So, should I rent out my ADU short-term or long-term? This is a common question that many ADU owners find themselves asking when looking to rent out their units.
First off, choosing to rent out your accessory dwelling unit (ADU) can be a great decision. If you do it properly, you may be able to earn a consistent rental income for many years to come.
But which option is the best for you? Well, that’s what we aim to answer. Here’s everything you need to know in regards to whether to go long-term or short-term.
1. Tenancy Laws
When renting out a short-term rental, there are many rules and regulations you’ll have to abide by. Cities are always trying to pass new laws in order to minimize the number of vacation rentals, especially when a beach is nearby.
Some cities, such as Coronado and Carlsbad, already have restrictions on vacation rentals, and the same is beginning to happen in San Diego. As a result, this means you might need to rent out your ADU long-term.
In addition, in some cities like San Diego, there are restrictions on the length of tenancy as well. You cannot rent out your ADU for less than 30 days. This can make it difficult for you to use your rental unit for anything other than a long-term rental.
Long-term rentals also do have their fair share of rules and regulations that landlords must abide by. They include:
Fair Housing Regulations. This requires landlords to treat all tenants fairly and equally regardless of their race, color, disability, religion, familial status, and national origin. In addition, legal protection is offered to those discriminated against based on their sexual orientation, gender identity and gender expression, marital status, medical condition, ancestry, source of income, age, genetic information, and arbitrary discrimination
Warranty of Habitability. Landlords are required to provide a home that meets all safety, health, and building codes
Privacy Laws. All tenants are entitled to enjoy their rented homes in peace and quiet. Most privacy laws require that landlords provide their tenants with “reasonable notice” prior to accessing their tenant’s rented unit
Security Deposit Rules. In California, you’re limited in how much of a security deposit you can ask from your tenant. It also depends on whether the unit you’re offering is furnished or not
If you have no previous experience being a landlord, hiring a property manager may be in your best interest in order to properly navigate the legal landscape.
2. Consistency of Rental Income
Rental income is inarguably the #1 reason why investors choose to rent out their homes. A consistent rental income can help you diversify your income streams, as well as help you build wealth.
When it comes to long-term rentals, it’s fairly simple to get traction when it comes to leasing them. You can post a rental ad on sites like Zillow and start getting interested applications almost immediately if your property is rent-ready and priced correctly. This is especially true in a city like San Diego, where rental demand is usually sky-high.
Renting a short-term property, on the contrary, requires some sort of rapport. When a person searches for a rental on a site like Airbnb, they tend to look for homes that have rave reviews. Building this rapport can be anything but easy. You’ll need to get a multitude of great reviews to ensure you get consistent vacationers coming to rent your home. Also, you’ll need to work hard to ensure you maintain great star ratings.
3. Communication Frequency
This is also something you’ll need to consider when it comes to choosing between long-term and short-term rentals.
When renting out a long-term rental, you don’t have to communicate with your tenants as often. Usually, you’ll only need to communicate when the tenancy starts, when maintenance is required, and when the tenant is moving out.
Also, a lease usually runs for a year, so you won’t have to worry about repeating the communication process again and again over a short span of time.
The same cannot, however, be said of short-term rentals. If you list your vacation rental on a site like Airbnb, you’ll need to keep in constant communication with prospective renters.
Additionally, Airbnbs usually need more coordination due to the high renter turnover rate. From time to time, you’ll need to be in constant communication with interested renters. What’s more, even during the renters’ stay, you’ll also have to keep up with inquiries and address problems.
4. Rental Demand
If you live in San Diego, then you’ve probably heard about the city’s housing crisis. Many people want to live there, but there aren’t nearly enough homes to accommodate them. Luckily for you, you may be able to take advantage of this by renting out your ADU.
By renting out your ADU, you’ll be providing renters with a more affordable alternative to an otherwise costly apartment. Young professionals and couples are usually on the hunt for small units. So, by renting out your unit, you may be able to earn a rental income, and you may help ease their struggles as well.
With these factors in mind, should you go for a long-term or a short-term rental? As with many things in life, there is no straightforward answer. The option to go for depends on your investment goals.
If you want some flexibility and control of the availability of your ADU, then go for short-term tenants. But if you’re looking for fewer seasonal fluctuations and more consistency, then long-term tenants are advisable.
Either way, you’ll need to ensure your property is properly managed in order for it to be successful. If you’re just starting out, North County Property Group can help. We can manage your long-term or short-term rental reliably and professionally. Get in touch with us today to get started!