Overview of Long-Term Rentals vs. Short-Term Rentals: Which Is Best for Beginners?
In this BiggerPockets Real Estate Rookie episode, Tony J. Robinson and Ashley Kehr compare short-term rentals (Airbnb-style) vs. long-term rentals for beginner investors by using two real portfolio examples: Tony’s Joshua Tree tiny home short-term rental and Ashley’s small-town New York duplex long-term rental. They break the decision down into the three factors that matter most for rookies: money, work, and risk—plus a major bonus topic: tax strategy.
The Two Deals Compared
Tony’s Short-Term Rental
- Property: 390-square-foot tiny home in Joshua Tree, California
- Purchase price: Just over $300,000
- Initial all-in cash invested: About $50,000–$55,000 including furnishing
- 2025 net cash flow: Just under $12,000
- Approximate cash-on-cash return: Around 20%
Ashley’s Long-Term Rental
- Property: Duplex outside Buffalo, New York
- Purchase price: $37,000
- Financing: Bought with a short-term bank loan, then refinanced
- Appraised value after minor improvements: $55,000
- Outcome: Refi allowed her and her partner to get their money back out and walk away with about $2,000 each
- Cash flow: Modest, roughly a few hundred dollars per month
Money: Cash Flow Is Not the Full Story
Main takeaway
You cannot compare properties based on cash flow alone.
- Tony’s deal produced much higher annual cash flow.
- Ashley’s deal required almost no money left in the deal, so her cash-on-cash return was the more important metric.
- The right question is not “Which makes more money?” but:
- How much money did you put in?
- How much risk are you comfortable with?
- What do you need the deal to do for your life?
Important rookie lesson
Before choosing a strategy, investors should ask:
- Do I need to keep cash liquid?
- Do I need to refinance and pull money back out?
- Am I investing for cash flow, appreciation, or tax benefits?
- How much capital can I realistically commit?
Short-term rental capital needs
Tony emphasized a common rookie mistake:
- Beginners often spend all their capital on acquisition
- Then they don’t have enough left to properly furnish and launch the Airbnb
- A strong short-term rental usually needs money for both:
- Buying the property
- Setting up the guest experience
His rule of thumb: don’t spend more than about 40%–50% of your available cash on acquisition if you want the rest available for setup.
Financing note
Long-term rentals are generally easier to finance because:
- Banks are more familiar with them
- Lease income is easier to underwrite
- Short-term rental financing is still less standardized and not offered by every lender
Work: Short-Term Rentals Take More Active Management
Short-term rentals
Tony explained that a well-run short-term rental can still be manageable, but it is not passive.
Typical workload:
- Guest communication
- Pricing management
- Maintenance coordination
- Cleaning turnover
- Issue resolution
He said that with good systems and automation, a small portfolio may only require 1–2 hours per week on average, but emergencies can create spikes in workload.
Examples of real short-term rental issues:
- Pool pump failing during peak summer season
- Cleaners canceling on a major holiday weekend
Long-term rentals
Ashley said long-term rentals are generally less time-intensive if tenants are already in place.
Typical workload:
- Rent collection
- Lease renewals
- Occasional maintenance requests
- Turnovers and inspections when tenants move out
Turnovers can be more involved, especially in states with stricter landlord-tenant rules, but day-to-day management is usually lighter than short-term rentals.
Bigger pattern
Both hosts stressed that:
- Systems matter
- Property management is increasingly automated
- AI tools and automations are already reducing some of the labor in both models
Risk: Different Problems, Different Stress
Short-term rental risks
Tony highlighted the two biggest fears for many investors:
- Remote management
- Regulatory risk
His approach to reducing regulatory risk:
- Invest in markets that are economically dependent on short-term rentals
- Look for cities where tourism revenue, occupancy taxes, or visitor spending are important to the local economy
- If a market is heavily reliant on STR revenue, it is less likely to ban them outright
He also noted that if a market isn’t a strong STR market, having a backup plan for a midterm or long-term rental can reduce risk.
Long-term rental risks
Ashley’s biggest long-term concerns were:
- Liability and lawsuits
- Major repairs like roofs
- Problem tenants
- Slow evictions, especially in stricter states like New York
Her comfort has improved with:
- Better insurance
- A good attorney
- Strong reserve funds
- Reliable boots-on-the-ground help
Biggest long-term lesson
A vacancy or nonpaying tenant is easier to absorb when you own multiple units, but legal and maintenance issues can still create major stress.
Taxes: The Biggest Advantage for High Earners
This was one of the episode’s strongest arguments in favor of short-term rentals for certain investors.
Why real estate taxes matter
Real estate investors can use depreciation to create paper losses, which can offset taxable income.
Long-term rentals
- Depreciation is available
- Bonus depreciation may apply if you qualify for real estate professional status (REPS)
- REPS is hard to achieve if you have a full-time W-2 job because you need to spend more time in real estate than in your job
Short-term rentals
Tony explained the short-term rental tax loophole:
- If you materially participate, you may be able to use STR losses against W-2 income
- Common thresholds include:
- 500 hours per year, or
- 100 hours if no one else works more than you on the property
Who benefits most
- High-income W-2 earners may get the biggest tax advantage from short-term rentals
- Long-term rentals still offer tax benefits, but usually not the same ability to offset active income unless REPS is in play
Who Should Choose Which Strategy?
Short-term rentals may be better if you:
- Want higher cash flow potential
- Can handle more active management
- Have enough capital to furnish and launch the property properly
- Are concerned about taxes and want to offset W-2 income
- Can choose a strong STR-friendly market
Long-term rentals may be better if you:
- Want a simpler, more established financing path
- Have limited capital and want lower setup costs
- Prefer fewer guest-facing responsibilities
- Want a more traditional, lower-touch rental model
- Are okay with lower immediate cash flow in exchange for simplicity
Final Takeaway
There is no universal winner.
- Short-term rentals can produce more cash flow and major tax advantages, but they usually require more capital, more systems, and more active management.
- Long-term rentals are generally easier to finance and easier to manage, but they may offer lower cash flow and fewer tax advantages for W-2 earners.
The best beginner strategy depends on:
- Your available cash
- Your time commitment
- Your risk tolerance
- Your tax situation
- Your long-term investing goals
The hosts’ core message: don’t build your life around real estate—use real estate to build the life you want.