15 Challenges You Might Face if You Own a Short-Term Rental

As an income property owner, you have a choice. You could market your home as a long-term rental or opt to make it a short-term rental. Going the latter route has its benefits as well as its drawbacks. Here are a few challenges you might encounter if you choose a short-term rental.

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When you sign a longer-term lease, you can look forward to steady rental income. With a short-term rental, that income may be inconsistent. That could make it harder to manage your expenses -- both business-related and personal.

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If you own a short-term rental in a beach or ski town, you may have no trouble getting bookings during your home's respective prime season. It's the off-season you'll need to be mindful of. You could go weeks, if not months, without any rental income, forcing you to cover all your costs yourself.

If you buy a short-term rental in an otherwise quiet area, your neighbors may not take kindly to the idea of seeing a different set of renters show up every week. And could you really blame them? That could lead to a world of conflict you'll have to deal with. And if your neighbors are rude to your guests, you might struggle to get them to return.

When too many short-term rentals pop up in the same area, lawmakers tend to take notice and start implementing restrictions. As such, with a short-term rental, you run the risk of not being able to maintain your business. However, local rules don't tend to be nearly as restrictive when it comes to long-term rentals.

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Guests who are only renting your home for a few days may not care about the state they leave it in. That means if you use your income property as a short-term rental, you could end up with lots of damage. Longer-term tenants may be more likely to treat your home with respect because they have to live there for many months.

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With a long-term rental, tenants are invested in having a good relationship with their landlords. With a short-term rental, your guests are people you might never see again. So, if they're the complaining type, they may be quick to write a negative review of your property if there was a single thing they weren't happy with. That could serve as a black mark and make it more difficult to draw in new guests.

Managing a long-term rental is something you may find doable, even if you have a full-time job outside of your real estate holdings. But managing a short-term rental takes a lot more work. That's because you're frequently signing new leases, among other things. If you have a property manager, you may end up spending more on a short-term rental than a long-term due to the extra work involved.

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Listing a short-term rental on sites like VRBO means paying a fee. And that fee could eat into your bottom line. You may have options for listing a long-term rental at a more affordable price point, if not for free.

When you have guests checking in and out of your home, you need to have it cleaned frequently. And the cost there could add up. Granted, you can try passing that cost onto your guests to some degree, but you might still bear the brunt of it.

It's important to offer nice amenities to your short-term guests. But that could mean spending extra money as towels or sheets get worn or kitchen supplies are used up. You'll need to make sure to budget for those added costs.

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If you don't have a property manager and your short-term guests encounter an issue, responding immediately is a must. But that could prove disruptive to your life. Granted, even with a long-term rental, you could get a call from a tenant at midnight complaining of a leak.

But if you have a decent relationship with that tenant, they may be willing to wait until morning to have the issue addressed. Guests staying at your rental for a couple of nights may not be nearly as patient.

If you own a home in a popular area, such as a beach or ski town, you might struggle to find guests even during your prime season if there's a lot of competition in the area. Now, you could say the same thing about a long-term rental. The difference, however, is that people always need a place to live, but they don't always need a place to vacation.

Collecting a security deposit from each tenant when you rent out a home on a short-term basis is important. But the more deposits you collect, the more issues you might run into when taking deductions for damages. And even if you end up with a string of careful tenants who don't cause damage, you'll still need to manage those deposits and make sure funds are returned on schedule.

When you rent out a home on a short-term basis, it's on you to cover utility costs. And that could get expensive, eating into your profits. After all, your guests may not care about turning the air conditioning off when they leave for the day, leaving you to foot the bill.

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When you own a short-term rental, you'll often need to go the extra mile to draw in guests at different points of the year. That could mean putting up fall decorations in October and replacing them with holiday lights in December. That could require a lot of your time -- and money.

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You might make a nice amount of money by owning and operating a short-term rental. Just make sure you're aware of the pitfalls involved. You may decide a better choice is to own an income property you rent out on a longer-term basis.

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