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This is a major thing for me too. I had a regular guest who asked about renting the room long-term next year but I couldn’t do it. He’s nice enough but the thought of having him here all the time is too much.
In answer to the question, I earn more than double doing STR than long-term. Another factor is that tenants use a lot more utilities as they’re cooking, washing clothes etc.
Way more than double!
100%, I would never, ever have a long term tenant living on my third floor.
Amen to the comments. In my case, the STR utilities are included in the HOA fee so unlimited usage is covered. It is undoubtedly less than what I would have to pay on my own because guests leave the A/C on 24/7, lights, etc.
I have multiple units and do this full time. Here are a few of my observations:
1.5 to 2.5 annual net revenue with STR
Higher quality tenants that leave a lighter footprint on my homes, LTR wear down my house
Lower turnover costs, I have more maintenance and repairs on LTR turnover
STR even with a 50% occupancy, I can generate more net revenue than LTR, that means 50% less wear and tear
Flexibility for personal usage, or friends and family, using the 30-40% vacancy dates
Home is ALWAYS maintained in show condition, cannot say that for LTR, it is always a crapshoot
Automation and streamlining can minimize time investment increasing personal ROI
A lot of factors to consider, and many variables that effect occupancy and ROI. But I prefer STR for my homes that are in prime locations.
Assuming you mean https://www.mrmoneymustache.com/2017/11/22/mr-money-mustache-uber-driver/, that is indeed an informative article.
I love MMM and hadn’t seen this article. Thanks for the tip. I’d considered doing Lyft but perhaps lucky for me, neither of my vehicles qualifies. I’d thought of getting a newer vehicle that would qualify and thinking Lyft would supplement it’s cost. The article doesn’t make it sound very appealing.
For someone who can make $16 an hour working at a job on a schedule or $7 driving and having almost complete control over their time, it’s an interesting calculation. With my airbnb room I’m making about $35 an hour for cleaning it but I don’t have much control over how often it’s booked and I can’t make more than about 2 hours pay per day no matter what.
Oh dang, I DO have a slight economic gain after all! Assume I have friends and family stay for 14 days personal use per year (maximum in order not to lose some tax expense deductions), that repesents utility to me – 1.16 days per month valued at my $83 average STR rate per night or an additional $96 per month.
This is fun; yes I am a geek. 2018 will be The Year of Ruthlessly Raising Prices to see how far I can go to maintain or increase profits.
I am not convinced for those of us renting out a spare room in our homes, that Mr. Mustache’s calculations using Über and or Lyft as an example are relevant. My house is going up 8% in value whether or not I rent out that floor. My net profit, and I calculate this very closely, adds a meaningful amount to our yearly income. As working professionals, we do not need this money to meet our expenses so we are never tempted to undercut our own prices. The house is our home, one of our largest assets, and for at least some time, is also creating income that we can use to fund other accounts. The amount of “wear and tear” of the house has amounted to nothing. [That is separate from wear and tear on consumables such as linens.]
Cars are fundamentally different. Using them decreases their value. They require maintenance based on the number of miles driven. Time waiting for a fare can never be recaptured to sell again.
Being in the AirBNB landlord business with multiple units changes the calculations tremendously.
Good points. Not meant as an exact comparison but an example of how easy it is to forget to take costs, in the broadest sense, into account. I don’t know how to quantify “host wear and tear,” but I think it for sure exists. We are selling ourselves (or our hospitality image). Also, it only takes one bad guest to cause serious and expensive damage that may or may not be fully covered by airbnb or your other insurance, including lost income during repair period. There are additional expenses that may not be super obvious – for example, I’ve got to replace a quilt much sooner than normal because I’m washing it all the time. And my gate latches are shot, and . . . And there is more wear and tear on the property, you are using it, more heavily than you would without guests. This is recognized by US tax code allowing me to expense depreciation. An uber driver can also use depreciation expense deduction. You are quite correct that the market value of your house could far far exceed its depreciated basis. Perhaps a better comparable in this case would be a Bentley or Rolls that a businessperson chauffeurs wedding parties around in.
Uber and Lyft drivers also have expenses beyond gas, car washes and wear and tear on their vehicles. Uber not only takes reviews even more seriously than Airbnb; they profit from their review system. If a driver’s ratings fall below 4.6 they are deactivated until they take a class (for which they have to pay) to instruct them on how to improve their ratings. Many drivers offer bottled water and snacks to ensure high ratings.
Again, not to say these businesss – Air, Uber, Lyft, MLM – are identical. Just raising some questions. Are vendors discounting some of their costs (tangible or intangible)? Could their time and effort (and blood, sweat and tears) be more profitably spent elsewhere? Do vendors have any negotiating power in these business arrangements? Would you consider any of these vendors to be exploited? This thread incited me to validate my conclusion I could do almost as well with LTR, your mileage may vary. Everyone’s input here (thanks OP) has been most interesting.
The value of having a place for your elderly parents to stay when they visit goes well above the monetary one.
And I will reiterate, no. This is not the case. When the space was home to my kid and her husband, the wear and tear on the space was actually greater than with STR. And the duvets, etc. that I use were never part of my household inventory. They were purchased specifically for my AirBNB guests, and I assume that linens, towels, and dish-ware will need to be replaced regularly. Those are direct costs. They are not wear and tear.
Your property might be different. Well, obviously it is since I don’t have any gate latches.
It all depends on the space and the tenant. If you had a really low impact tenant, say a single professional, or a serious grad student, that may be okay. There’s also the fact that in Hawaii like many states, laws favor the tenants. If STR were disallowed here, I may just leave it empty and get a second job at Target. 
And @dpfromva doesn’t count the income from cleaning, which I’m still battling with.
I used to own a pet shop, complete with full time staff…If I spent a couple of days working at the shop, should I deduct the equivalent of a shop workers wage from what I considered my earnings? I used to see my hours as a BONUS, as I wasn’t paying someone for the hours that I was putting in.
I lost my Sunday girl for a while, so I did Sundays…happy days, I was saving £70 for that day! I paid me, for the work I did!
orrrr…(I know you take a day off you day job) if you were going to pay Cubans to do your cleaning (see other thread!), and then you start doing it instead, the money becomes part of your income, and not theirs! Go on! Add the cleaning to your STR money!
EDIT: Are you minusing the cleaning fee, rather than just nulling it?
In my case, although the STR is more lucrative than the LTR, the LTR is far easier to manage.
When the tenants (a young couple) moved in, she was a traveling nurse who was hired by the medical facility after her contract ended. They have been in the apartment for five years, paying $1800/mo. I’ve never raised it, though I notice other units rent for up to $2100/mo. The net is only $1300 but it’s steady with absolutely no fuss, no muss and no drama.
Sooo much easier than the STR.
oooh, perfect. I find it hard to raise rent whilst somebody is in there. Far easier to wait for them to move out, then re-advertise at the adjusted rate…it saves having to have that dreadful ‘landlord’ conversation.
You can do almost the same with "longer " term. That means to rent to people who are on work progectbfor a month or two or people waiting for appartment approval.
These folks are looking for cheap alternative to hotel. Many of them are paid for accommodation by their company so they are not being very careful
Of how much rent is.
I think many answers here are about long term leasing. That’s a totally different story. There of course you will have to go down in price quite a bit. Try make weekly and monthly rate for the amount you will be happy to rent it for. If you occupancy max 60% of the time don’t be afraid to put a price that matches it for a month. You will still be a winner. Almost no work and you get the same money. ,
The dreadful face-to-face conversation can be easily avoided. It is actually preferable (and easier) to notify the tenant of the rent increase by letter or email because it provides a paper trail and also keeps it on a professional level. I’ve only ever communicated rent increases to tenants in writing.
I’ll usually reference their being tenants in the unit since [date]…and their rent of $…has remained the same, and that due to the current rental market and in order to meet the rising costs of the building, it is necessary to increase their rent by $…per month commencing with their [month] payment, and that their rent will be $… per month effective on the first of (that month).
Then I’ll end it by saying that I have appreciated their tenancy and hope they will remain but if they find it necessary to move, I will understand. I also remind them to give me … days’ notice if they intend to move.
Easy-peasy!
Also, I always give them the required # of days notice of the increase.