Choosing between a long-term or short-term rental strategy for your investment property is one of the most consequential decisions you'll make as a landlord. It affects your cash flow, your tax exposure, your insurance requirements, and the amount of time you'll spend managing the asset. There's no universal right answer — but there is a right answer for your situation, and it starts with understanding the real tradeoffs.
Potential Rental Income
Long-term rentals offer stable, predictable monthly income. You sign a lease, collect rent on the first, and budget with confidence. Short-term rentals — powered by platforms like Airbnb and VRBO — offer the potential for significantly higher daily rates. But "potential" is the operative word. You have to factor in occupancy rates, platform service fees, cleaning costs, and applicable occupancy taxes that vary by jurisdiction.
Adam Timothy Group, through AT Real Estate Group LLC, owns a property in Austin that was once operated as an Airbnb. During peak periods — ACL, Formula 1, SXSW — we charged premium rates. But the unit sat empty during the hottest summer months. After accounting for all the additional costs, our average monthly earnings were roughly equivalent to what we now earn from the same property as a long-term rental.
The revenue looked great on paper during peak weeks. The annual math told a different story.
For deeper analytics on any market, AirDNA.co provides historical performance data, occupancy projections, and revenue modeling that can help you make an informed decision before you commit to a strategy.
Using Your Investment Property as an STR for Personal Use
Some owners keep their property as a short-term rental specifically so they can use it when they're in town. This offers personal convenience and income when the property would otherwise sit empty. But it also introduces complications: your personal use blocks rental availability, creates inconsistent income, increases turnover-related maintenance, and can complicate your insurance coverage. If this is your plan, go in with clear expectations about the revenue impact.
Maintenance Costs: The Hidden Delta
Expenses are more predictable. Tenants typically handle minor upkeep and pay a security deposit that covers potential damages. Cleaning is handled at turnover — usually once per year.
Cleaning happens after every guest. Lawn care, ad hoc cleaning between bookings, restocking supplies, and wear-and-tear from frequent turnover all fall on the owner. Guest cleaning fees help — but depending on property size, they rarely cover the full cost.
Many first-time STR owners assume the cleaning fee covers all maintenance. It rarely does. The delta between what guests pay and what you spend on upkeep is a line item that deserves serious attention in your pro forma.
Insurance: The Landscape Has Changed
This is where many landlords get caught off guard. Standard homeowners insurance typically does not cover short-term rental activity. In recent years, major carriers like State Farm have added explicit riders excluding temporary guests from coverage.
While Airbnb offers its own form of host protection, it explicitly recommends that hosts carry additional coverage — either a commercial policy or a business-use endorsement. If you're listing on VRBO or another platform, verify your coverage before your first booking.
A standard landlord insurance policy is typically required and provides coverage for property damage, liability, and loss of rental income. Straightforward and well-understood.
Requires either a commercial policy, a business-use endorsement, or specialized STR insurance. Allstate's HostAdvantage® is one option. These additional premiums must be factored into your financial planning.
Speak to your insurance provider before you list. Understanding the evolving requirements is essential to avoid gaps in coverage that could cost you far more than any premium.
Making the Decision
Neither strategy is inherently better. Long-term rentals offer stability, lower management burden, and simpler insurance. Short-term rentals offer higher peak returns, flexibility, and personal use potential — but with more complexity, more cost, and more risk.
The right choice depends on your financial goals, your tolerance for active management, your property's location and seasonality, and your willingness to navigate the regulatory and insurance landscape.
Ask us for our quick back-of-the-envelope worksheet we use for decision-making in this regard. It's a simple framework that helps clarify the math before you commit.
An informed client is a great partner in the real estate process. If you need help leasing out your luxury condo or single-family home — or deciding whether STR or LTR is the right strategy — we may be a good fit for you. Let's talk today.
