Long-term and Short-term rental
Which is the better investment in Nigeria?

Since the introduction of Real Estate as a business in Nigeria, long-term rentals were the standard form of rentals for residential properties and some commercial properties like office space, stores, and shops. The short-term rental was generally associated with commercial hospitality like Hotels and Guesthouses. In more recent years since the launch of Airbnb and many online lodging platforms, there has been a tremendous rise of short-term rental for residential properties. This article will lay out what you need to know of each form of rental for you to decide what form of the rental will fit the properties in your property you intend to purchase as an investment or portfolio.

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Long-term and Short-term rental Which is the better investment in Nigeria

20.09.2021

Long-term Rental Strategy

Long Term Rental is a fixed-term lease that can have a duration of a year or more depending on what is agreed upon between the landlord and tenant.

No furnishings: you're not worrying about furnishing the property typically long-term rentals are gonna be completely vacant the tenant as to bring their furniture. The only thing you normally would provide are appliances.

Less management: You have less management because you have one tenant who pays yearly they're probably on a year lease and your tenant will take care of basic maintenance.

Predictable income: The income is very predictable. The monthly rent is whatever you guys say it is as it doesn't fluctuate. The only way it fluctuates is if they don't pay but other than that your rent is going to be the same rate every year, which makes it very easy for you to budget.

No utility bill: Your tenant is responsible for all utilities (electricity, water, waste management, and any other bill). You don’t need to worry about the kind of appliances or how much electricity your tenant consumes.

Less Marketing: A Long-term marketing strategy usually requires less advertising because your tenant is on an annual-based agreement and the tenant is required to notify you before moving out of your property which gives a bit more time to find new tenants.

Short-term Rental Strategy

As aforementioned, short-term rentals were generally associated with hotels, and in addition to the popularity of online platforms like Airbnb; short-term rentals became an option for not only travelers but Local residents in Nigeria. This has made short-term rentals a very viable strategy with a high ROI for investors. Other reasons include but are not limited to:

More income: Short-term rentals are usually listed with nightly rates and properties in highbrow areas are usually listed at higher prices, significantly increasing income at close intervals.

Not tied to the same tenant: Doesn’t necessarily require an agreement like long-term rentals, short-term is usually that your guest stays on the property based on the number of days paid for by the tenant.

Easier upkeep with repairs: Landlords have to consistently inspect the property to get it ready for the next guest so, maintenance is usually done during these periods.

While both strategies have their advantages their disadvantages are the inverse of the other advantages. It is very important to note that short-term rentals usually require finding the right LOCATION as one of the primary keys for the success of this strategy and also it can be a very competitive market for an investor as your competitor might be passive (using their personal property) for short-term rentals thus, most investors providing luxury services go above and beyond what a passive competitor would offer.

Luxury service provision has been quite successful for many investors in the right market, as they don’t only attract traveler guests but also local residents (family or friends) looking to have a getaway weekend of some sort all find short-term rentals more convenient if you provide necessary amenities such as (kitchenware, linens, and towels); guests would need and want if they were staying at a hotel.

Ultimately, the decision on what strategy best fits your portfolio or properties rests solely on you but make sure cash flow isn’t the only factor you have to consider; as you need to find the right market. Therefore, consider all other factors, and ask as many questions as needed from other investors or call on us and speak to one of our consultants. We will be willing to guide your decision-making processes all the way.

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