When a property manager mentioned to me that the unit next to one of my long-term rentals was generating three times my monthly rent as a short-term rental, my first reaction was that I had been leaving money on the table. My second reaction, two weeks later after running the numbers, was that I had been leaving drama on the table, and I was fine with that.
Short-term rentals (STRs) genuinely do outperform long-term rentals (LTRs) in gross revenue in most markets. The question is whether they outperform after you count the full cost of operations, and in many cases, by the time you do, the comparison is closer than the headline numbers suggest.
What the revenue comparison actually looks like
A typical long-term rental in a suburban market rents for a fixed monthly amount. The tenant signs a twelve-month lease, you collect rent on the first, and your gross revenue is predictable. In my case, a three-bedroom house in a decent suburban neighborhood generates about $1,900/month, $22,800 per year gross.
The same house on Airbnb, in a market with reasonable tourism or business travel demand, might gross $3,500-$4,500 per month during peak seasons and $1,500-$2,000 in the off-season. Annualized, that is often $28,000-$42,000 depending on the market and the operator’s effort. The top of that range is nearly double the long-term rent.
That gap is real. The gross revenue advantage of STRs is not marketing; it is just the economics of nightly pricing in liquid markets.
Where the comparison collapses
The gap shrinks substantially once you count the costs that are different between the two models.
Occupancy is not 100%. Airbnb hosts who project 90% occupancy are being optimistic. Realistic occupancy for a non-destination-city property doing moderate effort is 60-75% on a competitive listing. At 65% occupancy and $150/night average rate, a house that can sleep six grosses about $35,600. More than my LTR, but less than the naive projection.
Platform fees. Airbnb and VRBO take 3-5% of gross revenue. On $35,600, that is roughly $1,400-$1,800 off the top.
Cleaning. A professional clean between every guest is not optional. At $120-$150 per clean and two stays per week on average, that is $12,000-$15,000 per year. Guests often pay a cleaning fee, but it frequently does not fully cover the actual cleaning cost once you factor in restocking supplies and linens.
Supplies and restocking. Toiletries, paper goods, kitchen supplies, small appliances that break, linens that wear out. Budget $100-$200/month for a well-run STR. That is $1,200-$2,400 per year.
Management. If you self-manage, STRs require dramatically more time than LTRs. Guest communication, key handoffs, reviewing bookings, responding to reviews, handling complaints. A full-time job for a few properties. If you hire a professional STR manager, their fees are typically 20-30% of gross revenue, compared to 8-10% for a long-term property manager. On $35,600 gross, a 25% management fee is $8,900 per year.
Utilities. Short-term guests do not pay utilities. You do. Budget $200-$400/month for electricity, water, and internet that is fast enough for guests to give five stars.
Furniture and furnishings. A long-term rental can be rented unfurnished. A short-term rental must be furnished, styled, and maintained to a hotel standard. Initial setup cost $5,000-$15,000 for a typical house. Replace or refresh every 3-5 years. Annualized capital cost: $1,500-$4,000/year.
Higher maintenance and CapEx. Guest turnover is far harder on a property than a single long-term tenant. More cleaning, more use, more wear. Most experienced STR operators budget 1.5-2x the CapEx reserve rate of an LTR.
Running a realistic comparison
Let me compare my actual LTR to a realistic STR projection on the same property.
LTR: $22,800 gross. Operating expenses (taxes, insurance, maintenance, management at 10%): $8,000-$10,000. Net operating income: $12,800-$14,800.
STR: $35,600 gross (65% occupancy at $150/night). Platform fees: $1,500. Cleaning: $12,000. Supplies: $1,800. Utilities: $3,600. Management at 25%: $8,900. Higher maintenance: $3,000. Taxes, insurance: $3,000. Net operating income: $1,800-$3,800.
The STR generates more than double the gross. It generates about 15-25% of the LTR net.
These numbers depend heavily on location, demand, and how well you manage. A professionally managed STR in a destination market (beach town, ski resort, urban tourism corridor) with strong year-round demand can genuinely outperform an LTR net by 50-100%. But a suburban house in a city where visitors stay at hotels is doing very well to match the LTR net.
The regulatory variable
Zoning and short-term rental regulations have tightened significantly in most markets since 2020. Many cities now require STR permits, cap the number of nights a property can be rented, restrict STR operation to owner-occupied properties, or ban STRs entirely in residential zones. Before running any STR projections, verify the current local regulations. A deal that looks great as an STR may be prohibited by the time you close and convert.
When STR genuinely wins
If you own property in a high-demand short-term rental market, a beach community, a ski town, a dense urban neighborhood with strong tourist traffic, a college town with graduation weekends, the economics are genuinely different from a suburban house. Peak-season pricing can be extraordinary, and the best operators in these markets earn multiples of what a long-term lease would produce even after all costs.
If you can self-manage effectively and have the time, the management cost premium disappears. A hands-on operator who enjoys the hospitality side of running an STR and can maintain high occupancy and reviews will beat the economics I modeled above.
When LTR wins
When demand is moderate, when you want to own real estate but not operate a hotel, when you value predictability over upside, and when you plan to scale across multiple properties (self-managing ten STRs is genuinely a full-time business), long-term rentals are the more sustainable model. I discussed the self-management versus property management tradeoffs in a separate article, that framing applies directly here.
The LTR math I run on my four doors gives me consistent if unspectacular cash flow, low management burden, and equity growth that has compounded nicely over seven years. None of those doors would outperform in STR mode given where they are located. For a different set of properties in different locations, the math would be different.
Know the market before you convert. Run the actual numbers. And be honest about which variable in the comparison you are optimizing for, because STR and LTR optimize for different things, and the right answer depends on which one you actually want.