Short-term visitor accommodation vs long-term residential accommodation:
Which rental is right for your investment property?

So, you’ve taken the leap and bought an investment property. Now it’s time to decide how you want to make money from it.

Should you rent out on a long-term basis to locals or do short-term visitor accommodation renting to tourists? There’s a lot to consider here.

While long-term residential renting has traditionally been the way to make money from your property – and continues to be a reliable way to do so – the rise in popularity of holiday accommodation sites like Airbnb, Agoda and Bookabach has made short-term renting a very popular way to generate revenue.

As a developer who has management experience with both long-term and short-term renting, here’s a few things you should think about when deciding which way to go.

Earning potential

Will long-term renting or short-term renting make the most money?

For a property that is in a very touristy city, it makes sense to have it as a short-term visitor accommodation, as the earning potential is high. Short-term accommodation can generally charge higher nightly rates, and the rate can be adjusted based on seasonal demand.

The flexibility to change the nightly rate based on the peak holiday periods such as the school holidays and the Christmas break is an attractive reason to choose short-term accommodation for apartments in high-tourism areas, such as Queenstown.

For properties in more populated and business-centric cities, like Auckland, long-term accommodation is the way to go. People move to these cities for jobs or family, so there are many people needing a permanent place of residence.

Having a single tenant in your place guarantees a steady monthly income.

This is not to say that apartments in popular tourist cities shouldn’t be a long-term residence. A shortage of housing and a constant influx of tourism and hospitality workers means long-term accommodation is in high demand and can also command a premium price.

Cities that are not as touristy as others still need holiday accommodation, so if you have an apartment in a place like Auckland or Wellington, a short-term accommodation option will also give you a good return on your investment from frequent travellers.

Ongoing costs

How much of the ongoing costs do you want to have fall to you each month? As the owner of the property, bigger expenses like the mortgage, council rates and body corporate fees will be your responsibility to pay.

But the costs to run the apartment – such as water, electricity, and Wi-Fi – will either be your responsibility as well, or passed on to the tenant, based on your property’s rental type.

Utility costs will be the responsibility of your tenant in a long-term accommodation situation, or if you choose to do short-term accommodation, those costs will be yours to stay on top of.

It’s the same for other things like cleaning costs and upkeep of necessary things like toilet paper, hand soap and towels – for short-term accommodation it’s your job to manage, whereas for a long-term tenant it would be their responsibility.

Turnover

How often do you want people to be going in and out of your property?

For short-term accommodation, it’ll be every other day (based on frequency of bookings), so if you don’t mind the high turnover rate, meeting new people, and doing regular maintenance to make sure the apartment is spick and span, then short-term accommodation is the option for you.

If you prefer to have the same person using your property for a while, then go with long-term accommodation. You’ll get to know your tenant and have less maintenance to do on a regular basis.

There’s a lot to consider when deciding between renting out your apartment long-term or short-term. Both options will make your investment property an excellent source of income; just make sure to think about important cost-related and social factors such as the earning potential, location and turnover rate.

  

Thinking about buying an apartment?

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For more information, click here: Mountain Oak Queenstown Apartments

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For more information, click here:  LQ Ellerslie – The Residences | Now Selling | Safari Group

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Learn more

Want to learn more about the amazing new build investments that are under construction with Safari Group?  Take a look at our Queenstown, Ellerslie and Parnell opportunities, and then give us a call on 0800 790 790, or email us on sales@safarigroup.co.nz