Real Estate Investment: Long Term Rental vs Vacation Rental
One thing I’ve noticed trending in the real estate business is that there is an apparent growth in the demand for vacation rentals around the world. Especially in Asia, specifically in Thailand, Indonesia, and Malaysia. It could either be because more and more people are getting richer and can afford those months-long trips elsewhere, or that traveling is so much cheaper these days than it was twenty years back. That, or something else, I don’t know. The bigger deal here is that for whatever reason it’s on the rise, this has set a buzz among the real estate people and basically, the business-minded ones who are looking to get something out of everything they spend on.
People started buying second homes and vacation homes all looking to rent it out as vacation homes. Dilemmas begin to arise only when the location of the vacation home is just as viable a location for long term renters.
What do you do as a homeowner? Would you rent out your home for the long term, or would you opt for it to become a short term, vacation rental place? Should you invest in real estate that primarily involves short-term stays but with long-time benefits? Which earns more and which gives you a better return for your investment more?
Here is a quick comparison:
- Generally, rent-wise, vacation rentals come with a higher price tag than long term rentals. But there are more “amenities” that come with the higher rental too. Electric and other utility bills are also mostly included in the rental fee as compared to the regular long term tenancy where the tenant pays the utility bills separately.
- Vacation rentals, depending on how often the house is occupied in a year require mostly maintenance before and after occupancy. Longer gaps between occupancies usually come with bigger needs for maintenance. After all, some utilities and electronics are prone to damages when they are less frequently used. Long term rentals, on the other hand, requires constant maintenance to keep the home in great condition for the tenant.
- Income wise, long term rentals are more secure. I recently invested on a unit in Kuala Lumpur that is exclusively for short-term travelers. I liked it a lot and has become my favorite KLCC condo so much so that I got a unit for myself. For one, you’ll always have the security deposit to back you up for repairs and maintenance. Secondly, long term rentals allow you a more steady income from the monthly rental fees. Because you are likely to have a tenant year-round, the fees will come in more regularly than a vacation rental that would likely be occupied on average for 30 weeks a year.
If you are looking for some serious investment, then a vacation rental might not be for you. Most attractions anywhere around the world are seasonal so chances are, the up times for your vacation rentals are only a few times a year.
But if you’re just looking to make something out of your vacation home while you’re away, putting it up as a vacation rental would be more ideal. After all, putting it up on long term rents makes it impossible for you to use your vacation home whenever you please. It robs you of its “vacation home” appeal.
For whatever purpose you put your house on, the foremost thing to do is define your own intention for it, and to later on determine at which price you are putting it for rent. Whether it’s investing on a landed property or a condominium, it’s always important to set your priorities first to know what you truly want.