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Vacation Rentals vs. Long Term Rentals: A Guide to Investing in San Diego Real Estate

Vacation Rentals vs. Long Term Rentals: A Guide to Investing in San Diego Real Estate

Today, I want to talk about buying rental properties and, specifically, the difference between buying a vacation rental property in San Diego versus a longer-term rental property, which would be more of a traditional rental. A lot of people want to invest in real estate, but they’re a little overwhelmed at which of these is a better option. So, today I’m going to give you all the pros and cons of vacation rental homes versus long-term rental homes. 

The Basic

Right now, short-term rentals, like on Airbnb or VRBO, are super hot. This doesn’t seem like it will be changing any time soon. Even in the midst of the pandemic there is still tons of demand for these properties. In some sense, there’s something to be said for catching the wave while it’s still going. They seem to be resistant to the market fluctuations. Long term rentals, as the usually are, are good, stable investments.

Pros and Cons of Short-Term Rentals

Now, the huge advantage of short-term rental properties is that you make more money. Even if you pay a full-time manager, you’re still very likely going to make more money than you would with a long-term rental. That being said, they do require more work. Also, if your looking to invest in real estate make sure you check out our video: 9 Predictions for the Real Estate Market in 2021 

One large cost for vacation rentals, is that you need to buy furniture and decorate the place. This can cost anywhere from $15,000 to $25,000, plus all your time and energy. Even if you hire someone else to do it, there’s still a lot of decisions to be made, systems that need to be put in place, and marketing that needs to be done. You’re running a little business.

I tell people to go as high end as they can with vacation rentals. The nicer they are, the better they do. If you’re renting out a mediocre home short term, you’re going to deal with more issues and challenges. Though, I would suggest not to buy vacation rentals where there’s an HOA. Even if they allow you to rent your house in the short term, their rules could change, and you may no longer be allowed to a year down the line.

The flexibility of vacation rentals is another huge plus. If you suddenly decide to sell them, you don’t have to worry about any tenants. You can stop renting and get to selling.

We should also point out that if you’re the kind of person who cares a lot about what other people think of you, long-term rental might be a better option. Short term rentals have a tendency to upset neighbors because sometimes you just get the wrong tenant, and it’s a lot harder to control your tenants in these situations. There’s nothing wrong with renting out your properties on Airbnb and the like, but you might get some flack from your neighbors.

Pros and Cons of Longer-Term Rentals

Stability. Stability. Stability. There’s a lot more stability in the long-term world and a lot less questions, which is nice. You buy the property, call the property manage, and you’re essentially off to the races. So, if you’re looking for stability and predictability, long-term option might be a better for you. You also don’t need to worry about furnishing the home at all.

When it comes to purchasing a home for a long-term rental, we recommend people look to the low side of the median purchase price of homes for the area they’re looking in. We want to target people who are moving their way up through life’s economic steps. 

To Summarize it

In general, if you’ve got more money to put into this and a little bit more time and energy, go short-term rental. You’re going to make more money. And if things go sideways on it, if there’s some changes in the economy, you can sell it pretty quickly. As long as you’ve got the money, time, and energy to put in on the front end I would definitely recommend 

If you’re looking for something simpler and cheaper, go long-term. Either option is a great option. And regardless of what you choose, we’ve got great managers we can connect you with. 

If you’d like to look into purchasing one of these properties, shoot us a message. We are a real estate team specializing in San Diego and the surrounding areas. We do this every day, all day. We help people buy rental properties in either one of these circumstances. A lot of the people on my team have owned these properties as well, so we’re happy to share our insights and wisdom that we’ve accumulated the hard way over many years of doing this. So, give us a call or shoot us a message. We’ll be happy to help you out. 

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