With a potential recession on the horizon, families tend to cut vacation spending first. So you might have noticed a dip in bookings for short-term vacations. Reports show AirBnB occupancy rates down since the pandemic, although some reports do show that the market is beginning to bounce back. Even vacation properties in the Orlando area have begun to feel the pinch. If you own a vacation rental, instead of panicking, consider your options. Should you switch your vacation rental to a long-term rental home instead?
Florida’s Market Boom
Florida is enjoying the highest population growth in the country. In addition, industry employment has seen an average growth rate of 19%, 10 percentage points faster than employment growth nationwide.
According to economic forecasts, Central Florida will continue to experience population, employment, and industry growth. That means you can more easily find a long-term tenant right now.
Even with an over-saturated short-term rental market, a huge need exists for housing for longer-term tenants. With the large influx of people moving to Orlando and the surrounding areas, demand for rental homes will continue to rise.
Why Long-Term Rental Makes Sense Now
Plus, have you heard the term digital nomad? With the dramatic increase of remote work, folks have decided to work from locations of choice not proximity to work. Many of the country’s 35 million remote workers are looking for rental properties, ideally somewhere with a laid-back lifestyle.
Hmmm…sounds like Florida, amiright?
Property owners with long-term rentals can snap up these low-risk tenants. Owning a long-term rental in Florida has never been more lucrative.
Long-Term Multiplication
How lucrative? Time to get out your calculators.
Vacation homes typically rent for fewer than 30 days at a time.
The same property could convert to a long-term rental and secure an annual tenant. Yes, the average nightly rate is lower (if it’s booked), but you have far less hands-on upkeep with a year-long lease.
Just think what an entire year with one tenant could do for your property. That means no more advertising or doing upkeep on furnishings. Plus, you’ll have much less hands-on management, especially with a top Orlando property manager.
With your long-term rental occupied, it becomes much more of a passive income situation for you. Less paperwork all around, from taxes to leasing to no longer maintaining an online portfolio for the property.
Cons of Long-Term Leasing
With an average fee of $200 per night, a short-term rental can bring in lots of cash… if you keep it booked. That means a long-term rental will bring in less cash flow per month than a fully-booked vacation rental.
However, even the area near Disney World averages about 25% occupancy, leaving weeks of empty bank accounts. On average, short-term rental occupancy tends to sit around 46% and a “top performer” ranges at around 75% or above. So while there could be more reward (potentially), there certainly is more risk too.
Additionally, you can expect that most short-term/vacation rental property managers will charge between 25%-30% per month as a service fee, whereas long-term managers typically charge between 8%-12% for full-service management year-round.
If you really enjoy meeting different guests from different backgrounds, you’ll miss out on that opportunity with a long-term lease to one tenant. You also have less opportunity to make changes to your rental property if that’s really your thing.
If you own rental property in the Orlando area, learn how you can easily turn a short-term vacation rental property into a long-term rental home. Contact The Realty Medics at 321-947-7653 or complete our online form for a free rental analysis.
