Short-term vs long-term rentals: which is more profitable
A guest cancels on a Tuesday. You lose $340. That same week, a tenant in your long-term unit pays rent like clockwork, and you barely think about the property. If you've ever stared at those two numbers and wondered which model actually wins, you're asking the right question — and most of the answers online skip the parts that matter.
The honest answer: short-term rentals usually generate more gross revenue, but "more profitable" depends entirely on your market, your costs, and how much regulation eats into your margins. I've run both models, and I've watched the "2-3x revenue" claim collapse the moment you subtract platform fees, cleaning, and vacancy.
Key Takeaways
- Short-term rentals typically earn 2 to 3 times the gross revenue of a long-term lease on the same property.
- After operating costs — platform commissions, cleaning, supplies, insurance, management — the net gap narrows to roughly 30 to 50% more, not triple.
- You need an occupancy rate of 60 to 70% at a solid nightly rate before short-term beats long-term.
- Local rules (night caps, licences, banned zones) can kill the short-term model overnight.
- Long-term wins on time invested, predictability, and lower risk — that's real money, even if it never shows on a spreadsheet.
The revenue illusion: why "2-3x" is misleading
Almost every comparison starts and ends with gross income. That's lazy, and it's where most new hosts get burned. The gross number is real — but it's the start of the calculation, not the finish line.
What a short-term rental actually costs you
Here's the part the platforms gloss over. A short-term unit carries costs a long-term lease simply doesn't:
- Platform commission — usually 15 to 20% of every booking, taken off the top.
- Cleaning between guests, whether you do it or pay someone — and it happens far more often than a tenant turnover.
- Consumables: toilet paper, coffee, soap, towels that walk away.
- Short-term rental insurance, which costs more than a standard landlord policy.
- Furnishing the place. A long-term unit can be rented nearly empty; a short-term one has to look good in photos.
- Management or concierge fees if you're not local — often 20 to 25% of revenue.
Add those up and the "2-3x" evaporates fast. In my own first short-term unit, gross revenue was roughly 2.6 times what the same flat would have earned on a twelve-month lease. After commissions, cleaning, and higher insurance, the net was only about 1.4 times — and that was before I counted my own time.
Which brings up an obvious problem: time is a cost too, even when it doesn't appear on an invoice.
How to run the numbers properly
Forget revenue. Compare net operating income — what's left after every expense except the mortgage — on the exact same property. That's the only comparison that means anything.
The occupancy threshold nobody mentions
Short-term only wins above a certain occupancy level. Below it, you're working harder for less. In most mid-size markets, you need to sustain roughly 60 to 70% occupancy at a healthy nightly rate to beat a long-term lease after costs. Drop to 45%, and the long-term model starts looking like a relief.
Seasonality is the trap. A coastal unit might run at 85% in summer and 30% in January. Averaged out, that's fine — but you have to survive the empty months, and the mortgage doesn't care about your calendar.
| Factor | Short-term | Long-term |
|---|---|---|
| Gross revenue | High (often 2-3x) | Lower, stable |
| Operating costs | Heavy | Light |
| Time required | Constant | Minimal |
| Vacancy risk | Weekly | Yearly |
| Regulation exposure | High | Low |
| Cash flow predictability | Erratic | Reliable |
What is the 2% rule in rentals?
The 2% rule is a quick screening test: the monthly rent should equal at least 2% of the property's purchase price. A $200,000 property would need $4,000 a month in rent to pass.
In practice, almost no market meets that today — it's a relic of cheaper eras and higher-rate environments. Treat it as a rough filter, not a verdict, and note that it was built for long-term leases. It says nothing about nightly rates.
What is the 7% rule for rental property?
The 7% rule estimates annual maintenance and repairs at roughly 7% of the property's value. On a $300,000 house, that's about $21,000 a year set aside. It's aggressive, and most owners spend less — but short-term units wear out faster. More guests, more turnover, more things breaking. If anything, the 7% figure fits short-term better than long-term.
Which model actually wins, by situation
The right answer changes with your circumstances, not with a generic rule. Here's how I'd break it down.
Short-term wins when…
- You're in a high-demand tourist or business area with strong year-round bookings.
- You can self-manage, or the numbers still work after a 20% management fee.
- Local rules are permissive and unlikely to tighten soon.
- You want to use the property yourself part of the year.
Long-term wins when…
- Regulation caps nights or requires licences you can't get.
- You value quiet, predictable income over chasing bookings.
- The market is oversupplied with short-term units, pushing rates down.
- Your time is worth more than the extra net income.
In my second property, I chose long-term deliberately. The short-term net would have been maybe $400 a month higher — but it would have cost me a weekend every month in admin and guest messages. I valued my weekends at more than $400.
Do short-term rentals make more money than long-term rentals?
On gross revenue, yes — almost always. On net profit after all costs and your own time, only sometimes. The gap that survives real expenses is usually modest, and in heavily regulated or oversupplied markets it can disappear entirely.
What is the most profitable thing to rent out?
Not a single property type — a mid-term rental often beats both extremes. Furnished units rented for 30 to 90 days to travelling professionals, medical staff, or relocating families sidestep the nightly churn of short-term and the low yields of long-term. You get higher rates than a yearly lease without the constant turnover.
I switched one unit to mid-term in the off-season and it filled the gap that used to bleed cash in winter. No guest check-ins at midnight, no nightly cleaning. Just a tenant who stays eight weeks and pays upfront.
The regulatory risk nobody prices in
This is the factor that sinks more short-term plans than any spreadsheet error. Cities across Europe and North America have capped short-term lets at 90 or 120 nights a year, required licences, or banned them outright in certain districts. If your city changes the rules, your entire model can be invalidated between one renewal and the next — and you can't appeal to a market trend.
Before you buy anything for short-term use, check the current ordinance. Not a blog post about it. The actual municipal code.
So which should you choose?
If you want maximum income and you're willing to treat it like a part-time job in a market that allows it, short-term can win. If you want to own property without it owning your evenings, long-term — or mid-term — is the smarter bet, and the difference in net profit is often smaller than the headlines suggest.
The one thing I'd tell anyone starting out: run the net numbers on your specific property before you buy a single set of towels. The revenue figure is the easiest number to find and the least useful one to trust. What actually decides your profitability is the cost you forgot to count — and, more often than not, that cost is your own time.
