We explore the crucial considerations for property investors choosing between Airbnb and traditional renting, highlighting the impact of market dynamics, regulatory environments, and property characteristics on investment returns.

Airbnb vs Renting: Make the Right Choice for Your Investment Strategy

Airbnbs have higher potential returns but are variable and management-intensive, while traditional renting has more stable income but potentially lower returns.

Location, demand, amenities, and local regulations influence ROI for Airbnb, while economic trends and property features impact long-term rentals.

Effective strategy and dynamic pricing for STRs and understanding long-term market trends for LTRs is crucial.

Venture into property investment and sooner or later you’ll face this question: Should I Airbnb my property or rent it out the old-fashioned way?

Which choice is better? Where will I make the most return on my investment (ROI)? Let’s take the guesswork out of the equation. 

Real estate investment offers a wealth of opportunities for substantial returns, but the decision between short-term and long-term rentals demands thoughtful analysis. Grasping the elements that affect ROI for each choice is key. 

This guide aims to unpack the essential factors influencing both potential rental income and overall ROI in the Airbnb vs long term renting debate. 

Plan your STR strategy based on real booking activity and trends—plus, see how things change year over year.

Choosing between Airbnb and traditional renting takes into consideration investment goals, risk tolerance and involvement. Short-term rentals (STRs) offer higher returns but are more variable and are more demanding to manage. Long-term rentals offer more stability but may yield lower returns in markets with high STR demand. As an investor, deciding between the two involves prioritizing between potential returns vs stability. It's important to understand what drives ROI for both before deciding.

Here are key factors that influence the ROI of Airbnb vs renting: 

Location and Desirability: High tourism or business areas often mean higher demand.

Travel Demand: Seasonality, local events, and destination appeal are crucial.

Competition: The availability of similar accommodations impacts your pricing strategy.

Local Economy and Events: Economic growth and events can temporarily boost demand.

Property Amenities: Unique features, such as a pool, can justify a higher average daily rate (ADR) for your property.

Economic and Demographic Trends: Job, wage, and population growth indicate a strong market.

Market Supply: The balance of long-term rental properties and for-sale homes affects market saturation.

Community Attributes: School quality and neighborhood safety are key for attracting residents.

Property Features: Long-term appeal is boosted by practical amenities like storage and efficient appliances.

Whether you decide to start a short-term rental business or go with a traditional long-term rental, these factors will determine the feasibility and profitability of your investment property. For more information on how to navigate the STR investment market, read our Airbnb Investment Guide.

How to Calculate the Potential Income of Your Rental Property

Determining potential rental income is a key step in real estate investment strategy, whether you’re considering short-term or long-term rentals. It's not just about estimating profits, but understanding the market conditions and pricing strategies. Successful property investment lies in having a clear understanding of these factors.

STRs, such as those listed on Airbnb, offer unique revenue opportunities. Setting a competitive yet profitable rental price involves a blend of factors, including location desirability, seasonal demand, and the current landscape of travel accommodations. A balanced approach, combining your property analysis with market data, can lead to a more accurate income projection.

Platforms like AirDNA provide in-depth market performance dashboards that give a window into the STR market's vitality. Let’s look at Charleston, South Carolina's market performance dashboard as an example. Its vibrant STR market boasts an impressive average annual revenue of $94,800. 

Analytics like these give investors a glimpse into potential earnings. Remember, though, that this is part of a larger picture. For more detailed guidance, read our article on what to charge for rent for your STR. 

For those considering long-term renting, Zillow has a rent index that provides valuable metrics. They track and report typical rent levels in metropolitan areas, cities, and ZIP Codes, offering a snapshot of the long-term rental market. 

As of December 2023, for instance, Zillow noted an average monthly rent of $2,008 for Charleston, equating to an annual income of $24,096. This figure serves as a benchmark, helping investors to gauge the steady income potential for long-term rentals in contrast to the more dynamic STR market.

Note that regional averages cannot provide an investor with specific information about the potential income of a particular property. However, with AirDNA's Airbnb Calculator, you can input a property address and the tool will factor in similar properties in the area to give you a more accurate picture of its potential income. The customizable calculator can also help estimate the potential costs of operating the property as a short-term rental.

Understand the investment potential of any address in the world. 

Factors Affecting Total ROI of Airbnb vs Renting 

Understanding potential rental income is just the beginning of real estate investing. To get a complete picture of your investment as a property owner, it's important to consider other factors that shape the true ROI. These factors include market trends, operational costs, and more. 

We have created a chart that compares the various factors affecting both your total rental income and broader ROI when it comes to deciding between Airbnb vs renting. 

Why Net ROI is the Name of the Game of Airbnb vs Renting

Net Return on Investment (Net ROI) measures the profitability of an investment after accounting for all costs, offering a clear picture of the actual financial returns. It's calculated by subtracting the total costs from the total revenue generated by the property, then dividing this by the investment cost and multiplying by 100 to get a percentage.

In real estate investment, choosing between Airbnb vs renting hinges on understanding which option yields a higher Net ROI. This metric is crucial as it factors in not just the potential revenue, but also the operational costs associated with each rental strategy. The result is a comprehensive view of profitability.

AirDNA’s vacation rental pricing tool uses data-driven recommendations to propose the best daily rates.

Net ROI of US Markets Airbnb vs Renting 

We have created an interactive dashboard that estimates the net return on investment for long-term and short-term rentals in 40 different markets. Our estimates are based on AirDNA data on average annual short-term rental revenue combined with data from Zillow on typical long-term rental rates and home purchase prices.

In order to determine the Net ROI, we made certain assumptions. These assumptions include:

Operating expenses are 50% of the revenue for STRs 

Operating expenses are 35% of the revenue for long-term rentals

Average vacancy rates or lease-up times decrease annual long-term rental income by 5%.

The difference in operating expenses accounts for the higher costs of managing, furnishing, and maintaining an Airbnb property. 

Get a birds-eye-view of how different urban areas across the U.S. compare in terms of short-term rental revenue versus long-term rental rates. Filter by real estate type (apartments versus houses) and see how revenue projections stack up against real estate prices.

Our analysis confirms that Charleston, SC stands out as a winner. Net ROI of short-term rentals is substantially higher than the ROI of long-term rentals there:

Net ROI for STR of 9.1% vs 3.5% for long-term rental (LTR).

The STR net ROI exceeds the long-term value by 5.6%, which we call the STR net ROI premium (also listed in the dashboard).

Charleston has the largest premium of any major metropolitan area as of this data from the end of 2023.

We have developed an additional dashboard that enables users to delve into the submarket towns of any metropolitan area, provided that data is available. In addition to the net ROI for LTR and STR, this dashboard presents information on the total number of listings and year-over-year changes in rent amounts for different markets and submarkets. 

Using both dashboards makes it easier to determine whether Airbnb vs renting will provide a higher rate of return on your investment property.

Hone in on a specific city to see how short-term versus long-term rental revenue projections have changed over time and how they vary across different areas of the city.

Net ROI Market Highlights of Short-Term Rentals vs Long-Term Rentals

As we can see in the data in those dashboards, the profitability of Airbnb versus traditional renting varies significantly across regions:

Southeastern Markets Shine: Charleston, New Orleans, and Jacksonville lead with the highest STR net ROI premiums, making STRs a more attractive investment.

Western Markets Lag Behind: In the Bay Area, the attractiveness of STRs diminishes. San Jose shows no STR premium, with both rental strategies yielding a net ROI of just 1.5%. San Francisco's premium is slightly better at 0.7%.

Exceptions to Regional Trends: Atlanta presents a unique case with a low STR premium of 0.8%, attributed to the relative strength of LTRs there. Conversely, Providence, R.I., stands out in the Northeast with a strong STR premium of 4.2%, driven by solid travel demand and STR pricing.

It's important to remember that the ROI estimates provided are just a snapshot in time of these properties' net operating income potential based on their current prices. However, the full picture of their return on investment will depend on various factors that we will discuss next. 

Other Key Considerations of Vacation Rentals Vs Traditional Rentals

Property owners face a complex decision when choosing between investing in an Airbnb property or a traditional rental property, as they need to consider various factors beyond revenue potential. The impact of local regulations, taxation, and property management plays a pivotal role in shaping the viability and profitability of each rental strategy.

Short-term rental regulations set the groundwork for what's possible with property rentals. Cities like New York have implemented stringent zoning laws that curtail the ability to offer STRs unless specific conditions are met, such as the host's presence during the stay. These regulations can influence the decision to pursue Airbnb as an option, with the need for permits or strict guidelines potentially complicating the rental process.

The tax implications for Airbnb rentals can diverge from traditional rentals. Airbnb property earnings might come with hotel or tourist taxes and income taxes, creating a unique tax scenario for vacation home operators. Conversely, long-term rental properties typically fall under more familiar tax rules. Landlords can deduct expenses like mortgage interest, property tax, and maintenance costs directly related to the upkeep of the rental property.

Insurance for vacation rentals must cover the higher risks associated with transient occupancy, such as property damage or liability issues. These risks aren't usually covered in standard homeowners' policies. This specialized insurance tends to be more costly, reflecting the increased risk. Landlords of long-term rentals, however, generally invest in landlord insurance policies that provide liability and property damage coverage suitable for longer-term tenancies. Long-term rental insurance offers a different cost and coverage structure that aligns with the lower turnover rates.

The day-to-day management of an Airbnb rental property can be much more hands-on than a traditional rental. The high turnover of guests demands regular cleaning, maintenance, and active communication for check-ins and support. This operational demand can be both a time and financial burden on the property owner. In a traditional rental property, the property can often be managed more passively once a reliable tenant is secured. However, it is possible to operate your vacation rental remotely or hire a property manager to make your Airbnb investment more passive. 

How to Maximize Your Total Airbnb Earnings

If you’re leaning towards the Airbnb route, you’ll want to make sure you know how to make the most of it. We’d recommend you read our 22 Tips to Maximize the Return on Your Vacation Rental in 2024. It includes expert strategies and actionable tips covering everything from optimizing your listing to adjusting for peak seasonality, ensuring you harness the full potential of your property as you run your vacation rental business. 

Remember that making the Airbnb vs. renting decision doesn't have to involve endless number-crunching. AirDNA is here to lighten the load.

With AirDNA, you can access an extensive suite of analytics tools that dissect market trends, occupancy rates, pricing strategies, and much more. All of our products are designed to empower your decision-making process. Our platform offers detailed insights into local and global markets, competitor analysis, and revenue projections that can sharply define whether Airbnb hosting aligns with your financial goals. If it does, you’ll know you made your decision the right way—based on data.

Debating between the hustle of short-term rentals and the stability of long-term tenants? Our data showcases the the lucrative appeal of STRs—here’s why.

Key Takeaways:
Airbnbs have higher potential returns but are variable and management-intensive, while traditional renting has more stable income but potentially lower returns.
Location, demand, amenities, and local regulations influence ROI for Airbnb, while economic trends and property features impact long-term rentals.
Effective strategy and dynamic pricing for STRs and understanding long-term market trends for LTRs is crucial.

Venture into property investment and sooner or later you’ll face this question: Should I Airbnb my property or rent it out the old-fashioned way?

Which choice is better? Where will I make the most return on my investment (ROI)? Let’s take the guesswork out of the equation. 

Real estate investment offers a wealth of opportunities for substantial returns, but the decision between short-term and long-term rentals demands thoughtful analysis. Grasping the elements that affect ROI for each choice is key. 

This guide aims to unpack the essential factors influencing both potential rental income and overall ROI in the Airbnb vs long term renting debate. 

Ditch the guesswork

Plan your STR strategy based on real booking activity and trends—plus, see how things change year over year.

Get started
Market Dynamics of Airbnb vs Renting

Choosing between Airbnb and traditional renting takes into consideration investment goals, risk tolerance and involvement. Short-term rentals (STRs) offer higher returns but are more variable and are more demanding to manage. Long-term rentals offer more stability but may yield lower returns in markets with high STR demand. As an investor, deciding between the two involves prioritizing between potential returns vs stability. It's important to understand what drives ROI for both before deciding.

Here are key factors that influence the ROI of Airbnb vs renting: 

Short-Term Rentals (STRs)
Location and Desirability: High tourism or business areas often mean higher demand.
Travel Demand: Seasonality, local events, and destination appeal are crucial.
Competition: The availability of similar accommodations impacts your pricing strategy.
Local Economy and Events: Economic growth and events can temporarily boost demand.
Property Amenities: Unique features, such as a pool, can justify a higher average daily rate (ADR) for your property.

Get custom insights for your Airbnb.

Long-Term Rentals (LTRs)
Economic and Demographic Trends: Job, wage, and population growth indicate a strong market.
Market Supply: The balance of long-term rental properties and for-sale homes affects market saturation.
Community Attributes: School quality and neighborhood safety are key for attracting residents.
Property Features: Long-term appeal is boosted by practical amenities like storage and efficient appliances.

Whether you decide to start a short-term rental business or go with a traditional long-term rental, these factors will determine the feasibility and profitability of your investment property. For more information on how to navigate the STR investment market, read our Airbnb Investment Guide.

How to Calculate the Potential Income of Your Rental Property

Determining potential rental income is a key step in real estate investment strategy, whether you’re considering short-term or long-term rentals. It's not just about estimating profits, but understanding the market conditions and pricing strategies. Successful property investment lies in having a clear understanding of these factors.

STRs, such as those listed on Airbnb, offer unique revenue opportunities. Setting a competitive yet profitable rental price involves a blend of factors, including location desirability, seasonal demand, and the current landscape of travel accommodations. A balanced approach, combining your property analysis with market data, can lead to a more accurate income projection.

Learn about short-term rental data

Platforms like AirDNA provide in-depth market performance dashboards that give a window into the STR market's vitality. Let’s look at Charleston, South Carolina's market performance dashboard as an example. Its vibrant STR market boasts an impressive average annual revenue of $94,800. 

Analytics like these give investors a glimpse into potential earnings. Remember, though, that this is part of a larger picture. For more detailed guidance, read our article on what to charge for rent for your STR. 

For those considering long-term renting, Zillow has a rent index that provides valuable metrics. They track and report typical rent levels in metropolitan areas, cities, and ZIP Codes, offering a snapshot of the long-term rental market. 

As of December 2023, for instance, Zillow noted an average monthly rent of $2,008 for Charleston, equating to an annual income of $24,096. This figure serves as a benchmark, helping investors to gauge the steady income potential for long-term rentals in contrast to the more dynamic STR market.

Note that regional averages cannot provide an investor with specific information about the potential income of a particular property. However, with AirDNA's Airbnb Calculator, you can input a property address and the tool will factor in similar properties in the area to give you a more accurate picture of its potential income. The customizable calculator can also help estimate the potential costs of operating the property as a short-term rental.

Calculate potential earnings

Understand the investment potential of any address in the world. 

See your STR revenue potential
Factors Affecting Total ROI of Airbnb vs Renting 

Understanding potential rental income is just the beginning of real estate investing. To get a complete picture of your investment as a property owner, it's important to consider other factors that shape the true ROI. These factors include market trends, operational costs, and more. 

We have created a chart that compares the various factors affecting both your total rental income and broader ROI when it comes to deciding between Airbnb vs renting. 

Why Net ROI is the Name of the Game of Airbnb vs Renting

Net Return on Investment (Net ROI) measures the profitability of an investment after accounting for all costs, offering a clear picture of the actual financial returns. It's calculated by subtracting the total costs from the total revenue generated by the property, then dividing this by the investment cost and multiplying by 100 to get a percentage.

In real estate investment, choosing between Airbnb vs renting hinges on understanding which option yields a higher Net ROI. This metric is crucial as it factors in not just the potential revenue, but also the operational costs associated with each rental strategy. The result is a comprehensive view of profitability.

Market-Informed Pricing Decisions

AirDNA’s vacation rental pricing tool uses data-driven recommendations to propose the best daily rates.

Start for free
Net ROI of US Markets Airbnb vs Renting 

We have created an interactive dashboard that estimates the net return on investment for long-term and short-term rentals in 40 different markets. Our estimates are based on AirDNA data on average annual short-term rental revenue combined with data from Zillow on typical long-term rental rates and home purchase prices.

In order to determine the Net ROI, we made certain assumptions. These assumptions include:

Operating expenses are 50% of the revenue for STRs 
Operating expenses are 35% of the revenue for long-term rentals
Average vacancy rates or lease-up times decrease annual long-term rental income by 5%.

The difference in operating expenses accounts for the higher costs of managing, furnishing, and maintaining an Airbnb property. 

Explore Net ROIs by Market

Get a birds-eye-view of how different urban areas across the U.S. compare in terms of short-term rental revenue versus long-term rental rates. Filter by real estate type (apartments versus houses) and see how revenue projections stack up against real estate prices.

Our analysis confirms that Charleston, SC stands out as a winner. Net ROI of short-term rentals is substantially higher than the ROI of long-term rentals there:

Net ROI for STR of 9.1% vs 3.5% for long-term rental (LTR).
The STR net ROI exceeds the long-term value by 5.6%, which we call the STR net ROI premium (also listed in the dashboard).
Charleston has the largest premium of any major metropolitan area as of this data from the end of 2023.

We have developed an additional dashboard that enables users to delve into the submarket towns of any metropolitan area, provided that data is available. In addition to the net ROI for LTR and STR, this dashboard presents information on the total number of listings and year-over-year changes in rent amounts for different markets and submarkets. 

Using both dashboards makes it easier to determine whether Airbnb vs renting will provide a higher rate of return on your investment property.

Explore Net ROI by Submarket

Hone in on a specific city to see how short-term versus long-term rental revenue projections have changed over time and how they vary across different areas of the city.

Net ROI Market Highlights of Short-Term Rentals vs Long-Term Rentals

As we can see in the data in those dashboards, the profitability of Airbnb versus traditional renting varies significantly across regions:

Southeastern Markets Shine: Charleston, New Orleans, and Jacksonville lead with the highest STR net ROI premiums, making STRs a more attractive investment.
Western Markets Lag Behind: In the Bay Area, the attractiveness of STRs diminishes. San Jose shows no STR premium, with both rental strategies yielding a net ROI of just 1.5%. San Francisco's premium is slightly better at 0.7%.
Exceptions to Regional Trends: Atlanta presents a unique case with a low STR premium of 0.8%, attributed to the relative strength of LTRs there. Conversely, Providence, R.I., stands out in the Northeast with a strong STR premium of 4.2%, driven by solid travel demand and STR pricing.

It's important to remember that the ROI estimates provided are just a snapshot in time of these properties' net operating income potential based on their current prices. However, the full picture of their return on investment will depend on various factors that we will discuss next. 

Find your next investment

Other Key Considerations of Vacation Rentals Vs Traditional Rentals

Property owners face a complex decision when choosing between investing in an Airbnb property or a traditional rental property, as they need to consider various factors beyond revenue potential. The impact of local regulations, taxation, and property management plays a pivotal role in shaping the viability and profitability of each rental strategy.

Regulations

Short-term rental regulations set the groundwork for what's possible with property rentals. Cities like New York have implemented stringent zoning laws that curtail the ability to offer STRs unless specific conditions are met, such as the host's presence during the stay. These regulations can influence the decision to pursue Airbnb as an option, with the need for permits or strict guidelines potentially complicating the rental process.

Taxation

The tax implications for Airbnb rentals can diverge from traditional rentals. Airbnb property earnings might come with hotel or tourist taxes and income taxes, creating a unique tax scenario for vacation home operators. Conversely, long-term rental properties typically fall under more familiar tax rules. Landlords can deduct expenses like mortgage interest, property tax, and maintenance costs directly related to the upkeep of the rental property.

Property Insurance

Insurance for vacation rentals must cover the higher risks associated with transient occupancy, such as property damage or liability issues. These risks aren't usually covered in standard homeowners' policies. This specialized insurance tends to be more costly, reflecting the increased risk. Landlords of long-term rentals, however, generally invest in landlord insurance policies that provide liability and property damage coverage suitable for longer-term tenancies. Long-term rental insurance offers a different cost and coverage structure that aligns with the lower turnover rates.

Property Management

The day-to-day management of an Airbnb rental property can be much more hands-on than a traditional rental. The high turnover of guests demands regular cleaning, maintenance, and active communication for check-ins and support. This operational demand can be both a time and financial burden on the property owner. In a traditional rental property, the property can often be managed more passively once a reliable tenant is secured. However, it is possible to operate your vacation rental remotely or hire a property manager to make your Airbnb investment more passive. 

Hottest Airbnb Markets
Free Airbnb Calculator
How to Maximize Your Total Airbnb Earnings

If you’re leaning towards the Airbnb route, you’ll want to make sure you know how to make the most of it. We’d recommend you read our 22 Tips to Maximize the Return on Your Vacation Rental in 2024. It includes expert strategies and actionable tips covering everything from optimizing your listing to adjusting for peak seasonality, ensuring you harness the full potential of your property as you run your vacation rental business. 

Remember that making the Airbnb vs. renting decision doesn't have to involve endless number-crunching. AirDNA is here to lighten the load.

With AirDNA, you can access an extensive suite of analytics tools that dissect market trends, occupancy rates, pricing strategies, and much more. All of our products are designed to empower your decision-making process. Our platform offers detailed insights into local and global markets, competitor analysis, and revenue projections that can sharply define whether Airbnb hosting aligns with your financial goals. If it does, you’ll know you made your decision the right way—based on data.

Airbnb vs Renting: Make the Right Choice for Your Investment Strategy

Explore Net ROIs by Market

Get a birds-eye-view of how different urban areas across the U.S. compare in terms of short-term rental revenue versus long-term rental rates. Filter by real estate type (apartments versus houses) and see how revenue projections stack up against real estate prices.

Explore Net ROI by Submarket

Hone in on a specific city to see how short-term versus long-term rental revenue projections have changed over time and how they vary across different areas of the city.

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