For property investors, a big decision is to choose between short-term vs long-term rentals. Both of these strategies offer attractive returns. The best choice is dependent on your long-term goals, risk appetite, and how hands-on you want to be in managing the property.
The decision to go for Airbnb vs buy-to-let is more relevant with platforms like Airbnb’s increasing popularity, particularly in tourism hubs like Cape Town. However, traditional buy-to-let properties are considered a reliable way to build long-term wealth and generate passive rental income.
At IGrow, our investors have options suited to both strategies. Most IGrow developments are set up mainly for secure, long-term rentals.
Understanding short-term rentals
Short-term rentals mean that properties will be rented out for several days, weeks, or months via platforms like Airbnb or Booking.com. This approach works well in tourist hubs and areas where people travel for business.
When you consider short-term rental investment, investors are taken by the opportunity for higher rental rates compared to traditional rentals. During tourist seasons, short-term rentals can provide strong cash flow. This is the case especially in well-situated properties near business hubs, the beach, tertiary institutions, or near fun entertainment.
IGrow properties such as Mzuri Estate (Somerset West), appeals to digital nomads and travelling businesspeople. Mzuri is situated on a beautiful estate with a dam and trails. The estate offers the perfect blend of modern aesthetics, security, convenience and natural beauty, with a world of outdoor adventure on your doorstep. Bask in the views along with exceptional local wineries.
The Kingsley (Mowbray, Cape Town) appeals to tourists and visiting students. The Kingsley has easy access to major freeways, ensuring Cape Town’s hot spots, new Amazon headquarters, and international airport are easy to get to. It is the perfect base for life in the city, whether for students or working professionals. It’s also only 750m away from UCT.
The View (Table View) appeals to tourists. The View is an exclusive new apartment block consisting of 15 modern apartments, found in the popular Sunridge, Table View. It’s only a few minutes’ drive from the iconic Blouberg Beach. Elegant open-plan interiors lead onto generous balconies with superb views. Secure, access-controlled parking, garage, and storage options are available.
These short-term let options are ideal as Airbnb-style accommodation. You can also choose to lease them out long-term, so there is flexibility.
Benefits of short-term rentals
A core advantage of short-term vs long-term rentals is the earning capacity tied to short stays. Investors are able to charge more expensive nightly rates, which can mean better returns during the season.
Other benefits are as follows:
- The investor can use the property personally when needed
- You can adjust pricing
- If your property is in a tourist hub, it’s in high demand
Important regulations for short-term rentals in Cape Town
“The City of Cape Town (CoCT) has proposed new amendments that would classify certain short-term rental properties as commercial if they are used for that purpose more than 50% of the year.” (Source)
“CoCT said that the City’s rates policy requires that commercial property rates be paid for premises used for commercial short-term letting.” (Source)
The City has stated this isn’t a new tax, but an enforcement of the existing rates policy to ensure fairness in the property market. Properties utilised for long-term rentals or infrequent short-term letting aren’t affected by the commercial rate classifications.
Understanding long-term rentals
Long-term rentals imply renting out a property to tenants for longer periods, typically six months or more. This is still a very popular and proven investment strategy within South Africa.
Most of our developments at IGrow are designed for long-term tenants. This offers strong demand, better vacancy rates, and secure rental income. View our long-term let suited properties.
A profitable long-term rental strategy revolves around reliable tenants, rental income growth, and capital appreciation. Investors capitalise on secure monthly income and fewer management responsibilities than short-term rentals.
A key advantage for IGrow investors is IGrow Rentals’ rental management team. Our rental managers handle the daily running of your property. This is inclusive of tenant management, rental collection, property inspections, maintenance organisation, and overall support. Our investors can enjoy a more hands-off property journey.
Benefits of long-term rentals
A sound long-term rental strategy is built on stability and growth. Your tenants will be staying longer, meaning secure cash flow and lower operating costs.
Perks include:
- Consistent monthly passive rental income
- Less tenant turnover
- Property management falls on IGrow’s Rental Management team
- Occupancy levels will be more stable
For an investor choosing between Airbnb vs buy-to-let, traditional buy-to-let is commonly the preferred option because it offers passive rental income. Long-term rentals help wealth-generation goals. Investors can pay off their bond over time (as contributed to via rental income), and their property will appreciate in value.
Which is the best strategy?
The answer lies in your investment goals. Both strategies have key advantages.
If you are seeking the following, short-term rentals may be the best route for you:
- Higher potential returns
- Flexibility
- Access to tourism markets
If you prefer the following, long-term rentals may be best:
- Secure passive monthly rental income
- Less management demands
- Long-term wealth generation
When looking into short-term vs long-term rentals, the suburb plays a key role. Investment properties in tourist and business hubs may work well as short-term rentals, while high-demand nodes with strong tenant demand suit to long-term lets. At IGrow, we offer both approaches. Most of our developments offer dependable long-term tenants. Mzuri Estate, The Kingsley and The View are suited to short-term rentals.
Conclusion
Choosing between short-term vs long-term rentals doesn’t have a one-size-fits-all solution. Both models work well for investors to generate income when the right investment strategy accompanies their goals.
IGrow investors must consider their financial goals, the time they have available, management preferences, and risk appetite. This is before they decide between short-term rental investment options or a more traditional long-term rental strategy.
Contact an IGrow property investment strategist today, and let’s align your property investment strategy with your goals.
