Long-Term vs. Short-Term Rental ROI in 2025: Which Is More Profitable?

Introduction

If you have (or are consdering buying) investment property, one of the big questions you are likely wondering is long-term vs. short-term rental in 2025. Each strategy has its advantages and disadvantages, particularly when it comes to return on investment (ROI). This guide will break down the key differences between long-term and short-term rental ROI in 2025, so you can determine which rental model aligns best with your financial goals.

What Is ROI in Real Estate?

ROI (Return on Investment) is a key performance metric that evaluates the profitability of an investment property. The formula for calculating ROI is:

ROI = (Net Profit / Total Investment) × 100

For rental properties, net profit considers revenue (rental income) minus expenses like mortgage, property taxes, insurance, maintenance, and management fees.

Short-Term vs. Long-Term Rentals: Key ROI Factors

To determine if a long-term vs. short-term rental in 2025 is right for you, we must analyze the following factors:

1. Rental Income Potential

• Short-term rentals typically generate higher nightly rates, particularly in tourist-heavy locations.

• Long-term rentals offer consistent income but at a lower monthly rate compared to short-term rentals.

2025 Outlook: With travel demand projected to rise, short-term rentals in high-traffic areas may yield higher gross revenue than long-term rentals.

2. Occupancy Rates

• Short-term rentals fluctuate in occupancy due to seasonality and market demand.

• Long-term rentals provide steady occupancy with predictable rental payments.

2025 Insight: High-quality short-term rentals with strong marketing can maintain occupancy rates of 70% or higher, but long-term rentals offer near 100% occupancy over a lease term.

3. Expenses and Operating Costs

• Short-term rentals require more maintenance, cleaning, and utilities paid by the owner.

• Long-term rentals have fewer ongoing costs since tenants typically cover utilities and minor maintenance.

Cost Comparison: While short-term rentals generate more income, higher expenses can reduce net ROI.

4. Property Management & Time Commitment

• Short-term rentals require frequent guest turnover management, listing optimization, and dynamic pricing strategies.

• Long-term rentals are more hands-off, with tenant leases typically lasting 12 months or more.

2025 Trend: Tech-driven property management solutions, like automated messaging and pricing tools, are making short-term rentals easier to manage at scale.

5. Regulatory Environment

• Many cities are tightening restrictions on short-term rentals, requiring permits and occupancy taxes.

• Long-term rentals face fewer regulatory challenges but may be affected by rent control laws in some cities.

Regulatory Forecast: Cities with tourism-dependent economies may be more lenient on short-term rental laws, while others may enforce stricter regulations.

6. Market Appreciation & Resale Value

• Short-term rental properties in prime locations may appreciate faster due to higher demand.

• Long-term rental properties provide stable appreciation but may not experience rapid value increases.

2025 Prediction: High-demand vacation markets are expected to continue appreciating at a strong rate.

ROI Comparison: Short-Term vs. Long-Term Rentals in 2025

Which Has the Better ROI in 2025?

Well, like most things in life, the answer is "it depends."

• For higher gross income: Short-term rentals win in tourist-heavy areas.

• For passive income & lower effort: Long-term rentals are better for stable cash flow.

• For property appreciation: Both can be strong, depending on location.

Choosing the Best Strategy for Your Property

When deciding between long-term and short-term rentals, ask yourself:

• Is your property in a high-demand tourist destination?

• Do you have the time (or a management team) to handle short-term rentals?

• How important is cash flow stability versus maximizing revenue?

• Are local laws favorable for short-term rentals?

If your goal is maximizing profit, short-term rentals often provide a higher return but require more work. If you prioritize consistent passive income, long-term rentals offer stability with fewer headaches.

Conclusion: The Best Rental Strategy in 2025

Both short-term and long-term rentals have their pros and cons, but the best choice depends on your financial goals, risk tolerance, and property location. If you’re looking for a risk-sharing property management solution, TruStay offers full-service short-term rental management that maximizes revenue while minimizing your workload.

If you'd like to see what your specific property could do, get ayour free customized revenue projection today! There's no cost and no committment.