Why Converting Your Short-Term Rentals to Long-Term Rentals May Benefit Your Cash Flow
It’s no secret that short-term rentals are struggling right now. With people staying at home to flatten the curve, vacations and getaways have been postponed or canceled altogether. Airbnb hosts dealt with $1.5 billion in bookings completely vanish in mid-March when the travel industry froze. Short-term rental properties are now sitting vacant, meaning there’s little to no cash flow for both property management companies and individual owners during this trying time.
The lure of short-term rentals made sense for many pre-COVID. Despite the constant turn-over, the monthly revenue potential outweighed the additional cost and ultimately the desire for some to turn their property into a long-term rental. Unfortunately, this business plan only works when you have a healthy stream of travelers.
Despite this grim outlook, there’s a way to get people renting these properties again — the approach just needs to change a bit. Consider turning short-term rentals into long-term rentals.
Get your cash flow back
As we all know, bills never stop. No matter if we’re in the middle of a pandemic, mortgages still need to be paid and insurance payments don’t magically just “go away.” By converting your short-term rentals into long-term rentals, you’ll have some money coming in each month to help cover these expenses. You likely won’t net the same amount you would for a short-term rental each month, but you’ll have some money coming in as opposed to little, or even worse — none.
Besides getting cash flow back with a long-term rental, you’ll also save money on one expense you may not think about much — cleaning fees. With short-term rentals, it's possible to spend money on cleaning every week. Convert it into a long-term rental and you could spend money on cleaning as little as once a year.
Use for corporate housing
Travel will pick back up eventually, particularly for businesses, meaning the need for corporate housing will resurface. Instead of advertising your properties as short-term rentals perfect for a getaway, position them as longer-term rentals that are prime for corporate housing. A pre-furnished property with a large kitchen and other amenities will sound much more appealing to those traveling for work than a standard hotel room.
Since business needs vary and the duration of stays are all different, we recommend offering flexible leasing options to companies looking for corporate housing. Starting with 3 months and offering up to a 12-month lease will be more appealing for businesses than only offering one leasing option.
Opportunity to price properties higher since they’re furnished
In some markets, particularly larger cities, furnished properties designated as long-term rentals can be priced higher each month than similar properties in the same market that aren’t furnished. Companies looking to house employees in a different city from where they live aren’t looking for a non-furnished property, and furnished properties are harder to find than empty properties. Based on the lower supply yet demand in place, there’s a better chance of being able to rent out a long-term, furnished property for more money.
In addition to corporate travel, there’s also a demand for college students to rent out furnished housing during the school year. Having to move furniture for a 9-month long school year and then have to move it again somewhere else isn’t appealing, so some students opt for furnished long-term rentals close to their college or university instead. Pricing these furnished, long-term rentals higher than similar properties in the same area will help increase cash flow and bring back some of the profits earned when a property was a short-term rental.
The ugly truth
Even though many lockdowns are planned to end soon or have already started easing up, the possibility of still getting the Coronavirus won’t be leaving the general public’s mind anytime soon. Additionally, future lockdowns may be enforced if the second wave of the virus rolls through the country as predicted this fall. This will cause people to cancel their travels once again, leaving property managers and landlords in the same position as they’re in now — with empty short-term rentals.
To help minimize risk, turn your short-term rental property into a long-term rental for the time being. You’ll have money coming in to help cover bills, as well as drastically cut down on cleaning fees. And to advertise your properties to millions of renters, consider listing your properties on Rentals.com.
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