The most important factor driving the decision to choose short-term vs long-term rentals is your particular location. You will have to compare the monthly rental price in your area with Airbnb listings in your area.
One must consider tourism in your area, local rental and Airbnb prices, and any laws or ordinances governing your ability to list a short-term rental. You can also download our free tool kit to see how building a granny flat would work on your proerty.
Local Demand for Short-Term vs Long-Term Rentals
If you live in a major metropolitan area, it is safe to assume there are plenty of travelers visiting your fair city to justify the demand for an Airbnb or another short-term rental listing. However, your location within your city still plays a significant role.
For example, a compact city like San Francisco or Boston certainly has enough visitors and is dense enough that most neighborhoods within the city would be viable candidates. Pittsburgh, with its’ many suburbs, becomes less attractive as you move out into the ‘burbs.
Does your accessory dwelling unit have adequate walking amenities? Is there nearby public transportation, or would my guests need a car? Are there big events in my area that would increase my exposure for certain times of the year (think SXSW, Comic-Con, Jazz Festival, Annual Duck Tape Festival…)?
Non-urban options are also worth considering. Many rural areas don’t have hotel options, and there may be no Airbnbs in the area.
Do people travel to your rural area for any attractions (park, hiking, fishing, festival, college graduations etc.)?
A family member of mine owns a farm with an outbuilding he converted into an Airbnb simply because there were no other short-term rentals for miles around.
The occupancy rate was low, but even so, the nightly rate is enough to cover what a long-term tenant would pay monthly.
Some cities have disproportionately high Airbnb prices compared to monthly rental rates. Others don’t.
To Calculate Short-Term vs Long-Term Rentals for Your Property:
1. Estimate the monthly rental you could charge for a long-term tenant.
Use Zillow to find comparable rentals in your area.
2. Estimate the nightly rate your listing would have on Airbnb.
- Search for your area, zoom in relatively close (within 3 miles) to your property.
- In search settings, make sure to select “Entire Home” as I’m sure you would be renting the entire accessory dwelling unit.
- Turn off “Instant Book” so you can see all the options in your area.
- Look at some of the listings. Analyze what similar listings are charging.
- Select a few of the listings, and begin to adjust your travel dates to see the availability of their calendars.
- You will notice some are typically wide open (low occupancy rates) and others are consistently booked. Change dates around to see all the possibilities.
3. Compare.
Suburbs of Philadelphia (ex. Phoenixville) have nightly rates low, and vacancy is high on Airbnb.
Monthly rentals are all over $1,000/month. In this case, a long-term tenant is the way to go.
Austin (ex. East Austin) has nightly rates of $120-150 in neighborhoods near downtown (where many accessory dwelling units are being built) with occupancy rates over 50%, often booked every weekend.
Monthly rentals for these ADUs are typically under $2,000/month. In this case, Airbnb becomes a viable option.
Brooklyn, (ex. Prospect Heights) has nightly rates between $150-200/night and is consistently booked, likely over 60% occupancy.
Monthly rentals start around $1,800. Airbnb would be a good option, EXCEPT…
Legal Issues
Short-term rentals are not legal in all cities. For example, some places require minimum stays of a month whereas others, anything goes. In New York, for example, Airbnb is illegal within the five boroughs of New York.
Do your due diligence on your local rules and regulations. Then make your own decision.
All those folks listing short-term rentals in Brooklyn are doing so illegally.
They are rolling the dice with every reservation that they won’t get caught, fined, and shut down.
I know people listing legally, illegally, and some who have been found by Code Department, slapped a $10,000 fine, and are now regularly monitored to make sure they are no longer attempting to host on Airbnb.
Hopefully, you’re in an area that is open and friendly to the possibility of Airbnb for your accessory dwelling unit.
If you’re not, consult with Airbnb directly, maybe reach out to hosts in your area to see how they handle the law, and make your own decision that’s right for your space and your comfort level.
If you’re curious to learn more, read our article Short Term vs. Long Term Rentals: Consider This.
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