Short-Term Rental vs Long-Term Rental: When Each Wins

The 1.5× rule

If your projected Short-Term Rental cash flow doesn't beat the Long-Term Rental alternative by at least 1.5×, the extra work, regulatory friction, and turnover risk usually aren't worth it. Short-Term Rental adds work; the math has to compensate.

What Short-Term Rental adds to the operating cost stack

Cleaning between every stay: $60–$150 per turnover. Three turnovers a week = $180–$450/week.
Consumables: toiletries, coffee, paper goods. $40–$80/month per unit.
Higher utility usage: short-term guests use more than long-term tenants. Add 15–30% to electric, gas, water, internet.
Furniture + decor: $8,000–$25,000 to set up a unit nicely, plus replacement every 2–4 years.
Property management fee: Short-Term Rental PM is 18–28% (vs LTR 7–10%) because of the higher operational lift.
Licensing + insurance: Chicago requires $250/yr + $1M GL insurance. Other cities vary.
Vacancy risk: long-term has predictable vacancy. Short-Term Rental vacancy is seasonal and unpredictable.

The Long-Term Rental advantages

Predictable rent, predictable expenses, predictable cash flow
Tenants on yearly leases = lower turnover cost
Lower management overhead
No platform risk (Airbnb / Vrbo policy changes)
No regulatory risk on Short-Term Rental ordinances
Mortgage lenders consider LTR income more reliable for refinances

When Short-Term Rental wins

The property is in a true tourist market with year-round demand
The unit is small (1-2 bed) so cleaning + turnover costs scale acceptably
The local Short-Term Rental market hasn't already saturated (look at AirDNA active listings count)
There are no HOA / building / city restrictions
You have the bandwidth to either manage or pay a 22-28% management fee

When LTR wins

The market is regulated (Chicago, NYC, LA, Portland, etc.) or HOA-restricted
The unit is large (3+ bed) and turnover cost gets expensive
You want predictable income for refinance or DSCR loan underwriting
The local Short-Term Rental market is saturated and ADR is compressing
You're a hands-off investor

The Chicago-specific reality

Chicago's Short-Term Rental ordinance (6 Short-Term Rental units per building cap, $250/yr registration, $1M insurance, $1,500–$3,000/day fines for noncompliance) makes citywide Short-Term Rental meaningfully harder than markets like Nashville, Austin, or Scottsdale. For most Chicago investors, LTR is the right default and Short-Term Rental is a special-case upside play.

How Prop-Folio helps you decide

Prop-Folio underwrites each strategy on its own terms rather than putting them side by side in one view. Run the property as a Buy & Hold and note the cash flow; switch it to Short-Term Rental, where the app pulls per-unit nightly rate and occupancy from AirROI, breaks revenue down by unit configuration, and spreads it across the twelve months of the year. Both analyses are saved against the same property, so you can move between them and apply the 1.5× rule to two figures you actually trust.

The Short-Term Rental analysis is deliberately not a comparison tile. A single delta invites you to read one number and stop — and the two strategies differ in vacancy behaviour, management load, regulation, and how a lender treats the income, none of which fit in a multiple.

Run both strategies on your deal →