Airbnb vs. Renting: Which Option is More Profitable for Landlords and Property Investors In Pune?

Airbnb vs. Renting: Which Option is More Profitable for Landlords and Property Investors? Studio KHBS's take on the same.

Please remember the following information for Airbnb Pune: A typical short-term rental listing like Airbnb Pune is booked for 179 nights a year, with a median occupancy rate of 49% and an average daily rate of INR 2,253. In Pune, a typical host's annual revenue was INR410K in 2023. As of 2024-04-15, there are 1,226 active Airbnb listings.

A 49% median occupancy rate is considered a challenging market for Airbnb. While some hosts are making a really good income, year-round bookings may be a struggle. We recommend further research on this market by Studio KHBS.

When making property investments, it is important to allocate your funds wisely to ensure a profitable outcome. The real estate market can be challenging. If you are considering leasing your property, you may be deliberating between a short-term holiday rental or a traditional long-term residential lease. Various aspects should be considered when making this choice, and this article aims to assist you in your decision-making process.

• The distinction between short-term and long-term rentals.

• Airbnb versus Renting: Pros and Cons
  

• Airbnb versus Renting: Advantages of a long-term let

• Airbnb vs Renting: Which should you choose?

The distinction between short-term and long-term rentals.

Short-term rentals usually cater to tourists who rent properties for brief durations, ranging from a few days to a couple of weeks or even three months. Services like Airbnb collect fees from property owners for listing and promoting their properties to a global audience.

Long-term rentals, in contrast, are leased for a minimum of six months. Landlords usually use Rightmove to attract long-term tenants, establish a formal tenancy agreement, and receive monthly rental payments.

Airbnb versus Renting: Pros and Cons

Short-term rentals, such as holiday lets, can be highly profitable due to their ability to command significantly higher rates in comparison with long-term leases. Certain properties can generate in a week what they would typically earn in a month from a long-term rental, particularly if they are located in a sought-after tourist destination. However, the success of holiday lets is closely tied to the fluctuations in tourist seasons.

There is a strong demand for short-term rentals not only from vacationers but also from remote workers and individuals seeking a more leisurely experience during business trips. With a constantly rotating tenant base, there is the opportunity to constantly interact with new people. This setup offers great flexibility as tenants can easily extend their stay, there is no need for formal notice periods, and the property can be utilized by the owner, their friends, or family whenever desired.

• Void periods

Nevertheless, this flexibility also brings the risk of void periods. The pandemic has demonstrated that unexpected circumstances could result in extended periods without income, especially for properties dependent on seasonal tourism. Depending solely on your rental income as our main source of revenue may pose a significant risk.

Cancellations can also pose a problem. If your upcoming guests cancel at the last minute, it is unlikely that someone else will book on such short notice, resulting in a loss of income for you.

• Hosting and maintenance

Due to the frequent arrival of numerous guests each week, your property will experience additional wear and tear. As a result, maintenance expenses may rise, and if you are responsible for managing the property, ensuring its cleanliness and upkeep can become a time-consuming duty.

Being an Airbnb host requires dedicating time to communicating with guests, providing property location information, and giving them the keys. It is important to be responsive to their inquiries promptly. Although Airbnb and similar platforms offer some protection, any potential claims or losses ultimately depend on the discretion of Airbnb (or the rental platform), which may not always be in your favor.

Airbnb versus Renting: Advantages of a long-term let

Long-term rentals typically involve less management compared to short-term holiday lets. Although there may be more tasks to complete before the tenant moves in, they will likely to stay for an extended period, possibly several years.

After securing a tenant and handling the necessary paperwork (such as referencing, agreements, and deposit security), your visits to the property will mainly be for routine inspections or maintenance purposes. Landlords commonly conduct an inventory at the beginning of the tenancy and perform a mid-term check around six months later to monitor the property's condition.

Your tenant might contact you about maintenance or emergencies, but it is your decision on how to proceed. Many landlords prefer to handle maintenance tasks on their own, especially if they are nearby and have connections in the industry or are skilled themselves. Alternatively, some opt to delegate maintenance responsibilities to an agent, though this typically comes at a higher cost than managing it independently.

• Find the right tenant

A major benefit of opting for a long-term rental instead of a holiday let is the opportunity to carefully vet potential tenants and choose the most suitable individuals to occupy your property. During property viewings, you can personally interact with prospective tenants and assess if they are a good match for your rental space.

Tenant referencing includes credit and employment checks, along with a reference from their former landlord, to ensure that your tenant has a positive rental history and is financially capable of paying the rent.

• A consistent income

Opting for a long-term rental offers increased financial security and a steady source of income. This can facilitate annual tax preparation and simplify budgeting by providing a predictable monthly income.

Similar to Airbnb, there may be periods of vacancy, but the level of risk is significantly lower. Opting for a long-term rental with a reliable tenant can be a less time-consuming way to generate income.

Naturally, there will be maintenance and safety expenses to cover over time, and the possibility of rent default, but having rent protection in place offers a financial safety cushion.

While tenants won't stay in your property indefinitely, the turnover rate will be much lower compared to a vacation rental. By effectively promoting your property and ensuring proper upkeep, you might increase your rental income and enhance your return on investment even more. 

Airbnb vs Renting: Which should you choose?

The benefits of short and long-term lets depend on a range of factors. Location, costs, maintenance, and flexibility are just a few of the things to consider. If you’re still pondering which is best for you, ask yourself these questions:

• How much free time do you have?

Are you available to get the property ready for new guests every week, or would you prefer a less frequent schedule?

• Where is your property located?

Are you able to maintain the property yourself, or will you require someone to clean, host, and maintain it for you? Is the location frequented by tourists, or is it primarily a residential area?

• What kind of income do you want?

Are you seeking a stable monthly income, or are you able to handle fluctuations based on seasons? Do you enjoy interacting with a variety of individuals and managing multiple payments, or do you prefer a long-term relationship with one person or family?

Airbnb vs renting: Which one’s for you?

Both Airbnb and long-term renting have their advantages and drawbacks, but which one is right for you?

Typically, residential rentals require less time and lower maintenance costs while offering a steady income. The rental market continues to be strong, facilitating tenant acquisition, although vacation rentals undeniably have their charm.

If you're uncertain about the best investment option for you, schedule a complimentary call with our Studio KHBS specialists today.