Long term or short term rent? Which one should I choose?
Everybody says, that short term rent gives you a better revenue than a long term rent. Well, I guess it's true, but it takes hell a lot of time to manage everything. So much, that while having just 2 rooms for rent I was able to get my first free weekend this summer. OK, maybe there was one more, now that I think of it.
So I will do some calculations to find the answer. Unfortunately I don't have data for the whole year, as I started in January. But If we take a look at the first 7 months of the year, we will see that even though summer months generated quite nice income (red column), during the winter months I had to pay from my pocket, as heating is quite expensive.
So if I divide the money I earned (this is what's left after expenses were taken off) it would be 1,34K/7months = 191,1 € per month.
To be more precise I should mention, that one of the rooms was opened for rent two months later, in March. So taking in consideration, that occupation rate for the other room was around 60% (20 days) and the pink room usually has less visitors as the night price is higher (16€) we can do a prediction, that it would have been occupied 15 days a month. That would add additional 15days x 2months x 16€ = 480 € to my total income (expenses remain the same, as taxes and other things are the same for the whole apartment). So it would be 1817€/7 = 260 € per month.
Now let's try to calculate the revenue for the long term rent. As January is not be best month to start the rent, let's work on pessimistic option. So it would be 200€ for the room per month. For 2 rooms it would be 400 € per month. Let's minus 185 € of the expenses I have to cover (loan and taxes for the country) and it will be 400€ - 185€ = 215 € per month. Or 215€ x 7months = 1505 € for the first 7 months of the year.
That's a 1817€ - 1505€ = 302 € difference. Not so big. And at the moment I do all the cleaning by myself. If I would want to hire somebody to do that, it would cost around 15€ per visit and that would add 70visits x 15€ = 1050 € to my expenses. And that would make short term rent not profitable at all, as I would collect only 1817€-1050€ = 767 € per this 7 months time period or mere 63 € per month. But that's another story.
Now let's do some more calculations. The best month to start the rent is September, as many students are coming to study and looking for a place to stay. So we can charge 450 € - 500 € per month for both rooms. In that case monthly revenue would be 265 € - 315 € And from here on it's the same or even bigger than my short term rent I'm doing right now. That is just crazy...
Maybe my AirBnB night price is too low? If I take a look at the occupation rate, it's 65% for the gray studio and 59% for the pink one:
And I think it would be even lower, if I would make a higher price. Or I can decrease the winter time price and increase the summer price, but as winter is quite long, result most likely would be very similar.
So in my case starting September I will switch to long term rent. Less trouble and more money.
P.S. At the end of September I will do my 1 year investment overview, I guess I will mention how it went with long term rent for me.