How to Convert Your Airbnb Into a Long-Term Rental

The short-term rental market has seen a significant shift in recent years. While it once seemed like a lucrative investment opportunity, factors like the pandemic, regulatory changes, and market saturation have led many property owners to reconsider their strategies. The decline in vacation home demand and the growing popularity of long-term rentals have made this transition increasingly appealing.

If you're currently operating a short-term rental and facing challenges like frequent vacancies or high cleaning and repair costs, converting to a long-term rental might be a practical solution. This guide will provide you with valuable insights and steps to quickly and successfully navigate this transition.

Long-Term vs. Short-Term Rental Properties

The decision to convert your short-term rental to a long-term rentals and vice versa often boils down to personal preferences and market conditions. While both have their advantages, the dynamic nature of the real estate market underscores the importance of adaptability. Factors like location, financial goals, and time commitment should guide your choice. By carefully evaluating your options and staying informed about market trends, you can make strategic decisions that maximize your rental business' return on investment (ROI).

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 landlords operating long-term rentals:

Steady Income

A consistent cash flow is one of the more obvious advantages of a long-term rental. When you use a 12 month lease, you are guaranteed to receive a set amount of rent from properly screened tenants each month. While this rental income should not be depended on for your own survival, it can certainly help to cover the expenses that come with operating a rental of any lease length.

Longer Lease Length

With long term rentals, tenants sign a lease agreement for a certain amount of time, most commonly month to month, 6 months, or 12 months duration. Even in month to month leases, this monthly rental income may earn you more money in the bank as opposed to strictly weekend travelers and the unpredictability of filling in guest vacancies for short-term rentals.

Less Time and Money Spent Advertising

While it's true that prior to finding your perfect tenant you will need to market your properties online and locally, the advertising ends when you fill your vacancy. If you find reliable tenants interested in renting for a long time, you may not need to advertise the property again for several years.

This differs greatly from short term vacation rentals, where you must constantly advertise on vacation rental websites such as VRBO and AirBnB to find guests consistently.

No Utilities or Frequent Upkeep

Typically, long-term leases include clauses that place the responsibility for utilities solely on the Tenant's shoulders. Additionally, with long-term rentals, tenants usually take care of the property when it comes to basic maintenance and regular cleaning to keep the property in shape. On the other hand, managing short-term rentals requires frequent cleaning and occasionally minor 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 with a large tourism market, there are many drawbacks that have been highlighted by the coronavirus pandemic.

1. Seasonal and Timing Issues: A large portion of vacation rentals are only rented out during the busy summer months or around the holidays. This can lead to large portions of the year where your property is generating little to no income whatsoever. On top of seasonal issues, fewer people are making the decision to travel, and are more financially and physically cautious when they do so. This makes the short-term rental market more competitive for property owners.
2. Potentially Lower Income: Unless your property is in a prime vacation destination, there can be heavy competition and a low demand for short-term rentals. This low demand can lead to lower cash flow from month to month. However, housing is in high demand in large portions of the country, and as such a long-term rental could provide more reliable income.
3. Must be Fully Furnished: The draw of short term rentals is the notion that your guests have all of the luxuries of home and more while vacationing out of town. Due to this fact, short-term rentals have to be fully furnished with new or like-new furniture and modern amenities to make your guests' trip enjoyable. You are essentially operating a hotel, but you are the one who has to furnish and arrange cleanings after every guest stay.
4. Common amenities include: linens, towels, washer/dryer, kitchen utensils, dishware, bathroom supplies, etc.

How to Transition Your Rental to Long-Term

Update the property for long-term residents

Before you take any other steps, it's important to get the unit ready for long-term tenants. Thankfully, this process won't be much different than if you were turning the unit over for short-term tenants. For example, you'll still want to have the property professionally cleaned. That being said, you may want to take a few extra steps to freshen it up such as replacing the carpet, repainting the walls or upgrading outdated appliances.

Long-term tenants also have different needs that you'll need to cater to. Although your short-term rental likely came furnished, chances are a long-term tenant will want to bring their own furniture when they move in. Speak with your tenant prior to signing a lease to see if they would like to retain the current furnishings, or provide their own. If your unit is currently furnished, you may to want to make arrangements to sell the furniture or store it elsewhere.

Learn local landlord-tenant laws

Next, you're going to have to take the time to learn the local landlord-tenant laws. Often, these laws are applicable on a state or local level. For instance, in Colorado, a security deposit must be returned within 30 days if another amount of time is not specified in the lease. However, even if another amount of time is specified, it cannot exceed 60 days.

The American Apartment Owners Association is a good resource to help you familiarize yourself with your rights and responsibilities as a landlord. In addition to doing your own research, however, it is always wise to consult a real estate attorney to make sure you fully understand all of your legal obligations.

Advertise the unit properly

After your rental unit is ready and you've familiarized yourself with your obligations, the next step is advertising. When you were renting to short-term tenants and vacationers, using websites such as VRBO or Airbnb were probably necessary to finding your guests. However, long-term rentals use different platforms.

In this case, you should investigate websites such as Zillow, which can help you secure a tenant who's looking to stay in the unit for the foreseeable future. Alternatively, if you're short on cash, you can look into using Craigslist, which will allow you to post your rental listing for free. Advertising locally via yard signs, paper ads, and community posting boards can also help in your tenant search.

Find the right tenant

Once you have a list of potential tenants, it's all about proper and thorough screening. Long-term tenants are going to be living in your property for a considerable amount of time, and as such you'll want to put extra time and care into making sure they are the right fit for your property.

The typical tenant screening process involves conducting a credit check, background check, and verifying tenant employment. Investing in a property management software can help you automate and manage these tasks and stay organized while you do so.

A good step in the screening process is to sit down and talk to each of your outstanding applicants to determine which one is the best fit for your rental home. Ultimately, picking the perfect tenant is a matter of personal preference, as long as you stay compliant with fair housing laws and the tenant's screening reports are unproblematic.

Rewrite the lease

Lastly, you'll need to take the time to rewrite your lease agreement to better fit a long-term rental agreement. Specifically, you'll want to detail the length of the lease term, the amount of rent and it's due date, landlord and tenant responsibilities, pet and smoking policies, and any activities that would be prohibited under the lease.

Luckily, CreditLink Secure offers a complete Lease Creation Wizard tool to help you fully build your lease from the ground up. Our tools automatically search your local jurisdiction to ensure that the proper addendums have been added, and you are free to completely customize your lease within the bounds of the FCRA.

Successfully Transition to a Long Term Rental

While transitioning from a short-term to a long-term rental might seem daunting, especially for long-distance landlords, it's a viable and rewarding option. Despite the differences in rent calculations and legal regulations, the stability and reduced stress of long-term rentals can outweigh the short-term financial gains of short-term rentals. By understanding the process, utilizing virtual landlord tools, and considering the potential benefits, you can successfully make this transition and reap the rewards of a more sustainable rental strategy.

To make the transition even smoother, CreditLink's property management toolbox offers a suite of powerful features to streamline your operations and maximize your returns - all on one platform. From tenant screening to rent collection and maintenance management, we've got you covered. Experience the difference with CreditLink.

Created on: 09/10/24

Author: CreditLink Secure Blog Team

Tags: long term rental, short term rental , vacation rental , 12 month lease , extended lease,