Have you considered turning your vacation rental into a long-term rental property? Many aspects of our lives have been disrupted by coronavirus, and the travel industry has been one of the hardest-hit areas with a $2.7 trillion decline in travel and tourism GDP for 2020. If you have a vacation rental and have had trouble filling vacancies, it might be time to convert to a long-term rental for the foreseeable future. The process can be fairly quick and you can still keep your options open with lease lengths. Below we have provided a guide to help you convert your property into a long-term rental:
Long Term vs. Short Term Rental Properties
There are pros and cons to both long-term rentals and short-term rentals – however, the state of the world today has taught us that we need to be ready to adapt quickly so we can get the best ROI as property managers. Going from a short-term to a long-term, and vice versa, should be determined based on several factors including location, financial goals, and time. Make sure you always assess your options and research the market so you know what the smartest options for your rental business will be.
Pros of Long-Term Rentals
Long-term rentals have many advantages when it comes to property investing and can help you fulfill your financial goals as a landlord. Here are some of the greatest benefits to long-term rentals:
- Cash Flow: Having a consistent cash flow is one of the most obvious advantages of a long-term rental – with a lease, you are guaranteed to receive rent from tenants (make sure you screen renters).
- Longer Lease Length: With long term rentals, tenants sign a lease agreement for a certain amount of time – even if it’s month to month, this is still more money in the bank for you versus weekend travelers and the unpredictability of filling in guests for short-term rentals.
- Less Advertising: When you’re trying to fill your long-term rental, you’ll need to utilize online resources to market your properties, but once you fill it, there is no further marketing necessary. This is the opposite of short-term rentals which you always have to advertise on Airbnb and other vacation rental sites.
- No Utilities or Frequent Upkeep: Since tenants are living in your rental long-term, they will typically cover utilities (which should be specified in the lease). Additionally, with long-term rentals, tenants usually take care of the property when it comes to cleaning and basic maintenance to keep the property in shape – short-term rentals require frequent cleaning and small repairs that you’ll have to pay for.
Challenges with Short-Term Rentals
While short term rentals can be a great option for certain types of rentals and locations, there are many drawbacks that have been further unveiled by the coronavirus pandemic.
- Seasonal and Timing Issues: A lot of vacation rentals are only populated during busy summer months or around holidays – this means you could be stalled on filling them. Furthermore, on top of seasonal issues, the current travel climate is at an all-time-low and will make future travelers cautious and the market more competitive for short-term rentals.
- Need for Constant Cash Flow: Unless you’re in a prime vacation destination, there can be competition or a low need for short-term rentals – this means your cash flow will be less and you’re missing out on collecting monthly rent payments.
- Have to be Fully Furnished: Because you are providing a short-term stay for people out of town, short-term rentals have to be fully furnished with the necessary amenities to make your guests’ trip enjoyable – such as towels, linens, tvs, kitchen utensils etc. Almost like a hotel, but you are the one who has to furnish and arrange cleanings after every guest.
How to Transition Your Rental
If you live close to your vacation rental, converting it into a long-term is actually fairly simple. At the same time, even if you live far from your rental, many of the steps you’ll need to take can be done virtually and, if not, you can always hire out some work to a property manager to help you.
1: Familiarize Yourself with Local Landlord-Tenant Laws
Always do your research and make sure you know the basics of the rental laws in your area so you can always follow the law as a landlord.
2: Research competition and determine the right price:
You’ll want to make sure you are pricing your rental property right so you aren’t over or under – it will be different than what you priced it as a vacation rental, so make sure to analyze the rental market, which can often change.
3: Prepare Your Rental
You’ll need to prepare your rental by thoroughly cleaning and making basic repairs so your long-term renters will be excited to move-in as soon as possible. Since you’ll probably have a fully furnished vacation rental – you can decide if you want to leave things for your renters or go ahead and sell some of it and use the cash to make any additions or repairs you want to do.
4: Write Your Lease
Since you didn’t have a lease before, you’ll need to write a lease that follows local/state laws and also decide what rules and lease-length you are looking for. If you are wanting to only go long-term for a little while, a month-to-month lease could make more sense than a 12-month lease. Check out Law Depot for state-specific leases.
5: Use Online Property Management Software
As you’ll want to fill your property as quickly as possible, using online tools to streamline your rental process to make it easy and secure.
Don’t Be Afraid of Long Distance Landlording
A lot of the time, property investors don’t live by their vacation rentals; because of this fact, it might be intimidating to switch to a long-term rental and transition to being a long-distance landlord. Don’t let that deter you from converting your property – virtual landlording is a popular and smart option – check out how and why on our virtual landlord guide. While it’s good to have a property manager on hand to help with repairs and emergencies if you don’t live close, the whole rental process can easily be done online. Property marketing, online rental applications, tenant screening, video tours, and virtual communication with tenants are all easy and trustworthy ways for you to successfully run your long-term rental business from afar.