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Long-Term Tenant or Vacation Rental Property: Which Is Best?

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Before buying an investment property, you need to know the type of rental you’ll turn it into. While both types have their pros and cons, vacation rentals and long-term tenant rentals are drastically different.

Even if you think you have your mind made up, some further review and reflection won’t hurt. Take a look at the benefits and drawbacks of buying a vacation rental property or a long-term rental.

Long-Term Tenant RentalVacation Rental
PROS
– More consistent income
– Won’t have to worry about constantly finding renters
– Only have to pay for cleaning in between renters (about once a year)		PROS
– “Bad” renters only stay for a few days
– Not allowing pets won’t hurt your potential for renters
– Can have some downtime if there’s an off-season
CONS
– Could be a smaller profit margin
– Some cities require rent control
– Defects/issues may take longer to find out about (since you’re not in the property as often)		CONS
– Not allowed in all areas
– Downtime/off-season means no profit
– Will pay more for maintenance and cleaning
– Have to furnish

Long-Term Tenant Rentals

A long-term tenant rental is a property you lease out for a person or people to live in. Your property becomes their primary residence and they pay you to rent.

Pros

Consistent income: When successful, you’ll have very little downtime (unlike a vacation rental property that might have an off season). It’s nice knowing you can count on the same amount of rent each month.

Less turnover: Once you have tenants with a lease, you won’t have to worry about finding a new renter for months (if not a year or longer). Having to constantly find or market for renters is stressful — the less you have to deal with this, the better.

Spend less on cleaning: You really only have to hire professional cleaners between renters, or maybe annually if your renters are staying longer than a year. The renters are primarily responsible for keeping your place clean, which is not the case in a vacation rental.

Cons

(Potentially) smaller profit margin: Charging per month instead of per day significantly lowers how much you’re making each day with a long-term rental. For example, a vacation rental might cost $150 a night, but a long-term rental might be $900 a month — $30/day.

However, we say “potentially” because vacation rentals often won’t have visitors for months when there’s an off season. Depending on your circumstances, a long-term rental could still net an equal (or even greater) profit.

Dealing with rent control: Some cities put a cap on the amount you can charge for rent (New York is famous for this). If that’s the case, you can’t raise your rates, even if they keep up with the rising cost of living.

Issues take longer to find out about: Vacation rentals require more frequent attention. Things like a leaky faucet or a broken tile become apparent much faster when you’re around the property more often (which means they can be fixed much faster, too).

Vacation Rentals

A vacation rental property is an investment property that you use solely for (you guessed it) vacationing guests — picture Airbnb and VRBO rentals. While some rentals are available all year round, many vacation properties have an “on” season and an off season — they’re often only rented out for part of the year.

Pros

Bad renters are temporary: Problematic renters only stay in your property for a short amount of time, likely never to return. With a long-term rental, you run the risk of having awful tenants for an entire lease. Even if you get bad renters, most companies offer coverage that protects you, the property owner.

Downtime: Some people enjoy having several months off the clock. This, however, is also a drawback, as your property won’t make money in the off season.

Don’t have to worry about pets: Not allowing pets can hurt property owners with long-term rentals by limiting the tenant pool. As most people don’t bring pets on vacation, you won’t have to worry about this.

Cons

Not allowed in all areas: Some condos and cities prohibit turning your property into a vacation rental or have strict restrictions on how you can rent it out.

Higher maintenance cost: Much of your profit will turn over to cleaning and maintenance companies.

Furnish: Expect to pay thousands more for setting up and designing your vacation rental property than a long-term rental. Furniture, appliances, and decor are all expected upon guest’s arrival.

Between a long-term and vacation rental property, which is the better investment? That’s up to you to decide. But the great news is that no matter what type of investment property you’re looking for, you can find it on RealtyHive! Search through our listings and begin growing your investment real estate portfolio today.

How to Effectively Screen for Quality Tenants

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Every landlord wants good tenants who pay their rent on time, do not cause any trouble, and take care of the place as if it belongs to them. However, getting good tenants require effort and time. As a landlord, if you do it properly, you will be able to avoid complications and problems in the future. In the long run, you get to save time and money, while renting your property to high-quality tenants.

Here are some tips to effectively screen for quality tenants:

1. Do Not Rush

To get a high-quality tenant, the first thing you should do is to take your time and don’t rush into renting your property. Carefully screen each applicant, and whenever possible, meet them face to face.

A one-on-one meeting will provide you with a great deal of insight into the individual. Even if the applicant has been referred by someone or through other tenants, you should still screen them properly. Keep in mind that a hasty decision can prove to be a big mistake when it comes to tenant screening.

2. Hire the right Property Management Company

If you feel that you are not able to adequately screen prospective tenants because of your other obligations or for any other reason, it’s a good idea to hire a professional property management company,” according to UpkeepMedia.com, a marketing firm with an extensive history in real estate and property management.

A property manager will not only help you market your property and find new tenants, but they will screen them effectively for you. Most property management companies know exactly what is involved in the screening of tenants, and they will do all the hard work for you in exchange for a small fee. If you don’t have the budget, you can do it yourself but make sure you give this task some time and effort.

3. Use Application Forms

Before you rent out your place, make sure every potential tenant completes an application form. You can download free sample rental application forms or make your own.

The application form must cover everything that you need to know about the tenant such as their date of birth, financial information, place of employment, whether they are smokers or non-smokers, whether they have pets or not, their previous residence, social security number, phone, references, and marital status.

The application must state that a criminal and background check will be done so that the applicant can give you the authorization to proceed. As a landlord, it is your responsibility to verify the data in the application.

It’s important that you not only rely on paper references. Do the legwork and call the previous landlord and present employer to verify the facts. If the application has any missing information, ask the applicant. If they do not provide the information you need, proceed with caution.

4. Do a Credit Check

Many states permit the landlord to charge the prospective tenant a small fee for conducting a background and/or credit check. But there are some states that do not allow you to charge the tenant.

Check the laws in your state to be sure. In any case, check the credit score of the tenant and look at their history of late payments, bankruptcies, debts, and so on.

5. Run a Background Check

A background check must be done for all applicants. For a small fee, you can get a lot of detail about the prospective tenant’s past history, including any prior convictions, eviction history, and credit history. All you need to do is order a background or credit check. Evaluate this information carefully and then make your decision.

6. Speak to the Previous Landlord

Your tenant applicant should require the applicant to provide information about their current and previous landlord. But this is not just information that you just file away. You should call the landlord and get feedback on the quality of the tenant. You should verify if the rent was paid on time, why the tenant was moving, and if there was any property damage or other issues.

7. Verify Employment

In order to verify if the applicant has a steady income, you should also speak to their employer before you approve or reject them. You can either contact the employer directly or ask the tenant to supply you with a few recent pay stubs.

In most cases, if you call the employer, they will not divulge the salary but will confirm if the applicant is under their employ.

8. Speak to the Applicant

Conduct a personal interview with the prospective tenant. These are some questions that you can ask. Make sure that any additional questions you ask comply with the Fair Housing Act to avoid any discrimination:

  • Do you smoke?
  • Do you have any pets?
  • What is your regular workday like?
  • How long do you plan on staying?

Screening prospective tenants is a worthwhile effort if you do not want to get stuck with poor quality tenants. Proper screening does not mean you break any privacy laws or reject people on the basis of their race, background, or ethnicity.

The only thing you need to do is evaluate their financial situation, background, and employment status. The goal is to find a tenant who will take care of the property, pay their rent on time, and stay long-term.

About the author (UpkeepMedia.com)

Alexander Hassoulas is a digital marketing consultant and co-founder of Upkeep Media Inc. Upkeep Media specializes in working with the real estate industry to improve their online presence through SEO, Paid Ads, Content Marketing, Website Development and Reputation Management.