Rental Formulas: Advantages and Disadvantages

The rental market is rich and complex, offering a variety of options ranging from short-term commitments, ideal for temporary stays, to long-term engagements, which are more stable and predictable.  For second-home owners or prospective rental property investors, grasping
these various options is critical. Selecting the appropriate rental strategy not only enhances financial returns but also reduces the challenges and risks linked to property management.

In this article, we will detail the different rental formulas available on the market. We will discuss the advantages and disadvantages of each option, providing you with precise information and strategic advice to help you optimize your investment. Whether you are already the owner of a second home or considering investing, this article is designed to guide you in navigating rental choices and help you make informed decisions that align your financial goals with your property management needs.

Short-Term Rentals

Short-term rentals, often chosen for vacation or professional stays, are particularly prized for their flexibility. They offer tenants the possibility to stay in a place for a limited period without the constraints of a long-term lease. For owners, these types of rentals represent an
opportunity to maximize income, especially with rates adjustable according to demand, which soar during high season. Specialized companies like GuestReady demonstrate the success that can be achieved in this sector through optimized and professional management.

As a property manager in this sector, optimizing and automating operations is important to maximize time and revenue. For example, the company Guestready automates the management of its keys by using the KeyNest Points service.

Advantages:

 Higher revenues: Prices can be adjusted according to demand, allowing for higher revenue during peak seasons.

 Increased flexibility: Owners can use the property for their own use between bookings, offering unparalleled convenience.

 High seasonal demand: Periods such as school holidays or local events can significantly increase the attractiveness and profitability of the property.

 

Disadvantages:

 Intensive management: The need to manage frequent tenant changes, key handovers, and regular cleaning can increase the workload.

 High maintenance costs: The high frequency of use and rotation of tenants can lead to quicker wear and tear requiring repairs and regular maintenance.

 Irregular income: Outside of high season, revenues can be unpredictable and lower.

 Risk of nuisance: Complaints from neighbors about noise or frequent comings and goings can pose relational and legal problems.

 Dependence on reservation platforms: A strong dependence on platforms like Airbnb can result in significant service fees and affect net revenue margins.

 

Medium-Term Rentals

Medium-term rentals, generally lasting between one and six months, offer an interesting compromise between the flexibility of short-term rentals and the stability of long-term rentals.

This type of rental is ideal for clients such as professionals on temporary assignments, exchange students, or families transitioning between two properties.

Advantages:

 Revenue stability: Unlike short-term rentals, medium-term rentals ensure a more constant revenue flow over several months.

 Reduced management: The frequency of tenant changes is lower than in short-term rentals, which reduces the time and effort required for daily management.

 Usage flexibility: Owners can still plan personal use of the property between two rental periods, although less frequently than in short-term rentals.

 Attractiveness to a professional clientele: These rentals attract professional or academic clients looking for a comfortable stay without the constraint of a long-term lease.

 

Disadvantages:

 Lower revenues compared to short-term rentals: Although more stable, revenues are often lower than what can be obtained with very short-term rentals, especially during high season.

 Increased wear and tear: With longer stays, wear can be more marked than in short-term rentals, potentially requiring more substantial maintenance interventions.

 Contractual complexity: The need to draft contracts that reflect the specific duration of the rental can represent a legal and administrative challenge.

 Less flexibility for rapid price adjustments: Prices are generally set for the duration of the contract, which limits the ability to adjust prices in response to a sudden increase in demand.

Companies like Flex Living and Blueground have illustrated how professional and effective management can transform the challenges of medium-term rentals into lucrative opportunities, by providing tailored services that increase tenant satisfaction and optimize revenues.

Serviced Apartments

Serviced apartments are becoming an increasingly popular housing option, especially in large metropolises. They are designed to offer tenants comfortable stays with a full range of hotel services while providing the space and privacy of an apartment. This solution is ideal
for professionals on the move, families on vacation, or individuals in residential transition who are looking for amenities superior to those of a standard hotel.

Advantages:

 Full amenities: These apartments are generally equipped with quality furniture, a fully functional kitchen, housekeeping services, and often access to facilities such as gyms or swimming pools.

 Home comfort: They offer a more domestic atmosphere, which is particularly appreciated for extended stays.

 Flexibility: Tenants can choose the duration of their stay, which can vary from a few days to several months, without the constraints of a traditional long-term lease.

 High revenue potential: Daily rates are generally higher than those for non-serviced residential rentals, which can generate substantial income for owners.

 

Disadvantages:

 High management costs: Providing hotel services and maintaining quality standards can lead to significant operational costs.

 Dependence on tourism and business travel: Demand can be heavily affected by fluctuations in the tourism market and business travel.

 Significant initial investment: Furnishing and equipping these apartments requires a larger initial investment than for a classic residential rental.

 Specific regulations: In some areas, serviced apartments may be subject to stricter regulations, similar to those of the hotel industry.

Serviced apartments combine the advantages of a private apartment with the luxuries and services of a hotel, offering a flexible and comfortable solution for tenants and an attractive source of revenue for owners. However, they require careful management and a clear
understanding of local market dynamics to maximize their potential.

Underthedoormat and The Square, two leading companies in the serviced apartment sector, have been the subject of case studies by KeyNest, illustrating their success in automating operations and simplifying key management.

Long-Term Rentals

Long-term rentals, generally lasting several months to several years, offer stability and predictability that short or medium-term formulas cannot provide. This type of rental primarily attracts families, professionals committing to a region for a long period, or students pursuing
long-term studies. The advantages of long-term rental are numerous for both tenants and owners.

Advantages:

 Financial stability: Long-term contracts ensure a stable and predictable revenue stream for owners.

 Less daily management: Once the tenant is settled in, daily management and maintenance are generally less frequent and less intensive.

 Durable tenant relationships: Long-term rentals allow for stronger and more stable relationships between owners and tenants.

 Reduced vacancy periods: With longer contracts, periods during which the housing remains vacant are minimized.

Disadvantages:

 Less flexibility to adjust rents: Rents are often set for the duration of the lease, which limits quick adjustments in response to market fluctuations.

 Risk of prolonged non-payment: In case of a tenants financial difficulties, the eviction process can be lengthy and costly.

 Accumulated maintenance: Maintenance issues can arise and accumulate over time, potentially requiring significant repairs.

Specialized companies like Uni Lets and Dromor have effectively exploited the long-term rental market. Uni Lets, for example, focuses on year-round rentals, particularly for students. On the other hand, Dromor distinguishes itself by maximizing the use of properties often
during the summer holidays. KeyNest has also conducted case studies with these two companies and helps them simplify key handovers with tenants and service providers.

In summary, each type of rental—short, medium, or long-term—brings its own advantages and challenges, suited to different profiles of owners and tenants. Effective management, encompassing aspects such as key management and regular maintenance, is crucial for
maximizing profitability and maintaining tenant satisfaction. The use of specialized technologies and services can greatly facilitate these operations, making property management smoother and more profitable.