While there are countless ways to make money in real estate, investors are always confused about whether vacation rental or long-term rental provides better ROI. Well, vacation rental and long-term rental have specific pros and cons of their own. While both fall under the umbrella of rental property investments, these are entirely two different ways to put your money to work in real estate. This specifically applies to home builders in Cape Coral, where there is a massive demand for rental homes.
So, what is a vacation rental and long-term rental?
A home or a property that is rented out for a short period, say two days to certain weeks, is defined as a vacation rental. In contrast, properties rented for one month or longer is usually considered a long-term rental. A vacation rental is usually preferred by individuals who prefer to greet new guest each and every day, while long-rental is a better fit for individuals who prefer to have the same tenants over a longer period of time, thus having to deal with less tenant turnover.
In this article, we have outlined the benefits of vacation rental and long-term rental to help you in selecting the best investment mode for your property in Cape Coral.Read on to discover the unique sets of advantages and disadvantages that are often associated with vacation rentals and long-term rentals.
Vacation Rental vs. Long-Term Rental in Cape Coral
With a vacation rental, you can make more money in comparison to long-term rental options, especially in a location like Cape Coral. A property that could get around $1,500 per month from a long-term tenant can often make more than double that amount as a vacation rental. However, vacation rental options are not completely free of challenges. Management expenses are generally higher in the case of vacation rental as new guest checks in each and every day.
By opting for vacation rental, you can gain more flexibility as a landlord and a real estate investor. You can use your property for your own vacation by adjusting the rental period. Also, depending on the number of days per year in which you occupy your property, you may be able to claim various tax deductions.
Another major advantage of choosing a vacation rental is that you can manage your properties even if you don’t live nearly. You just have to advertise your properties or hire a general contractor in Cape Coral to manage your property. You also get the complete access to adjust your property prices in a vacation rental based on the seasons. If an inventory is filling up quickly, you can opt to raise the rent to maximize profits. Even if vacation rentals are not occupied all the time, the nightly rate for vacation rentals is typically high enough to bring more cash flow to real estate investors and home builders in Cape Coral than traditional long-rental options.
In a long-term rental, stability in the cash flow if offset by a generally lower earning potential in comparison to vacation rental. This is because long-term tenants would be most unwilling to pay higher rates compared to individuals staying for a weekend. Even finding a new tenant becomes extremely difficult during the off-season, so you’ll have to negotiate the monthly rent, resulting in huge losses.
But long-term rentals have their advantages as well. A longer-term tenant may even help bring in more steady and stable cash flow as well. Tenants who occupy your home will pay all the utility bills, which creates significant cost savings in certain seasons, such as during the winter or summer. And, there will be less wear and tear in your property as long tenants consider your home as their own. In addition to this, long-term tenants tend to handle some of the maintenance issues that are owners’ responsibilities, such as cleaning, stocking essentials, and yard maintenance.
Similar to vacation rentals, a long-term rental is easier to manage if you hire a general contractor in Cape Coral. You also don’t have to spend money on advertising the property frequently, handle constant tenant turnover, or make sure the property is ready to rent.
If you own a home in Cape Coral or are planning to buy one, you should first and foremost celebrate the fact that you have successfully invested in a property that is in a market well-positioned for vacation tenants. While short-term vacation rentals have tended to provide better ROI than long-term rentals in the form of monthly rental income and cap rate, choosing between a vacation rental and long-term rental is your personal choice. But you should consider the pros and cons mentioned above in order to be sure that you’re choosing the optimal rental strategy.