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Property Rentals – The Long And The Short Of It

By Patricia Tan

Lower property prices in Florida and a healthy demand for rental properties has led to an increase in demand from overseas investors. One of the questions I hear a lot when I am traveling is “Should I buy a property for short or long term rental?”

Florida is an international vacation destination, and a house that can be rented weekly or monthly to visiting tourists may seem a compelling proposition, especially in the Orlando or coastal areas, where demand for such property can be high.

Here are some of the things buyers should consider before deciding upon the kind of rental that will work for them.

• Initial cost and capital outlay. A property that is rented for vacations must be fully furnished to a high standard, and this can add a substantial amount to the cost of the property itself.

• Ongoing costs. The costs associated with running a short term rental can be considerable. The landlord is responsible for all utility bills, whereas the tenant in a long term rental would normally be responsible for these.

• Property management. Successful management of a vacation rental property requires a lot of time and effort, and this is reflected in higher management fees.

• Personal use of the home. If you intend to use the property yourself for part of the year, then you must buy a property suited to short term rentals.

• Property zoning and community rules. While most local authorities and home owners associations allow long term leases, many of them do not allow short term rentals

• Vacancy rate. This indicates how much of the time your house is unoccupied. For a long term rental, this will normally be the time between annual leases, and in our current market conditions you can expect this to be about 30 days. For short term rentals, the vacancy rate will depend upon a number of factors such as supply and demand, and economic conditions that impact tourist traffic.

• Cost of advertising and finding tenants. For a long term rental, these costs are limited to the time between leases only. To secure vacation rentals, these costs are ongoing and can be significant.

In my own experience, a long term rental will usually be more profitable than a short term rental, primarily due to lower running costs and vacancy rates. This is illustrated in the table below.

*This table illustrates the differences in running costs and potential income between short and long term rentals. The short term figures used are based on actual costs for a house with 3 bedrooms, 2 bathrooms and a pool. The long term rental figures are projections for the same home rented, unfurnished, on an annual lease, where the tenant is responsible for pool maintenance, but the landlord maintains the lawn and landscape.

Patricia Tan was born in England, and her career in international sales and marketing led her to live and work in many countries around the world before moving to Sarasota in 1997. Patricia is a Certified International Property Specialist (CIPS), Graduate Realtor Institute (GRI), and Transnational Referral Certified (TRC). She is involved in global activities of the Sarasota, Florida and National Association of Realtors, and currently serves as NAR President’s Liaison to U.K. Her real estate business operates from Coldwell Banker on St Armands Key, where her focus is to bring international buyers to the local market. She regularly makes marketing trips to Canada, Asia and Europe, to promote Florida’s Gulf Coast and the Sarasota area in particular. Patricia may be reached at 941-504-9232 or Pat@PatriciaTan.com.

Copyright © 2012 REAL Magazine

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