[ITEM 3] QUESTION: Rental investments: short-term or long-term rent — what to choose?

The choice between short-term and long-term rental is a key decision for an investor, significantly affecting the level of income, labor costs, and property wear and tear. To make an informed decision, it is necessary to calculate in detail the baseline scenario for both options, as well as to compose a stress scenario taking into account possible crisis phenomena in the market. This approach will help understand which format will bring maximum profit in your specific case and what difficulties you will have to face.

With long-term renting, you get a stable monthly income with minimal involvement in the tenants' lives, but the overall yield is usually lower, and flexibility in price management is limited by the term of the agreement. Short-term renting can bring one and a half to two times more money, however, it requires constant control, regular cleaning, frequent linen changes, and prompt resolution of guests' domestic problems. In addition, with short-term renting, the wear and tear of furniture, appliances, and finishes happens much faster, which entails frequent cosmetic repairs.

To minimize financial risks, be sure to include a safety cushion in your project budget amounting to ten to twenty percent of the planned revenue. This amount will cover unforeseen expenses for urgent repairs, the purchase of a new washing machine to replace a broken one, or compensation for losses during an unexpected apartment vacancy. This margin of safety will allow you to feel confident in any situation and not rush into choosing dubious tenants for the sake of momentary profit.

Decide in advance which expenses or investment contributions you will cut first in the event of a sharp deterioration in the economic situation or a drop in tourist flow. For example, you can temporarily abandon hiring a management company and take on cleaning and check-ins yourself, or transfer the short-term property to long-term lease for several months. A clear action plan in case of force majeure will protect your investments from panic and help maintain business profitability in the long run.