Orlando Miner: airbnb vs long-term rental: which investment strategy wins?

Hello everyone, welcome to the channel. My name is Orlando. And today we're gonna be answering a viewer's question. And Justin, a viewer is asking, should you start an Airbnb business or rent out long-term for your investment properties? Well, Justin, that's a good question. That's a great question. Let's jump into this. Well, I have always thought to myself, is the short-term rental game better for me? Because as you guys know, I do long-term rentals, apartments, things like that. That's what I'm into. So I'm your normal one-year tenant in a unit. So that's what I'm used to. So I have thought about getting into the Airbnb business, but here is some of the pros and cons that we can talk about to make you understand which one is best for you. So once again, I just wanna highlight this. Highlight this guys. It is what is best for you. Not what's best for me, but what's best for you. And when you see these pros and cons, you will see how to evaluate the risk that allows you to either do the Airbnb or want to do the long-term rental. So let's get into it. Okay, so one, you have stable income. Two, you have no furnishing expense. Three, it's less management. Less management guys. Now let's talk about those things. Now, stable income. What do I mean by that? Well, you're gonna sign someone to a one-year lease or a two-year lease or whatever you and the person agree on. And they're gonna pay that monthly rent to you every month. And you know what they're gonna pay. And you know what the amount's gonna be at the end of the year. So you can actually see and know that this person is on the hook for this amount of money. And this is what I'm supposed to get at the very end. That income is very stable and very predictable in comparison to the Airbnb. Then let's talk about furnishing expense. When someone moves into a unit, they have to furnish everything. You do not have to pay for the furnishing, the unit so they can live in it. I mean, there are some landlords who like to do that, who like to have a furnished unit. But for the most, I would say 95% of regular landlords and regular property owners do not furnish. That is the tenant's responsibility. Then we have less management. Now, what do I mean by less management? Well, as you know, for me, if you watch any of my videos, how much I preach to have your properties managed by professionally, by property management, that means less management. The amount that you're going to pay for management is way less on a year long-term tenant. When I say long-term, I'm talking about a one-year tenant in a unit. So I'm paying 6%. You probably can get away with six to 10 on a regular basis. And then the property manage themselves, it's just less work that they have to do. There isn't this constant cleaning. There isn't constant moving in and out. It's one tenant who's gonna live in it for a year or two, and then they move out. So you can see less fees, less management, all of those things are the pros for a long-term rental investment property. Okay, so let's talk about the pros for an Airbnb investment. Okay, so number one, you're gonna have higher income. Number two, you're gonna have a more of a diversified income stream. And then number three, you will be able to use your actual unit that you are renting out on an Airbnb. So let's go into a little bit more detail about those. So the higher income, you know, the higher income is a really big sell for a lot of people. Like for example, like if I have a unit that's renting at $1,000, and if you pick the right market, an Airbnb, you could probably rent that out for, I mean, and we're talking about on a monthly basis, you probably will end up being able to get around $4,500 a month on that. So that's a big difference. So you got $1,000 on one side, $1,000 on one side, on the other side, you have $4,500. I mean, that big of a difference, that $3,500 difference, really for a lot of people, you know, it's that juiciness of the income, right? The juiciness, but this is gross income, guys, gross. So we have to really look at, do you really get that full $3,500? That's what we have to look at. But the pro is, is that in the right market, you can make a killing in Airbnbs. And then let's talk about diversified income. What do I mean by that? Well, in a long-term rental, you only have one person that you're depending on to make that payment. So let's just say that person has some type of hardship and they can't pay you that month, then that's it. You don't get the rent and you're chasing that one person. Well, in an Airbnb, you are dealing with four to five people that are renting out on a monthly basis, right? So, and possibly it could be more than that. So you have a big pool of individuals that you're dealing with that makes that risk a lot lower, right? And that's what it's about. I know you guys have heard when someone says, you need to diversify your income. Well, that's what this Airbnb is basically doing. It's taking your income and saying tenant A, B, C, D, and E are going to pay you this amount of money versus just tenant A. Okay, and then let's talk about use. Well, you can use the Airbnb that you are also renting out. Let's just say that you and your family want to go on vacation and wherever you have your Airbnb at, and you say, oh, you know, let's go. You can do that. You cannot do that with a long-term rental. You cannot use it yourself. It only has one use, one use, and that is renting to that tenant. That is their home for that allotted time, which is normally a one to two-year lease. So you can't go in, you can't use it at all. Versus an Airbnb, you can definitely do that. You can take your family, go have a nice vacation on the beach, and go back to renting it out. Okay, so let's talk about the cons for a long-term rental. Okay, so number one, it doesn't make as much money as an Airbnb would on a monthly basis. Number two, it's not as diversified when it comes to the income. And then number three is you can't use it. You can't use the long-term rental at all. So let's go into detail really fast on these to kinda explain this. So the amount of money that you're, like I said, that you're gonna make on a rental, it's just completely different, guys. You're gonna be making that set amount of money that you have already set with the tenant, and that's it. So that $1,000 a month is what you're gonna get, and that's it. It's mighty different than the 4,505 grand or whatever it is, especially, especially, guys, in a hot season, in a hot town that you choose for your Airbnb. If it's a beach town and it's summer, you can, in some instances, people are making $10,000 a month plus on a rental from an Airbnb. Those hot summer vacation towns, people love them. I use them, I know other people use them, my friends use them. So you can just imagine the amount of money that you could make in those seasons, in those peak seasons. Number two, which is it's not as diversified income. Once again, you're only paying one person, guys, one person. And this one person, if they decide not to pay the rent, then you're just on the hook, and there's not much you can do. Okay, so let's talk about the cons for Airbnb, and that would be that there's more management, and this includes fees, it's less stable, and you have a furnishing expense. Now, let's jump into the management fees, because the management fees can be tricky, guys. On the other side of a rental, you have six to 10% that you're looking at when it comes to management fees. On the Airbnb, it can be as low as 15% and go as high as 45%. In the beach towns, in the beach towns, some beach towns in Florida, especially on the Gulf, Miami, things like that, I have seen Airbnb management fees for property management up to 45%. So they're almost asking for 50% of your income to manage the property because of the in and out and cleaning and all that other stuff, and posting it on Airbnb and managing the responses and everything for you, they are taking 50%. Now, why are they taking 50%, you would ask yourself that question, and the reason why is because you're making way much more than you would normally make in a traditional long-term rental. In most cases, you still have enough to cover even the 50% management fee. Now, I'm not saying all of them will be 50%. I'm saying that, like I said, it starts at that 15 to 45 at the high end, but it's normally somewhere in the middle at that 25%. So you have to really look at those numbers and see if that works for you. And then we have less stable. The reason why I am saying this is less stable is because this works as a season, guys. If you have a location that has winters, Airbnb isn't gonna be really booked during winter. So you have the seasons, which are like peak season, and then you have your off seasons, you know, and that's the truth. I mean, and the income is going to fluctuate with that. You have to remember, the guys, that when you're doing Airbnb, you are legitly running a hotel. That is exactly what it is. It may not seem like a hotel, but you're running a hotel. You're providing the furnishings, you're providing the bath towels, you're providing all the utensils and stuff in the kitchen. And then when they leave, you go and you clean it for the next person. That is basically a hotel. And you have to understand that you not only are in the real estate business, but you are in the hotel business also. And then we have the furnishing expense. I couldn't imagine going to a house and have to fill up the whole house with flat screen TVs, couches, and sheeting, and things that, linen and all that other stuff. That is a cost that you will have to bear upfront. And you have to remember that these things do wear down with use, so you will have to replace those things. So those are the pros and cons for a long-term rental and versus an Airbnb. And at the end of the day, like I said, it is your choice and your decision on the risk. It's obvious that one is the long-term rentals are less risky, but they don't have the huge jump in income. And then Airbnbs have the more income, but they have higher risk involved. You have higher management fees, you have furnishing fees, you have all this other stuff attached to it. So it's really dependent upon what your risk tolerance is. And if you've watched any of my other videos, I am really big on trying to figure out where you are when it comes to your risk tolerance, what type of person you are, what can you digest? What will allow you to sleep at night and not have to worry about your investments? And if Airbnb doesn't bother you for a higher risk, then great. If you need something that's more conservative, then maybe long-term rentals are for you. So thanks again for watching this video. I'm gonna need you to watch this next video. It will get you into your first rental property. I am going to help you get into your first rental property. And I talk about the housing market and this crazy, crazy market. And I will see you guys in the next one. Thanks.