Short-Term vs Long-Term Rentals: A Financial Comparison for Landlords

By PropsManager Team · Rent & Finance · Oct 03, 2024

I've had this conversation at least fifty times. A landlord friend shows me their Airbnb earnings—$4,200 last month on a two-bedroom condo—and asks why I'm still doing annual leases at $1,800/month. My answer's always the same: "Show me your expenses." The smile usually fades pretty quick.

The short-term vs long-term rental debate isn't new, but it's gotten louder since platforms like Airbnb and VRBO turned every spare bedroom into a potential cash machine. The reality, though, is way more nuanced than the Instagram landlords would have you believe. I've run both models across different markets, and the actual net profit numbers might surprise you.

Let's break this down with real math, not hype.

Understanding Short-Term Rentals (STR)

Short-term rentals are stays of fewer than 30 days—think Airbnb, VRBO, Booking.com. You're essentially running a micro-hotel. The nightly rates look incredible on paper, and in the right market, the gross revenue genuinely is two to three times what a long-term tenant would pay.

The Revenue Upside

A two-bedroom apartment in Nashville that rents long-term for $1,600/month might pull $175/night on Airbnb. At 75% occupancy, that's roughly $3,940/month in gross revenue. In peak season—think summer or during CMA Fest—you might hit $250/night.

In popular tourist markets like Scottsdale, Destin, or the Smoky Mountains, the numbers can look even better. Some hosts report $60,000 to $80,000 in annual gross revenue on properties that would rent long-term for $24,000 to $30,000 per year. That's a compelling spread.

The Expense Reality

Here's where the dream meets the spreadsheet. Short-term rental expenses are significantly higher than most first-timers expect:

• Platform fees: Airbnb takes 3% from hosts (sometimes more). VRBO charges 5%. That's $1,200–$2,400/year right off the top on a $40,000 gross.
• Cleaning costs: Professional turnover cleaning runs $85–$150 per stay. With an average stay of 3.2 nights and 75% occupancy, you're looking at roughly 85 turnovers per year. At $100 each? That's $8,500.
• Furnishing: A two-bedroom STR needs $8,000–$15,000 in furniture, linens, kitchenware, and decor upfront. Replacement cycles hit every 2–3 years.
• Utilities: You're covering electricity, gas, water, internet, and streaming subscriptions. Budget $250–$400/month.
• Supplies: Toilet paper, coffee, shampoo, paper towels, dish soap—the little stuff adds up to $100–$200/month.
• Occupancy taxes: Many cities charge 6%–15% in local hotel/tourism taxes. On $40,000 gross, that can be $2,400–$6,000.
• Insurance: Standard landlord policies don't cover STRs. Specialized short-term rental insurance runs $2,000–$4,000/year.
• Maintenance: Higher turnover means faster wear. Expect 30–50% more maintenance spend compared to a long-term rental.

When you stack all that up, the total operating expenses on a short-term rental typically consume 40–60% of gross revenue. That $40,000 in gross? Your net might be $16,000–$24,000.

The Time Factor

This is the part most Airbnb evangelists gloss over. Managing a short-term rental is a hospitality job, not a passive investment. You're handling:

• Guest messaging and inquiries (often at 11 PM)
• Check-in/check-out coordination
• Cleaning crew scheduling
• Restocking supplies
• Handling complaints ("the WiFi is slow," "there's no ice maker")
• Dealing with damage from bachelor parties
• Writing and responding to reviews
• Adjusting pricing daily based on demand

A well-run STR eats 15–25 hours per week of active management per unit. You can hire a property manager, but they'll take 20–30% of gross revenue—which further erodes your profit margin.

Understanding Long-Term Rentals (LTR)

Long-term rentals are your classic 12-month lease. One tenant, one move-in, steady checks hitting your account on the first of the month. Boring? Maybe. But boring pays the mortgage.

The Revenue Baseline

That same Nashville two-bedroom rents for $1,600/month on a long-term lease. That's $19,200/year in gross revenue. Not as flashy as the STR numbers, but here's the thing—almost all of that hits your bottom line.

The Expense Advantage

Long-term rental expenses are dramatically lower:

• No platform fees. Zero.
• No cleaning costs between guests (tenant handles it).
• No furnishing. Tenants bring their own stuff.
• Utilities: Tenant pays their own electricity, gas, water, and internet. Your cost: $0.
• No supplies to restock.
• No occupancy taxes.
• Insurance: Standard landlord policy, typically $800–$1,500/year.
• Maintenance: Normal wear and tear. Budget 1% of property value annually.

Total operating expenses on a long-term rental typically run 15–25% of gross revenue. That $19,200 gross becomes $14,400–$16,300 net.

The Time Factor

After the initial tenant placement—advertising, screening, lease signing—a long-term rental requires maybe 2–5 hours per month of active management. Handle a maintenance request here, respond to an email there. That's it. This is genuinely passive income in a way that STRs simply aren't.

The Real Financial Comparison

Let's put these side by side with actual numbers on that Nashville two-bedroom:

Read that last line again. When you factor in the time commitment, the long-term rental pays you roughly $439 per hour of actual work, while the short-term rental works out to about $16/hour. That's barely above minimum wage in some states.

Now, the STR still nets slightly more total dollars in this example. But the margin is razor-thin—about $900/year, or $75/month. For 20 hours a week of extra work. One bad month of occupancy, one broken TV, one guest who trashes the place, and the LTR wins outright.

When Short-Term Rentals Actually Win

I'm not here to trash STRs entirely. There are scenarios where they clearly make sense:

Prime Tourist Locations

If your property is beachfront in Destin, next to Disneyland, or in downtown Nashville, the revenue premium can be large enough to overcome the expense disadvantage. In these markets, gross revenue might hit 4–5x the LTR rate, which keeps net profit substantially higher even after all costs.

Hybrid Strategies

Some landlords rent long-term during the off-season and switch to short-term during peak months. A cabin near a ski resort might do a 9-month lease from April through December, then go nightly during ski season at $300–$500/night. This requires a flexible lease structure and more management, but it can be the best of both worlds.

Tax Advantages

Short-term rentals can qualify for significant tax deductions—depreciation on furnishings, supply write-offs, and in some cases, the property qualifies as a business rather than a passive investment. If you materially participate (more than 750 hours/year), you can often deduct losses against ordinary income. Talk to a CPA about this one; it's worth the $300 consultation fee.

Scale with Systems

If you build—or buy—systems to automate much of the STR management, the hourly rate improves dramatically. Automated messaging, smart locks for self-check-in, a reliable cleaning crew, and dynamic pricing tools can cut your active management time to 5–8 hours per week per property. That bumps the effective hourly rate considerably.

When Long-Term Rentals Clearly Win

You Value Your Time

If you've got a day job, a family, or other investments that need attention, the LTR model is almost always the better choice. The math on time-adjusted returns is overwhelming.

Markets with STR Regulations

Cities like New York, Los Angeles, San Francisco, and Denver have cracked down hard on short-term rentals. Some require permits that cost thousands. Others cap the number of days you can rent short-term. A few have outright bans in certain zones. If your market has hostile STR regulations, the long-term model isn't just better—it's the only legal option.

You're Scaling a Portfolio

Here's the thing about scaling: managing 10 long-term rentals is entirely feasible for one person with good software. Managing 10 short-term rentals is a full-blown business that needs staff. When you're building a portfolio, the LTR model scales linearly while the STR model scales with increasing complexity and headcount.

Using a platform like PropsManager makes scaling long-term rentals even more manageable. Automated rent collection, maintenance tracking, tenant communication, and financial reporting all live in one dashboard—so adding your fifth or tenth unit doesn't multiply your workload.

Stable Markets

If your rental is in a steady market without tourist appeal—think suburban neighborhoods, college towns during non-game season, or small cities—the STR demand just isn't there to justify the extra effort and expense.

The Vacancy Factor: The Hidden Risk

Vacancy is where most STR projections fall apart. That 75% occupancy rate I used above? It's optimistic for many markets. According to AirDNA data, the average Airbnb occupancy rate across the U.S. sits around 56%. Some markets are lower.

At 56% occupancy, that Nashville STR grosses $35,770 instead of $47,250. But most of the expenses are fixed or semi-fixed—cleaning scales down, but insurance, furnishing, utilities, and taxes don't. Net profit drops to roughly $8,500. Meanwhile, the LTR sitting at 95% occupancy (one month of vacancy every two years) still nets $15,800.

And here's the kicker: STR vacancy isn't just lost revenue—it's compounding lost revenue. Every empty night means you paid for utilities, insurance, and platform subscriptions with nothing coming in. With an LTR, if the unit's empty, your only cost is the mortgage and insurance.

A Practical Checklist: Which Model Is Right for You?

Before you commit to either strategy, run through this honest self-assessment:

• Do you have $10,000–$15,000 for upfront furnishing? (STR requirement)
• Can you dedicate 15–20 hours/week to guest management? (or pay 25% to a manager)
• Is your property in a high-demand tourist area? (check AirDNA for your zip code)
• Does your city allow short-term rentals? (check local ordinances)
• Do you have a reliable cleaning crew? (non-negotiable for STRs)
• Are you comfortable with income fluctuations? (STR income varies wildly month to month)
• Do you want passive income or are you building a hospitality business?

If you checked fewer than four boxes, the long-term rental model is probably your better bet. And honestly? For most landlords managing one to five units, long-term leases with solid tenants and good software delivers better risk-adjusted returns with a fraction of the stress.

Managing Either Model Effectively

Whichever path you choose, the fundamentals of good property management don't change. You still need solid tenant screening, enforceable lease agreements, organized finances, and a system for handling maintenance.

For long-term rentals especially, the right property management software makes an enormous difference. PropsManager handles automated rent collection, lease management, maintenance tracking, and financial reporting—all the operational pieces that let you scale without drowning in spreadsheets. It's built specifically for independent landlords and small property management companies, not enterprise operations with 500 units and a full-time IT department.

If you're running STRs alongside long-term units, having a single platform to track the financials across both models is critical for tax time. Knowing your actual net per property—not just gross revenue—is what separates profitable landlords from busy ones.

Check out PropsManager pricing to see how it fits your portfolio, or request a demo to see the platform in action.

What About Medium-Term Rentals?

There's a middle ground worth mentioning: furnished rentals with 30–90 day stays. Think traveling nurses, corporate relocations, insurance housing for displaced families, and digital nomads. These "mid-term" rentals often command 30–50% premiums over long-term rates without the crushing overhead of nightly turnovers.

A furnished two-bedroom that rents long-term at $1,600 might pull $2,200–$2,500/month on a 90-day furnished lease. You're still covering utilities and furnishing, but the cleaning and turnover costs drop by 80–90% compared to STRs. It's an increasingly popular strategy, and platforms like Furnished Finder cater specifically to this niche.

If you haven't considered furnished rentals as a hybrid approach, it's worth running the numbers for your market.

Explore More PropsManager Resources

Looking for the right property management software? Check out our in-depth guides:

• Compare Property Management Software — See how PropsManager stacks up against Buildium, AppFolio, Rent Manager, and Propertyware.
• Software for Small Landlords — Built for landlords managing 1–50 units without the enterprise price tag.
• AI-Powered Property Management — Discover how automation can save you 5–10 hours per week.
• Solutions for Property Managers — Scale from 50 to 500+ units without scaling your costs.

Frequently Asked Questions

How much more do short-term rentals make than long-term rentals?

In gross revenue, short-term rentals typically earn 2–3x more than long-term leases on the same property. However, after accounting for platform fees, cleaning costs, furnishing, utilities, occupancy taxes, and insurance, the net profit difference shrinks dramatically—often to 10–20% more for STRs, and sometimes less. In markets with lower occupancy rates (below 60%), long-term rentals frequently net more profit with far less work.

Are short-term rentals worth the extra work?

It depends on your situation. If you're in a prime tourist market with consistent 70%+ occupancy, have systems and help in place, and enjoy the hospitality side of things, STRs can be worth it. But if you're a solo landlord with a day job managing a property in a mid-tier market, the 15–25 hours per week of active management rarely justifies the marginal revenue increase. Run the numbers on your specific property before committing.

What are the biggest risks of short-term rentals?

The top risks include regulatory changes (cities are increasingly restricting or banning STRs), seasonal vacancy swings, higher property damage from frequent guest turnover, platform dependency (Airbnb could change their algorithm or fee structure tomorrow), and market saturation as more hosts enter the space. Long-term rentals carry risks too—mainly bad tenants and eviction costs—but those risks are more predictable and manageable with proper tenant screening and lease management.

Can I switch from short-term to long-term rentals easily?

Switching from STR to LTR is relatively straightforward—you'd remove furnishings (or include them in the lease), list the property on traditional rental platforms, and sign a standard lease. Going the other direction is harder because it requires $8,000–$15,000 in furnishing investment, setting up platform listings with photos and descriptions, building a review history from scratch, and navigating local STR regulations. Most landlords find it easier to commit to one model for at least 12–18 months to accurately evaluate performance.

Do I need different insurance for short-term rentals?

Yes, absolutely. Standard landlord insurance policies typically exclude short-term rental activity. You'll need a specialized STR policy or a commercial hospitality policy, which generally costs $2,000–$4,000/year compared to $800–$1,500 for standard landlord coverage. Airbnb's AirCover program provides some protection, but it's not a substitute for your own insurance—there are coverage gaps, claim limits, and plenty of horror stories from hosts who relied solely on it. Talk to an insurance agent who specializes in rental properties before listing your first STR.

The Bottom Line

The short-term vs long-term rental debate doesn't have a universal winner. But for the majority of independent landlords—especially those managing one to ten units alongside other commitments—long-term rentals deliver better risk-adjusted, time-adjusted returns. The gross revenue gap looks impressive on paper, but expenses eat most of it, and your time has value.

If you do go the STR route, treat it like what it is: a hospitality business. Budget accordingly, build systems early, and track every dollar. If you go long-term, invest in great tenants and great tools. Either way, know your actual numbers—not your projected ones—and make decisions based on net profit per hour of your time, not gross revenue.

The landlords who build real wealth aren't the ones chasing the highest gross. They're the ones who understand their margins, protect their time, and scale systematically. Whatever model you choose, PropsManager helps you track the numbers that actually matter.