Which is the smarter investment, long term rentals or vacation rentals?

Posted By @ Feb 29th 2016 3:06pm In: Branson Homes and Real Estate

So you’re about to dip your toes into the world of real estate investment and have just bought your first investment property.  This can be an exciting and scary time, because now the real work begins and important decisions have to be made, the main one being do you rent your new home out on a long term basis or keep it as a short term vacation rental?  Yeah, this is not going to be an easy decision to make, so maybe we can help break it down for you.  Sunset Nightly Rentals has been in the business for many years, and though we only offer vacation rental services, we have discovered the following things.

Long Term Rentals

As an investment, renting your home out as a long term rental can be the safest and most stable way of generating income.  You’re guaranteed a set amount of money each month with that rent paying your mortgage and adding a little extra to your bank account.  You don’t have the added expense of utility bills - the tenant is responsible for making all those payments - and it’s not necessary to furnish the home, saving you on the initial costs.  And finally, if you pay off the mortgage prior to selling the home, the income generated all goes in your pockets; you’ve now got a retirement income that you might not have had without your second property. 

The down sides of owning long term rentals are mostly minimal, but can cause issues in the long run.  Tenants are notoriously late or sometimes stop paying altogether.  Depending on where the property is located, it can be time consuming and expensive evicting tenants; for many people this fact alone can be a deal breaker.  Another point in the con column is whether or not you planned on using your investment property as a vacation home for yourself.  Branson is a perfect town to get away to when life in the real world gets too tough, but if your property is rented out long term, renting a hotel room or vacation home is the potentially expensive option in your future.

Vacation Rentals

Now for the pros of vacation rentals.  Let’s start with income potential, shall we?  A vacation rental in a popular tourist town like Branson, Missouri has the potential to earn you at least as much as or more than a long term rental would.  Let’s say the normal monthly rent of a 3 bedroom, 3-bathroom house runs around 1800 per month; that’s definitely a good amount to be bringing in every month, but when you rent out by the day or week that can increase. In fact, that same house can bring in anywhere from $148-$307 a night.  This nightly earning potential, in many cases, can be at least as high (or higher than) what you’d get from a monthly earning potential in a long term situation. In addition, when you use your vacation home as a rental, you can schedule visits to your future retirement homes during the down times, saving you money in the long run.  This is starting to sound like a great deal isn’t it?  Well, as in every other are of life, there are some cons. 

That big paycheck isn’t guaranteed; during high season you can probably expect to keep it rented, but high season doesn’t last year round, unfortunately, and empty homes can be a drain on your pockets.  Especially when you consider the cost of furnishings, utility bills, and the cost of marketing or hiring a property management company to do the marketing and other necessities for you. 

Sunset Nightly Rentals can help

So as you can see, when starting to invest in income properties, there’s a lot you have to consider, which is where our knowledgeable staff at Sunset Nightly Rentals enters the picture.  Give us a call or check our website at www.sunsetnightlyrentals.com and discover what a premier property management company can do for you.  We can make your decisions quite a bit easier!

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