Short-Term vs Long-Term Rental: Comparing the Numbers
STR gross revenue looks like a different asset class. So does the expense line underneath it.
+61% / −35%
STR gross revenue against STR net operating income, fully managed.
Compare them on NOI, not on revenue
Almost every STR-versus-LTR comparison you will read compares gross revenue, which is the one number where STR always wins and the one number that decides nothing. The honest comparison is NOI — after every operating cost each model actually incurs.
STR revenue = Average daily rate × 365 × Occupancy rate
Occupancy for an STR is a business input, not a vacancy problem. 60–70% is normal and healthy.
The same property, both ways
The $240,000 example: as a long-term rental it lets for $2,100 a month. As a short-term rental it achieves $185 a night at 62% occupancy.
| Long-term rental | Short-term rental (managed) | |
|---|---|---|
| Gross revenue | $25,200 | $41,866 |
| Platform fees (~3%) | — | −$1,256 |
| Vacancy / occupancy | −$1,260 (5%) | Already in the 62% occupancy |
| Effective gross income | $23,940 | $40,610 |
| Property taxes | −$3,000 | −$3,000 |
| Insurance | −$1,400 | −$2,400 (STR policy) |
| Management | −$2,016 (8%) | −$8,373 (20%) |
| Maintenance | −$1,260 (5%) | −$3,349 (8%) |
| CapEx reserve | −$1,260 (5%) | −$3,349 (8%) |
| Utilities and internet | — | −$4,680 |
| Furnishing amortisation ($25,000 ÷ 7 yr) | — | −$3,571 |
| Supplies and consumables | — | −$1,250 |
| Licensing, software, lockbox | — | −$900 |
| NOI | $15,004 | $9,738 |
61% more revenue, 35% less NOI
Where STR actually wins
Remove the management line — self-manage — and the same STR produces $18,111 of NOI, against $15,004 for the long-term rental. That is a 21% advantage, and it is the real STR case.
But notice what you agreed to: guest communication, dynamic pricing, cleaner scheduling, restocking, review management and same-day problem solving, roughly 8–12 hours a week. At the $8,373 you saved, that is around $15 an hour. Whether that is a good trade is a personal question — but it should be an explicit one, not a hidden assumption inside a spreadsheet. The same logic applies to self-managing a long-term rental, just at three times the intensity.
The risks are different in kind, not just degree
| Risk | Long-term | Short-term |
|---|---|---|
| Revenue volatility | One lease, known for 12 months | Nightly. Seasonality can swing quarterly revenue by 50% |
| Regulatory risk | Low — rent regulation in some cities | High. Permit caps, primary-residence rules and outright bans, sometimes enacted in months |
| Competition | Slow to change | New supply can appear in a single season and reset local rates |
| Financing | Standard rental underwriting | Many lenders discount or ignore STR income; some will not lend at all |
| Insurance | Standard landlord policy | Requires a specific STR policy — a standard policy may not cover commercial use |
| Recession behaviour | Resilient — people need housing | Discretionary travel falls first and fastest |
| Exit | Sells to any investor | Sells to a smaller buyer pool, and value may depend on a transferable permit |
Regulation is the risk that cannot be modelled
When each one is right
| Choose long-term when… | Choose short-term when… |
|---|---|
| You want a passive asset | You want a business and will operate it |
| The property is ordinary for its market | The property has a genuine draw — location, view, layout, walkability |
| You are financing conventionally | You have a lender who will underwrite STR income |
| Local regulation is uncertain | Regulation is settled and you hold or can get a permit |
| You need predictable DSCR for the lender | You have reserves to absorb a 50% seasonal swing |
| You live far away | You live nearby or have a reliable local team |
Whatever you choose, run the long-term numbers first in the free calculator. They are your floor — the return the property produces if the short-term business stops working — and a floor you can accept is what makes the upside case safe to take. See also why STR expense ratios run 55–75%.
Frequently asked questions
Is a short-term rental more profitable than a long-term rental?
Gross revenue is typically 50 to 100% higher, but the operating costs are much higher too — 20 to 25% management, plus utilities, internet, furnishings, supplies and specialty insurance. Professionally managed, a short-term rental can produce less NOI than the same property let long-term. Self-managed, it usually produces meaningfully more.
What occupancy rate should I assume for a short-term rental?
Around 60 to 70% is typical for a well-run listing in an established market, and it is not comparable to a long-term vacancy rate. Use local data for comparable listings rather than a national average, and stress-test at ten points lower before buying.
How much does short-term rental management cost?
Full-service short-term rental management generally runs 20 to 25% of gross revenue, compared with 8 to 12% for long-term management. The higher fee reflects nightly guest communication, dynamic pricing, cleaner coordination and turnover handling.
Can I get a mortgage on a short-term rental?
Yes, but the terms are usually less favourable. Many conventional lenders will not count short-term rental income at all, and DSCR lenders that do often discount it or require a documented operating history. Check with your lender before underwriting a purchase on short-term revenue.