Isabella Carter
Short-term rentals, also known as vacation rentals, are housing arrangements where tenants rent a property for a temporary period. While there is no universally accepted definition of what constitutes a short-term rental, it typically refers to a furnished home, apartment, or room rented for fewer than 30 consecutive days. In the US, the IRS defines a short-term rental as a rental property where the average stay is fewer than seven days or where the property is used for personal purposes for more than 14 days in a year. Short-term rentals offer tenants the convenience of shorter stays and are perfect for those who want to explore a new city without committing to a long-term lease.
| Characteristics | Values |
|---|---|
| Length of stay | Fewer than 30 consecutive days; fewer than 7 days according to the IRS; up to 6 months |
| Furnishing | Fully furnished |
| Amenities | Washer, dryer, dishwasher, kitchen/kitchenette |
| Lease agreement | No long-term commitment; lenient contracts |
| Occupants | Families, business travellers, remote workers |
| Tax | Subject to local taxes, including transient occupancy taxes (TOTs) |
| Income | Higher nightly income than long-term rentals |
| Regulations | Rules around maximum occupancy, fire safety, and health standards |
| Caps | On the number of tenants allowed to stay at one property and/or in one room |
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Local laws and regulations
The definition of a short-term rental varies across different locations. In the US, it typically refers to a furnished home, apartment, or room rented for fewer than 30 consecutive days. However, this definition is not standardised across the country, and local jurisdictions define what constitutes a short-term rental for a specific area. For instance, in California, cities like San Francisco have implemented strict rules for short-term rentals, such as a cap on rental days per year and the requirement that the rental must be the host's primary residence. Similarly, in London, the 90-day Airbnb rule restricts hosts from renting out entire homes for more than 90 days annually.
Short-term rental hosts are generally required to collect and pay local taxes, including transient occupancy taxes (TOTs), which can vary depending on the city. For instance, in California, TOTs can range from 8% to 15%. Additionally, most short-term rental regulations include rules regarding maximum occupancy, fire safety, and health standards. Many cities and states also impose limits on the number of tenants allowed to stay at one property or in a single room. These regulations are designed to maintain safety and prevent overcrowding.
Another critical aspect of local regulations is zoning laws. Zoning regulations can determine whether a property is permitted to operate as a short-term rental in a specific area. These laws can vary from one location to another, and it is essential for property owners to verify the zoning regulations in their specific area before offering short-term rentals.
Furthermore, local laws may also address the potential impact of short-term rentals on the availability of long-term rental options for permanent residents. In some cases, landlords may convert their properties into short-term rental units, reducing the supply of long-term housing. This can lead to increased rent prices and contribute to housing shortages. Therefore, local regulations may aim to balance the needs of short-term renters and the stability of long-term residents.
When considering short-term rentals, it is crucial to be aware of the legal restrictions and regulations specific to the area. These regulations can vary significantly across different cities, counties, and states, and non-compliance can result in hefty fines. By staying informed about local laws and regulations, property owners and renters can make informed decisions and ensure they abide by the relevant rules governing short-term rentals in their desired locations.
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Rental duration
The duration of a short-term rental can vary depending on the location and the platform through which it is booked. Generally, a short-term rental is considered to be a rental lasting fewer than 30 consecutive days, with some sources stating that anything under six months can be considered short-term. Short-term rentals are typically fully furnished apartments, homes, or rooms rented for short periods of time, often by vacationers, business travellers, or remote workers. They are usually seen as an alternative to hotels, offering more space, privacy, and amenities at a lower cost.
In the United States, the definition of a short-term rental varies between states, but it generally refers to a rental of fewer than 30 days. For example, in California, cities like San Francisco have implemented rules such as a cap on rental days per year, limiting tenants to 90 nights each calendar year. Similarly, London has a 90-day rule that restricts hosts from renting out entire homes for more than 90 days a year.
According to the IRS, a short-term rental is defined as a rental property where the average stay is fewer than seven days, or where the property is used for personal purposes for more than 14 days in a year or more than 10% of the total rental days in a year. This definition is important for property owners seeking tax deductions on rental income.
Short-term rentals offer flexibility and convenience for tenants who want to explore a new city, relocate, or travel for business or pleasure without committing to a long-term lease. They are also ideal for landlords who want to generate higher income, market their properties effectively, and benefit from tax advantages. However, short-term rentals can be more expensive for tenants due to higher nightly rates, and they may face legal restrictions in certain locations.
In contrast, long-term rentals are typically defined as leases of at least 90 days, with some landlords requiring a minimum of 180 days or a full calendar year. These rentals cater to tenants seeking stable, affordable, and community-oriented living arrangements. Long-term rentals also provide landlords with consistent income and the potential for favourable lease terms and reduced monthly costs compared to short-term rentals.
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Pros and cons
The length of stay that constitutes a short-term rental varies depending on the source and location. In general, a short-term rental is a furnished home, apartment, or room rented for fewer than 30 consecutive days. However, some sources state that anything under six months can be considered a short-term rental, while others suggest that short-term rentals are typically for less than seven days or for a few nights to a couple of weeks.
Pros:
- Short-term rentals offer flexibility and no long-term obligation, making them suitable for those who want to explore a new city or are in between permanent homes.
- They are fully furnished and come with amenities, providing a comfortable and convenient option for travellers or those relocating.
- Short-term rentals can be a good source of income for homeowners, potentially yielding a higher nightly income compared to long-term rentals.
- They provide an alternative to hotels, often at a more reasonable price, and with more space and amenities.
Cons:
- Short-term rentals can be more expensive than long-term rentals due to the cost of preparing the property for each new tenant.
- There may be legal restrictions and regulations regarding short-term rentals in certain locations, such as caps on rental days and requirements for the host to live on-site.
- The proliferation of short-term rentals can impact the availability of long-term housing options for permanent residents and affect the sense of community in an area.
- Short-term rentals may experience higher maintenance and wear and tear due to frequent tenant turnover, which can add to the overall cost and time commitment for landlords and tenants.
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Rental types
When it comes to rental types, there are several options available depending on your needs and preferences. The two main categories are short-term and long-term rentals, each with its unique characteristics and advantages. Let's explore the details of these rental types:
Short-Term Rentals
Short-term rentals are ideal for individuals seeking temporary accommodation, such as vacationers, business travellers, or remote workers. These rentals typically refer to furnished apartments, homes, or rooms rented for a short period, usually less than 30 consecutive days. In some cases, short-term rentals may extend up to a few weeks or even a month. They offer flexibility, convenience, and a home-away-from-home experience with amenities like kitchens, washers, and dryers. Short-term rentals are often fully furnished, saving tenants the hassle of moving or purchasing furniture. Additionally, they provide the opportunity for personal use by owners, such as for family vacations or hosting guests.
Long-Term Rentals
Long-term rentals, on the other hand, cater to tenants seeking a steady and secure living arrangement. These rentals are typically residential properties leased for a significant duration, usually six months or longer. Long-term rental agreements offer stability and a sense of community for tenants. They allow tenants to personalize their living space and establish connections with their neighbours. From a landlord's perspective, long-term rentals provide consistent income and the potential for favourable lease terms and reduced monthly rental costs compared to short-term options.
Extended Stay Rentals
Extended stay rentals are a unique category that bridges the gap between short-term and long-term rentals. These rentals offer tenants the option to stay for as long as needed, providing flexibility and a home-like experience. Extended stay rentals are ideal for individuals who require accommodation for an indefinite period or those transitioning to a new city. They can be more affordable than short-term rentals, as tenants can negotiate favourable lease terms and benefit from reduced costs over time.
Vacation Rentals
Vacation rentals, also known as short-term rentals, are specifically targeted towards individuals on vacation. These rentals can range from a few nights to several weeks in duration and are typically furnished apartments, homes, or rooms. They offer a cost-effective alternative to hotels, providing amenities and a comfortable stay. Vacation rentals are often chosen by homeowners who also wish to use the property themselves, allowing for a balance between personal use and rental income.
Timeshares
Timeshares are a unique form of rental where multiple co-owners share the rights to use a property, typically a unit in a hotel or condo complex. Each co-owner is allotted a specific time period during which they can exclusively use the property. Timeshares offer a cost-effective way to own a vacation home, as the expenses are shared among the co-owners. They provide a luxurious experience and are maintained and inspected after each stay to ensure pristine conditions.
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Rental costs
When it comes to rental costs, short-term rentals (STRs) tend to yield a higher nightly income for landlords than long-term rentals (LTRs). However, STRs also tend to be more expensive for tenants than LTRs. This is because landlords have to spend more time and resources on preparing the property, which may happen several times a year.
In addition, tenants of STRs may be responsible for maintaining the property, which can add to the overall cost and time commitment. STRs are typically furnished and come with amenities such as a kitchen/kitchenette, washer and dryer, and even allow pets. This means there is a higher likelihood of wear and tear, which can increase costs for both landlords and tenants.
Furthermore, local taxes, such as transient occupancy taxes (TOTs), can add to the cost of STRs for landlords. These taxes are similar to those charged to hotels and can range from 8% to 15% depending on the city. For example, in California, cities like San Francisco have implemented strict rules for STR hosts, such as a cap on rental days per year and a requirement that the STR must be the host's primary residence.
While STRs may offer a higher nightly income for landlords, the profitability of these rentals can be impacted by taxes, maintenance costs, and local regulations. On the other hand, LTRs offer landlords a more stable and consistent income stream, and tenants may be able to negotiate favourable lease terms and reduced monthly rental costs.
Overall, the rental costs of STRs and LTRs depend on various factors, including local regulations, demand, and the costs associated with preparing and maintaining the property.
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Frequently asked questions
This depends on the location and local regulations. In the US, a short-term rental is typically considered a stay of fewer than 30 consecutive days. However, this can vary from a few nights to several weeks or even a month. The IRS defines short-term rentals as properties where the average stay is fewer than seven days or where the property is used for personal purposes for more than 14 days in a year.
Short-term rentals can refer to furnished apartments, houses, or even rooms in someone's home. They are often seen as an alternative to hotels, providing a more home-like experience with amenities such as kitchens, washers, and dryers.
The definition of a short-term rental can vary between states and countries. For example, in San Francisco, there is a rule that limits hosts from renting out entire homes for more than 90 days a year. In Australia, short-term rentals have contributed to a rental crisis, leading to concerns from neighbourhood community groups. It's important to check the specific regulations of your desired location.
