Deciding what to do with your investment property can be overwhelming – short term or long term rental? Do you choose the “safe” route with long term tenants? Or try and get big returns as a short term holiday let?
At Cozie Homes, we’ve tried it both ways and here are some key points we’ve discovered…
Return on Investment
Maximising your return on investment is your key to financial freedom. Here is a real-life example of one of our clients who was choosing whether to go with short term or long term rental arrangements. You will of course need to work out the figures for your own individual circumstances and speak to your own financial advisor.
| Long Term Rental | Short Term Rental |
|---|---|
| Estimated rental income = $1400 per month | Estimated rental income = $2500 per month |
| Work/Styling/Furniture Costs = $0 | Work/Styling/Furniture Costs = $7500 |
| TOTAL INCOME PER YEAR = $16,800 | TOTAL INCOME PER YEAR = $30,000 |
That’s an additional $5700 income in the first year and $13,200 per year after that over a long term rental!
As you can see, the conservative estimates we used initially made it a no-brainer decision for this client. We are very happy to say that the actual figures show an even greater return on investment for our client with every month producing between $2500 and $3750. She is over the moon!
Maintenance
With long term tenants, you can’t just perform regular maintenance whenever you like. There are strict laws around gaining access to the property and you must always have the agreement of those tenants.
With short term holiday let properties. You can choose to block out dates or just perform maintenance activities between stays. No permission from tenants required.
In addition to this, the level of maintenance required (provided you have an excellent property manager) is typically lower as holiday makers spend less time in the property than a long term tenant would.
At Cozie Homes, we are able to perform some of those smaller maintenance tasks for you and organise professional tradesman for any larger jobs.
Flexibility of short term rental
If you want flexibility with your investment, then choosing between short term or long term rental will be a very easy decision.
Long Term rentals effectively mean you hand the property over to the tenants for a set period of time – normally 6 or 12 months.
Short Term rentals give you complete flexibility around how long and how often you have tenants in the property.
Here are some examples of how some of our clients use that flexibility:
- Spend half a year living in the property themselves and half the year as a holiday let
- Fly in Fly out (FIFO) – holiday let when away at work
- Block out dates you want to spend at the property yourself
- Only holiday let when you decide to go away
Tax Benefits of Short Term or Long Term Rentals
Another thing to consider when choosing between short term and long term rental are the tax benefits of depreciation.
As short term rentals require the property to be furnished, you may be able to claim depreciation on the furnishings throughout the property.
See the ATO Guidelines for expenses you can claim.
We encourage you to seek advice from a financial professional regarding this before making your decision.
Conclusion
Choosing between short term or long term rental options doesn’t need to be difficult. The wonderful thing about short term holiday let is that if you try it and it doesn’t work out then you can always switch to long term tenants. On the flip side, if you try it, you might just find it works better than you ever imagined.
At Cozie Homes, we do everything possible to make owning a short term holiday let investment property simple and easy. Check out our services and pricing to find out how we can help you.