The short-term rental industry is one of the hardest-hit economic sectors by the spread of the COVID-19 pandemic across the globe. When lockdown and restriction of movement measures we put in place to curb the reach of this deadly virus, many travelers opted to stay home, and this left the short-term rental industry counting losses and out of business.
For instance, one of the leading short-term rentals industry giant Airbnb recorded a loss of $1.5B in the form of booking when the COVID-19 pandemic hit the country in March. The trend was the same, even with the smaller short-term rental players, and they have been struggling to stay afloat and meek their financial obligations for the last few months. Many major tourist destinations such as Gatlinburg, Florida, San Francisco, and Coastal cities attracted very minimal tourists.
Since the pandemic hit, it’s now evident that short-term rentals are volatile, and it’s difficult to predict income over a longer period of time. Many short-term rental owners have now learned this hard lesson, and they are now looking forward to transition from short-term real estate rental investments to long-term rental landlords.
Before we dive deeper into the process of switching from short-term rentals to long-term rentals during the COVID-19 crisis, let’s define the two forms of rental investments.
What are short-term rentals?
Short-term rentals, also referred to as vacation rentals, are fully furnished self-contained properties rented out for a short period either daily, weekly, or monthly. Travelers see them as an alternative to hotels because they enable them to travel to different places without being tied to one particular area.
For the last few months, the landscape surrounding the short-term rental industry is evolving, and many owners are now switching their investments to long-term rentals.
What are long-term rentals?
Long-term rentals are rented out to tenants for a longer period, usually more than six months. Depending on the type of investments, landlords can offer long-term rentals either fully furnished or unfurnished.
Switching to long-term rental
Do you own short-term rentals, and they have not been doing well since the Coronavirus crisis? All it’s not lost. Suppose you have been looking for ideas on how you can transition your short-term rental investments into long-term rentals. This ultimate guide will help you understand how to switch from short-term rentals to long-term rentals during the COVID-19 pandemic crisis.
Upgrade/modify your rental property
From the onset, it’s important to understand that a short-term tenant’s needs are different from that of a long-term tenant. For instance, a traveler who will only stay for a weekend will not pay a lot of attention to the type of appliance and fixtures that your house will want to focus on furnishing and aesthetics.
On the other hand, a long-term tenant will focus on a house fitted with high quality and modern appliances, countertops, flooring, and lighting fixtures.
A long-term tenant will also be looking for a house that can be a potential home, and that’s why they put more emphasis on property location, amenities, and accessibility. Therefore, it’s imperative for you as a landlord to renovate your rental property to fit long-term tenants’ needs.
Consider removing all personal items such as family photos, wall hanging, and declutter the house before you can organize for a long-term rental showing. When the house appears neutral, tenants will have an easier time envisioning themselves living in your home and decide whether it suits them or not.
Understand the local laws that govern long-term rentals
Laws governing short-term rentals and long-term rentals may vary depending on the city and state that you are in. After switching to long-term rentals, you will need to clearly understand your rights and obligations as a landlord and those of your tenants.
You will understand whether there are rent controls in your area and the procedures you need to follow if you want to evict a bad tenant. Long-term rentals are also subjected to a different tax obligation, and you will need to understand that as well.
Research for the best suitable rent
You need to bear in mind that the rates for short-term rent are usually higher than long-term rent. Therefore, you need to find out your property value and set a monthly rent price of about 0.8-1% of the property value.
Alternatively, you can compare rental prices of similar long-term rentals in the neighborhoods to help you settle on a fair rent price.
Marketing long-term rentals and screening potential tenants
Once you have converted your short-term rentals into long-term rentals, the next step is to market them to attract potential long-term tenants. You can use various online platforms and social media for marketing your long-term rentals.
Conduct market research and understand your target market and develop ways to promote your vacant property to them. Consider hiring a professional real estate photographer to take the best photos of your property in its best condition to lure potential tenants.
Once you get an expression of interest from various potential tenants, you will need to screen them to ensure you are dealing with honest individuals who have a clean past track record. Ask for references from their past landlords and check their financial status to determine whether they will be able to pay the monthly rent on time or not.
Learn how to write lease agreements and long-term rental property management
As a landlord, when you switch for long-term rentals, you will need to know how to draft lease agreements, and it’s your responsibility to manage the property. You can engage a real estate attorney to help you craft a comprehensive lease agreement that protects you and your property.
All tenants must sign a lease agreement before they can move in. The lease agreement should outline essential clauses such as the rent price, the rent due date, penalty for late payments, pet policy, and responsibility on property damages.
To ease the burden of long-term rental property management, it’s advisable to automate the process. It would be best to consider using online long-term rental property management software from a company like PROPERENTY. With this online property management software, you can easily automate lease agreements, rent collection, have easy real-time communication with your long-term tenants, and much more.
Switching to long-term rent from short-term rentals during the COVID-19 crisis can seem overwhelming and challenging, but it’s doable. After a successful transition, you will enjoy a more stable rental income, which will help mitigate the Coronavirus pandemic’s impact. When you have tenants who have signed a long-term lease, you are assured of moderate but steady income every month rather than relying on high-return short-term rentals that are unpredictable.