The rental market is constantly shifting, especially when we talk about an area as highly desired as Santa Rosa. We’re seeing far more residents who are remote workers come into the area, relieved that they no longer have to live minutes from their office. There are a lot of older tenants looking for homes, deciding that it’s better to rent and enjoy a low-maintenance lifestyle for the next stage of their lives.
We’re also seeing far more short-term rentals than we ever had previously. Not every resident is in search of a long-term lease. Some tenants aren’t moving with furniture. They’re more nomadic.
Can you leverage this trend with your own rental property?
As a landlord, you may find yourself wondering whether you should focus your portfolio on short-term or long-term rentals. Perhaps you’ll work on diversifying your portfolio and bring in a mix of both property types. In Santa Rosa, there are opportunities for both long-term and short-term rental properties. Deciding what to do with an investment is a common conundrum for many property owners.
Most owners are trying to determine which rental scenario will be the most profitable for them now, as they collect rent, and in the long run when they think about the return on investment (ROI) that’s possible.
We can’t tell you which is better. The best we can do is give you an unsatisfactory answer: it depends.
Both short-term and long-term rentals have their advantages and disadvantages, and it’s essential to weigh them before making a final decision. Your best choice will depend on your own investment goals, the age and location and condition of your property, and how much effort you want to dedicate into keeping the property occupied, updated, and profitable.
Short-Term Rentals in Santa Rosa: Pros and Cons
Short-term rentals are properties that are rented for a period of time that’s less than a year. Typically, they rent by the week, by the month, or sometimes even by the night. When we think about short-term rentals, we can be talking about furnished executive apartments that people might rent for one to three months while they’re in town on business. Or, we could be talking about vacation homes. Maybe visitors to the Santa Rosa area will want to rent a furnished home or condo with lots of amenities and comforts rather than a hotel. They appreciate the privacy and the space and the idea that they have a home away from home.
Short-term rentals can also be found on sites like Airbnb, where someone might stay for only a night or two.
These types of rental properties have become increasingly popular among travelers in recent years. With this option, short-term landlords can command higher daily rates compared to long-term rentals. This is a great option if your main investment goal is to generate more revenue, especially on a per-night and a per-unit basis. You’re thinking less about long-term ROI and more about what you’re earning on your property every night.
Another reason that property owners enjoy short-term rentals is that they’re more flexible. When you can rent out the space for a few days, a week, or even a couple of months, you can also use the property yourself if you need to. Maybe you’re an investor from out-of-state who does come to Santa Rosa from time to time throughout the year. You can make sure your property remains open when you need it.
Short-term rentals provide more flexibility and higher per-night rental rates. There’s less of a need to establish a great relationship with your tenants because they won’t be thinking about renewing a lease agreement for another year. If you end up with guests who you do not like working with, you know you won’t have to keep them around forever. That can be a huge relief.
There are plenty of benefits. However, short-term rentals also come with some potential downsides. For example, managing a short-term rental requires more work compared to a long-term rental, as you need to handle multiple check-ins, cleanings, and repairs between guests. Furthermore, short-term rentals require you to adhere to local regulations, such as zoning laws, insurance requirements, and occupancy rules. The short-term rental industry is far more regulated now than it was even a few years ago. Be prepared for that.
Short-term rentals can be time consuming if you’re not working with a Santa Rosa property management company. Just keeping the property occupied could be a full-time job. If you have long vacancies, you won’t be making any money. You also have to furnish the property and keep those furnishings maintained. Most of your guests will expect the same type of comforts, linens, and amenities they find in a high-end hotel.
Long-Term Rentals in Santa Rosa: Pros and Cons
Long-term rentals, on the other hand, are more traditional, and you can expect to rent out your property to tenants for at least six months or more. Usually, the lease term with a long-term rental is a year or more. You have a lot of stability for your investment property, and you can spend some time really getting to know your residents. That trust is important, especially when it comes to maintaining your property and following the terms of the lease agreement.
With this option, you can enjoy a steady stream of rental income. You can budget better because you know exactly what you’ll be earning in rent over the term of a year. You’ll also have fewer vacancies, and less turnover compared to short-term rentals. There’s less time and money that needs to be spent when you’re moving from one tenant to another. If you do a good job with tenant retention, you won’t have to turn the property over too frequently. This is a huge money-saver.
Moreover, it’s easier to manage a long-term rental, as you only need to deal with one tenant over the course of a year, and you can develop a long-term relationship with them. There isn’t a constant revolving door of people using your property. You’ll find less deterioration on appliances and systems.
There’s no need to furnish a long-term rental. Your residents will want to move in their own furniture, household items, and linens. There’s no cleaning to manage. Your tenants can be expected to keep the property clean and maintained on their own. It’s their home.
Many Santa Rosa properties are subject to rent control laws, just cause eviction laws, and other mandates that can make long-term rentals more difficult. You also cannot raise your rents any time the market shifts. You have to wait for that renewal period. This is difficult for owners, especially when expenses associated with the property begin to rise.
Legal Considerations in Short-Term vs. Long-Term Rentals
In California, there are different legal considerations that landlords need to account for when they choose between short-term and long-term rentals. If you decide to invest in short-term rentals, you need to get a Short-Term Rental Permit from the city of Santa Rosa. Additionally, short-term rentals require specific permits and licenses that can take a long time to obtain, and you also need to pay transient occupancy taxes. This is compared to long-term rentals, which generally only require you to sign a rental agreement and meet the state’s tenant and landlord laws.
Financial Considerations in Short-Term vs. Long-Term Rentals
When we are talking about financial considerations, the best and most profitable way to rent out your property depends on multiple factors, including:
- Location
- Property type
- Vacancy rates
- Amenities
- Season
- Demand
Generally, we know that short-term rentals can generate more revenue, but they also come with higher expenses, such as utilities, cleaning, advertising, and maintenance, which can eat into your profits. Long-term rentals, on the other hand, are more predictable, and you can expect to have a stable income stream. However, you may need to contend with late rent, potential property damage, and eviction costs, which can be more expensive in the long run.
As we said, there’s no single answer to the question of whether short-term or long-term rentals are better. Each option has its advantages and disadvantages, and there are legal and financial considerations to account for as well. Ultimately, the decision will depend on your goals, your rental property’s unique circumstances, and your available resources.
We recommend that you study the market, consider what you’re hoping to do with your property, and lay out some investment goals that will help you decide whether a short-term rental or a long-term rental is the best way to go.
Our experienced team of property managers would be happy to talk this through with you. We know the market, we know what tenants are looking for, and we understand how your property compares to competing rental homes. Your Santa Rosa property management partner can be a huge asset when it comes to deciding how to manage your rental property.
Please contact us at Prestige Real Estate & Property Management. We manage homes in Sonoma County, including Santa Rosa, Windsor, Sebastopol, Petaluma, and Rohnert Park.
