Short-term rental, long-term rental or a combination of both. What is the most financially profitable

The real estate industry is currently doing very well. Demand for short-term and long-term rentals is not decreasing. Students prefer to live close to their university rather than commute to classes every day from their family home. Young people want to become independent of their parents and live on their own. Transportation is so well developed that you can easily pop away for a week-long vacation or a weekend, even to the other end of the country. Meanwhile, more and more employees on business trips prefer to rent a small apartment rather than stay in a hotel.

So if you own an unoccupied apartment, you can decide to rent it out. The monthly profit will be additional income. Real estate is a good investment, which is why many people who have all or part of the capital decide to buy an apartment in order to rent it out. Even when taking out a mortgage to buy an apartment, the owner will easily cover the cost of the monthly installment from the rent.

Short-term rental

It is the most popular, as apartments are rented by the night to tourists and people on business trips. Short-term rental has the greatest chance of profit if the apartment has a high standard of finish and is located in the center of large regional capitals, e.g. Wrocław, Kraków or Warsaw, or in places with great tourist appeal, e.g. by the sea, by a lake or in the mountains. This form of rental offers a much better chance of higher profit, but it requires an investment of both time and money. It also involves risk. After the tourist season there may be far fewer guests, so it may turn out that sometimes you only manage to cover your costs.

Long-term rental

The owner can rent the apartment to a couple, a married couple or a family for a period of at least a year. In addition, in cities with universities, you can rent the apartment to students, also for a period of at least a year. Long-term rental is more profitable than short-term rental if the apartment is of an average standard, is located in a student city, on the outskirts of a city, or in a small town without much tourist appeal. This form of rental won’t bring big earnings, but it allows you to receive a steady, reliable income without much effort on the owner’s part.

MIX – or how about mixing different forms of rental?

Mixing the two forms of rental is becoming increasingly popular. This is possible if you own an apartment in a city that is attractive to tourists but also has universities. The academic year runs from October to June. Many students look for a rental only for this period, because during the summer break they go back to their family home or go abroad to work. So you can sign an agreement for 9 months and, in July, August and September, rent out the apartment by the night as a vacation rental.

The advantages of this solution are a reliable, steady monthly income with a chance of additional profits during the summer. In addition, students who don’t have to pay rent for the 3 summer months would probably be happy to rent the apartment for the next academic year. When planning a mixed rental model, however, you would need to provide a higher standard of furnishings in the apartment. To avoid problems, though, you would need to choose quiet students who would take care of the apartment for 9 months and not cause any damage.

Which type of rental is the most profitable?

Let’s assume that Mr. X owns an apartment in the center of Wrocław. It has 50 m2 and consists of two rooms (20 m2 and 13 m2), a separate kitchen (9 m2), a bathroom (4 m2) and a hallway (4 m2).

• Short-term rental

The apartment should be fully equipped with furniture, home appliances and electronics, tableware, bed linen, towels, etc. Decorative elements must not be forgotten either. For short-term rental, the apartment should be of a high standard. It’s worth refreshing the look of the apartment once a year by repainting it or slightly changing the accessories.

The price for renting the apartment per night is PLN 200 gross. In the warm months (spring, summer, early fall) and around holidays and days off, you can count on high occupancy. However, in months such as October, November, January, February and March, interest in short-term rental may be lower.

You can assume that for 7 months of the year the apartment will be rented for at least 20 days a month, which multiplied by PLN 200 gross gives monthly earnings of PLN 4,000. After deducting the cost of the building maintenance fee (PLN 600) and other operating charges (PLN 300), PLN 3,100 a month remains.

During the 5 less attractive months of the year, you can count on rentals of about 10 days a month. Multiplying them by PLN 200 gross gives a monthly profit of PLN 2,000 gross. After deducting the cost of the maintenance fee (PLN 600) and other charges (PLN 200), PLN 1,200 a month remains.

The annual profit is: 7*PLN 3,100 + 5*PLN 1,200 = PLN 27,700 gross. However, keep in mind that the owner has to devote time and money to this type of rental.

• Long-term rental

The apartment should be equipped only with basic furniture and home appliances such as a fridge or an oven, plus basic tableware and pots. It’s enough for the apartment to be tidy – there is no need to equip it with a TV, a microwave or trendy accessories. A renovation is necessary once every few years.

The agreement is signed for a year. The total price is PLN 2,300 gross per month. About PLN 600 of maintenance fees must be deducted from this. Other charges, depending on usage, are paid by the tenant. Monthly earnings are PLN 1,700 gross. In this case the annual profit is PLN 20,400 gross, with a small annual investment of money and time by the owner.

• MIX

The apartment should be fully equipped with furniture, home appliances and electronics, tableware and decorative accessories. Bed linen and towels can be provided only for the summer period of short-term rental. After the 9-month rental, the apartment would need a thorough cleaning and the walls repainted.

The calculations above show that 9 months of long-term rental from October to June will yield earnings of PLN 1,700 gross per month (already after deducting costs). In the 3 summer months, with short-term rental for at least 20 nights a month, you can earn PLN 3,100 a month after deducting costs.

The annual profit is: 9*PLN 1,700 + 3*PLN 3,100 = PLN 24,600 gross, with the owner devoting more time only during 1 quarter.