Short-Term vs. Long-Term Rentals: What’s Best for Your Property in Elk Grove

Just south of Sacramento and close to a lot of the best attractions in north-central California, Elk Grove is a community that attracts visitors and full-time residents. The population has been growing, even while the number of residents across California declines. 

Its high quality of life and low cost of living make it a great place to live. The proximity to California’s capital city and the abundance of outdoor recreation, entertainment, and local wineries make it a desirable place to visit. 

This leads any real estate investor to the natural question of: whether it is better to rent out a property for the long term or the short term.

As expert property managers in Elk Grove, we can provide some insight into this question. The right path for a rental property always depends on the owner’s unique investment goals. That will drive most decisions. However, we can provide a look at why each rental type may or may not work and help you decide what’s best for your investment property in Elk Grove. 

Short-Term Rentals in Elk Grove 

There’s plenty of demand for short-term rentals in Elk Grove. People are looking for long weekends, extended vacations, and even entire seasons that can require a full month’s rental. There are also business travelers and professional stays that are better suited for a private home than a hotel. 

• The Benefit of Flexibility 

Short term rental properties are a benefit to property owners because they provide flexibility. If you’re renting out your own home because you’re leaving the area temporarily, you might want to come back to the property within a year. Knowing that you’ll be able to easily move back into your own property can be a relief, and you’ll also have the opportunity to earn some money while you’re not actually living in that home. In a scenario such as this, short-term renting makes sense. Owners who want to use the home themselves once in a while can also benefit from the short-term option since long-term residents will have a lease in place, and it would be impossible to have them leave in service of the owner’s own purposes.

Short term leases will allow property owners to get the home back when they are ready. Current California law requires that a relocation fee be paid to any long-term residents who are removed from the property while not at fault. Renting out for the short term only protects you from having to pay that relocation fee.  

• Higher Per-Night Rates

Another benefit to renting out property in the short term is that owners can typically charge more for the home if it’s rented for a shorter term. A lot of landlords do really well renting their property out as seasonal rentals or short term stays, and they generate great cash flow. The nightly or weekly rate that’s charged on a short-term rental is often double or even triple what can be charged per night on a long term rental. This can be an important benefit to owners who care more about immediate cash flow and less about long-term ROI and stability for their investment property. 

There are, of course, drawbacks to short-term rentals that rental property owners need to be aware of before pursuing this sort of investment. 

• Constant Turnover

One drawback to renting an Elk Grove property out for a short term is that it requires more work from you. Owners must be responsive to those frequently changing renters. There could be five different guests staying at the property in the course of a single week. There’s also the time required in marketing a short-term rental; you’ll have to locate new tenants and move them in every few days, weeks, or months. You’ll need to handle the rental agreements and make sure the property is in good condition during each turnover. 

The intense ongoing maintenance, cleaning, and care can be a lot. When it’s too much, professional property management is essential. Or, a short term lease might not be best. 

• Vacancy

Vacancy is another concern. While Elk Grove has a high demand for short-term properties, the rental won’t always be occupied, and that can create some instability and revenue loss.

When you take all that vacancy you’re incurring over the long haul, it will add up to a lot of money that you would have saved had you locked in a tenant for a 12-month term. 

• Furnishing a Short-Term Rental in Elk Grove

Owners will do well to think about the amenities and the furniture that they’ll need to provide. Short-term rentals need to be furnished not only with big-ticket items like sofas and beds but also with any amenities and appliances that their guests may need. That includes cooking supplies, linens, coffee makers, tea kettles, and televisions. It’s important to have all the utilities kept on and services like cable and Wi-Fi included.

Long-Term Lease Agreements for Elk Grove Rental Properties

 

Long-term lease agreements in Elk Grove are likely to be for a period of at least one year. Some landlords will approve a tenant for a different term, maybe nine months, 10 months, or 18 months. Whatever the lease term, it’s for more than 30 days, and it’s a structured lease contract that bestows certain rights and responsibilities upon both landlords and tenants. 

Long-term rentals are almost always unfurnished properties, and tenants will usually be expected to set up and maintain their own utility accounts. There’s a lot less turnover throughout the year; you’re renting to one specific tenant or group of tenants. 

As you’re comparing long-term rentals to short-term rentals, be aware of the following benefits to a long-term lease agreement:

• High Demand

Well-maintained homes in desirable locations are in high demand throughout the Elk Grove rental market. The supply is not exactly keeping up with the demand, especially now, when tenants are putting off home purchases until interest rates come down and more residents are moving into the area. There is a healthy pool of qualified renters, which means you can count on consistent profitability. There’s less hustling to find the next renter, as there is with a short-term rental. 

• Stability for Investment Properties

Long-term tenants provide stability for your Elk Grove property. There’s less cleaning that needs to be done, and the wear and tear usually isn’t as intense because instead of a revolving door of guests, you have consistent people in place for a year or longer. 

This doesn’t mean that long-term rentals don’t come with their own set of challenges. These are some of the reasons that investors prefer to stick with short-term properties. 

It starts with earnings. Doing the math can be discouraging with a long-term rental, especially when compared to what a short-term property can potentially earn. There’s not going to be as much money coming in per night. While your monthly rent will be comfortable and predictable, especially as rents are rising, a short term rental can bring in a lot more money per night.

You’re also locked into the lease agreement. If you decide you want to move into the home yourself, but the tenant still has seven months on the lease agreement, you’re going to find that it’s practically impossible. You don’t have the same kind of flexibility.  

Landlord and tenant laws apply to long-term homes as well. California is pretty strict when it comes to tenant protections, and owners need to be prepared to navigate these laws and strict requirements when renting out a home to long-term tenants. There are security deposit limits and requirements. Rent control is in place throughout the entire state for a lot of qualifying properties. There are just cause eviction laws, fair housing standards that need to be met, and habitability requirements. 

Laws Around Short-Term Rentals 

We talked about some of the legal requirements for long-term rental properties. You’ll need to be up to date on all of the landlord/tenant laws, The Tenant Protection Act, and even federal laws like the Fair Housing Act.

Short-term rentals have their own set of legal requirements in Elk Grove, including:

• Permits. A short-term rental permit is required to list and rent a property. The application fee is currently set at $230. 
• Residence. The owner must live in the property for at least six months of the year. 
• Property use. The property cannot be exclusively used for short-term rentals. 
• Rental length. A short-term rental is defined as a stay of less than 30 days. 
• Room rentals. Individual rooms cannot be rented to separate guests. 

The owner of a short-term rental is also responsible for collecting a Transient Occupancy Tax (TOT). Property owners must register their rental and vacant properties with the city. The initial registration fee is $10, and rental registrations must be renewed every three years. 

Short-term rentals in Elk Grove must comply with local safety, noise, and insurance ordinances.

Let’s talk about your specific property and whether it’s better suited for a long-term tenancy or a short-term rental. Please contact us at Key Realty Center.