Long term rentals vs Short Term Rentals on Ibiza

feb 09, 2017

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Are you wondering what would be the best way to go? Offering your property for a long term rental or a short term rental? Both ways have their pros and cons and both offer their own levels of return on investment. If you like to enjoy a steady income, you would probably opt for a long term rental, but a short term rental has the potential to get you a greater return. Moreover, legal matters play a role in making this decision as well. Some properties just can’t be rented out as a matter of fact. Think of apartments and attached properties.

Each property will have its tailored approach, but we can point out some of the general terms which you might not have considered yet. This might help you to decide on the right property investment strategy.

Short term vs. Long Term Property Rentals

Long-term property rental advantages:

  • Enjoy a steady income: Never worry about what your next months’ income will be as your tenant (if it’s a reliable one) pays the rent at every start of the month.
  • Utility Costs: Water and electricity bills can be high. When renting out your property for the longer term on Ibiza, you could shift these costs towards the tenants.
  • Unfurnished: Furnishing is a matter of taste. Long term tenants don’t always require furnished properties. Some even prefer to furnish it themselves. This would save you time, money and effort to create an appealing ambiance.
  • Current demand on the long-term rental market: Looking from the tenant-side it is really hard to get a nice property for a reasonable price. Prices have risen 16% on average in 2016 while short-term rentals haven’t increased that much. This could make your property interesting to rent out for the longer term. It’s worth to review the options each year.

Long term rental disadvantages:

  • Availability: You can’t enter the property when you would like to. Property owners on Ibiza tend to buy to enjoy themselves a bit as well. Renting long-term means that you physically don’t own the property for a longer term.
  • Legal terms: Renting your property for 1 year through a rental contract is a nice way to go, on paper. However, a clever tenant might want you to stick to the legal contract term which requires you to rent it out for 3 years.
  • Contracts: There is more paperwork involved when entering a long term contract. You need to draw up the rental terms, tenant obligations and go through the negotiation process.

Short Term Property Rentals

Short-term rental advantages:

  • Rates: Daily/weekly prices are set according to a number of factors. Where is the property located (very important)? How is the interior/exterior styling and quality? Number of bed- and bathrooms? All these variables have a huge effect on the potential rental income and occupancy that you could enjoy. Having the right property in a sought-after location with good pictures could earn you a good return.
  • Flexibility: Occupancy and bookings can be managed in a way that the property owner can enjoy the property as well without having to deal with long-term tenants.
  • Property Management Specialist: Short-term rental management takes a lot more time. You could outsource this to a specialist. This would save you time on marketing, administration, cleaning/laundry, check-in/out reports and taking care of any concierge type of services when the guests are there.

 

 

Short-term rental disadvantages:

  • Apartments: Although the local government is working on a new law to approve short-term rentals in apartments it is still not possible in any way to rent out. At the moment, stay away from renting any apartments or attached houses.
  • Styling & Decoration: Little (styling) improvements could earn you more money on your rentals, but you would need to do these investments upfront. Whilst long-term rental tenants tend to agree to outdated furniture, short term tenants would skip yours and move on to the next one.
  • Furniture: As a matter of fact, your property will show signs of tear and wear a bit faster than you would rent it out for the longer term. For example; the lifetime of your sofa could reduce from 5 to 3 years.

 

 

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