, they’ll want to make it their own. Because of this, you’ll save any money you would have spent setting up the room as an Airbnb rental.
If you happen to have extra furniture, you do have the option of renting your accommodation fully furnished. The choice is whatever is most convenient for you.
Renting Cons – Where Traditional Renting Loses Out
Potentially Less Privacy
With a tenant that stays on the same property or a roommate, you’re never going to completely have your space to yourself. Your home becomes their home as well. It may be an adjustment to share common areas and to have some of their items cluttering up your space.
Fixed Pricing for Long-term Rentals
Although you can change the price per night of your Airbnb rental as often as you please, a long-term rental doesn’t offer the same benefit. Oftentimes you’re signing a contract or lease for six months or more, and the rent will remain at the same rate for the entire time. You may raise the rental rate at the end of the lease term or if you have a month-to-month agreement, at the beginning of the following month.
Marketing and Vetting your Long-term Rental
While you can list your Airbnb rental property for free, you’ll have to rely on word-of-mouth or use traditional marketing techniques to advertise your long-term rental. For example, you may take out an ad in a newspaper or post it online. You will need to find your own tenants, each and every time.
After you find your potential tenants, you will also need to vet them. You may wish to order credit checks or review employment income. Criminal background checks can also help to keep you safe versus sorry. These are all important items you need to consider when renting out your home.
For those renting out full units, a property management company is another option. Just know that these companies are typically licensed and cannot have any bias when it comes to choosing a tenant. Should you do the work yourself of choosing a tenant, you will be able to trust your gut for selection purposes.
Receiving Rent for Long-term Rentals
When all goes well, as a landlord you will receive monthly payments, usually in the form of checks. Should something go wrong and your tenant not provide you with the expected payment, you will need to go through the lengthy legal process that eventually can lead to eviction. Each state and country has their own legal requirements that must be followed when rent is not paid. Let me be clear — This is not a fun process. This is why it is important to be very careful when selecting a tenant.
In the case of Airbnb, all payments are made via the platform. You are protected by Airbnb. When renting your listings on Airbnb, never ever accept payments any other way.
Airbnb vs. Renting Income
When comparing Airbnb vs renting income, it’s important to note that both Airbnb rentals and long-term rentals are a great source of supplemental income. Regardless of which option you choose, you will be adding to your current income. However, they do differ in quite a few ways.
Occupancy Rates for short-term rentals vs. long-term rentals
One of the largest variations between the two types of rentals is their occupancy rate. This is definitely something to note because it really makes a difference in your rental income! With a long-term rental, your renter will be around and paying rent for several months or even a year at a time. That’s a consistent source of income that you can count on every month. In contrast, you may encounter entire months where you don’t have any Airbnb guests. A lower occupancy rate can lead to less income. However, in many cities, the sum of a short-term rental that is booked for 10 days each month is often equivalent to a full month’s rent with long-term rentals. One must determine which is more important for them. The potential for high income or the potential for more consistent rental income.
Insurance Policies
In addition to the question of occupancy rate, there are also different insurance policies that apply for short-term rentals vs. long-term rentals. With an Airbnb rental, insurance companies assume there is a greater risk of damage to your property due to the steady stream of guests. Therefore, your insurance premiums may be higher depending on your type of policy. Additional insurance options may also be purchased for very low fees as discussed in Does Airbnb provide Insurance for Hosts?
Whether you choose to go with a long-term rental or a short-term rental, you may ask for a deposit to attempt to be prepared in case of any damage.
Main Takeaways on Airbnb vs. Renting
Every host/landlord must make the determination between Airbnb vs. renting. As discussed above, when looking into short-term rentals vs long-term rentals, each comes with advantages and disadvantages. An Airbnb or short-term rental comes with the benefits of flexible pricing and the greater potential for income! You also have the advantage of the Airbnb review system. It allows you to check out your guests’ reputations on Airbnb before welcoming them into your home. One of the biggest advantages is the platform is to be used for payment. You will not be expected to trust your guests’ methods of payment. Airbnb handles the security on that front. However, for some hosts the downsides include constant interaction with guests and upkeep of the room. Additional insurance costs and an inconsistent schedule are other factors to look into.
For long-term traditional rentals, a greater possibility exists for receiving a steady stream of income. Some negative points are that you’ll have to remain with set pricing for the duration of the lease. You will also have to stick with your tenant for the duration of the time determined on your lease. Should your tenant live within your home or on the property, your privacy and sense of ownership will also be reduced as you will be sharing a space with another person that will also call your place home.
