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April 17, 2023

Making the Right Rental Move: LTR or STR

by Alices Home

Making the Right Rental Move: LTR or STR

Alices Home
April 17, 2023

Table of Contents

One of the most significant decisions property investors need to make today is whether they list their investment property with the long-term rentals (LTR) or short-term rentals (STR).

Not very long ago, the difference was clear; most investment properties were, by default, long-term rental properties, and only investments bought for that specific purpose, eg within a holiday apartment complex, were ever considered STR. 

With today’s property landscape and increasing interest rates, the distinction between the two is becoming a lot less clear with good reason.

What is LTR (Long-Term Rental)?

LTR or long-term rental is designed for tenants to stay for a term that’s longer than 30 days. Terms and conditions are set out for this provision, and both tenants and property owners have conditions and responsibilities. LTR properties are generally not furnished.

LTR Long Term Rental - Alices Home

Benefits of LTR

  • You don’t need to constantly market your property to attract guests. Since guests will typically sign a 6 month or a 12-month lease, the turn-over is a lot less than if it were a vacation rental.
  • You don’t need to furnish the property or worry about constantly supplying sheets, towels and other amenities. This is a great expense in both time and money you will be saving.
  • Reliable income. The total amount of time your property sits empty between tenants is greatly reduced.

Challenges of LTR

  • Reduced income potential. Generally, you can charge more for shorter stays, and you also won’t be able to adjust the fee depending on demand and peak season (eg summer, school holidays).
  • You have less control over the property. Rental laws exist to give the tenant a lot greater protection and privacy. Whilst you can inspect the property every few months, after giving the tenants official notice, you won’t be able to inspect the property as often as if the property were a short-term rental.
  • Its unlikely you will be able to enjoy personal use of the property. If it were a STR, you would have the opportunity to use the property for your own vacation, but Long-term rentals are unlikely to be vacant for very long, and if they are, they have no furniture.

STR (Short-Term Rental)

STR is lodging where furnished spaces like rooms, apartments, or houses are rented out for brief stays, usually lasting from a few days to a few weeks.

Our previous blog has covered everything you need to know about Short Term Rentals (STR). From understanding the concept of STR, which involves renting out furnished spaces for short stays, to discussing the typical duration of such rentals ranging from a few days to a few weeks, we have provided comprehensive information on this type of lodging. Be sure to check out our previous blog to gain a complete understanding of STR.

STR Short Term Rental - Alices Home

Benefits of STR

  • Greater earning potential. More guests will bring in more money, and the amount can be adjusted for peak times and busy seasons.
  • Greater flexibility for you to use the property in between guests for your own vacation, and whilst there, you can change or upgrade furniture and appliances. You can decide when you want to rent it out, and when you want to keep it vacant for your own personal reasons.
  • If you are within personal proximity of the property, you have the opportunity to meet different people from all over Australia and the World, as they come to stay in your STR.

Challenges of STR

  • More maintenance. More people in and out means there will be more wear and tear on the property, and more that you will be responsible for, than if it were an LTR.
  • Forking out for furniture and consumables – long-term rental tenants bring their own of everything, whereas with a short-term rental you will need to supply almost everything.
  • Staying up to date with all of the industry regulations, constantly working with guests and marketing the property turns holding an investment property into a full-time job.

Just as with the LTR industry, now the STR industry works with property management consultancies to assist with the amount of work involved.  Whether you own either a LTR or STR, the smartest thing you could do to guarantee the success of your investment strategy is working with a professional property management consultancy so you can ensure you reap all the advantages you possibly can.

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