Short-term rentals: Should you let your property?

Article summary

• Short-term rentals will always be a strong investment in a country with high tourism rates.
• Short-term rentals require more maintenance but provide higher income.
• Short-term rentals are more flexible as renters come and go frequently.

Property investors have a number of variables to take into account when looking at properties to purchase. You need to have a strategy, and one important element of that is whether you intend to rent out the property long-term or short-term.

Each has completely different requirements. Here’s an overview.

Short-term rentals: Always a good investment in South Africa

South Africa (and especially Cape Town) is a tourist hotspot, so short-term rentals are always a viable option.

This is especially the case in the post-pandemic period as pent-up demand from international investors is being unleashed.

There are some important factors investors need to take into account that make short-term rentals distinct from long-term rentals.

For example:

• Location: With long-term rentals, you can look at more affordable areas, but with short-term rentals, there’s no point if they’re not in tourist-friendly locations. This means they might be a bit pricier.
• Marketing: Long-term rentals are usually marketed through estate agencies, but with short-term rentals, it makes more sense to market them through Airbnb or bookings.com.
• Rental costs: With long-term rentals, it makes sense to invest in affordable accommodation, for example, aimed at students. Not the case with short-term rentals, where you’ll need to charge higher rates to make good on your investment. So you’ll be targeting a narrow market, mainly international property seekers.

The advantages of short-term rentals

• Flexibility: Renters come and go frequently, providing you with plenty of windows of opportunity to perform maintenance or renovations, or even occupy the property yourself.
• Higher income: You can charge higher prices as you’ll be targeting tourists willing to spend more money since it will be a short-term. You can also boost your income by charging higher rates during peak tourist season.
• More reliable tenants: You won’t have to worry about unruly tenants who fail to maintain the property and keep missing rent.

Disadvantages of short-term rentals:

• More maintenance: You have to ensure the property is in perfect condition for each new tenant.
• Furnishing the property: You have to kit it out with creature comforts such as DSTV, internet, furniture, and kitchen appliances.
• Occupancy: You may go for long periods without occupancy, especially when tourism slows down.

In summation: Short-term rental is a strong investment

As with any form of property investment, it depends on your strategy, but short-term rentals will always be a strong option in a country with high tourism rates.