Short-Term vs Long-Term Rentals: ROI Comparison

The rental strategy you choose significantly impacts your returns. Here's a detailed comparison for Montenegro.

The Options

Short-Term (Holiday Rental) - Airbnb, Booking.com - Weekly/nightly rates - Seasonal demand - Higher management intensity

Long-Term (Annual Rental) - 12-month contracts - Monthly payments - Stable income - Lower management needs

Income Comparison

Example Property: 2-Bed Apartment, Budva

Value: €150,000 Location: 200m from beach

#### Short-Term Rental

Seasonal Pricing - Peak (Jul-Aug): €120/night - High (Jun, Sep): €90/night - Mid (May, Oct): €60/night - Low (Nov-Apr): €40/night

Occupancy Estimates - Peak: 85% - High: 70% - Mid: 50% - Low: 25%

Costs - Management (20%): €2,751 - Cleaning: €1,500 - Utilities: €1,200 - Maintenance: €800 - Linens/supplies: €400 - Platform fees (15%): €2,063 - Total costs: €8,714

Net Income: €5,040 Gross Yield: 9.2% Net Yield: 3.4%

#### Long-Term Rental

Monthly Rent: €500

Annual Income: €6,000

Costs - Maintenance reserve: €500 - Vacancy (1 month): €500 - Agent fee: €500 - Total costs: €1,500

Net Income: €4,500 Gross Yield: 4.0% Net Yield: 3.0%

Key Factors

When Short-Term Wins

Location Dependent - Prime tourist locations - Sea views - Beach proximity - Old Town positions

Property Dependent - 1-2 bedrooms (highest demand) - Well-furnished - Modern amenities - Parking/pool

Owner Dependent - Can manage actively or afford management - Available for guest communication - Willing to handle turnover

When Long-Term Wins

Location Dependent - Away from tourist centres - Near schools/offices - Podgorica properties - Residential neighbourhoods

Property Dependent - 3+ bedrooms (families) - Unfurnished OK - Garages valuable - Gardens for families

Owner Dependent - Prefer passive income - Not local to manage - Want predictable returns - Lower risk tolerance

Hidden Costs to Consider

Short-Term Hidden Costs

• Platform commission (15-20%)
• Professional photos (€200-500)
• Initial furnishing (€5,000-15,000)
• Linen replacement
• Guest amenities
• Pricing tools/software
• Channel management
• Late-night guest issues

Long-Term Hidden Costs

• Tenant finding (1 month rent)
• Contract legal fees
• Property inspection
• Potential non-payment
• Wear and tear
• End-of-tenancy disputes

Tax Implications

Short-Term - Tourist tax per guest/night - Full income taxable - More complex accounting - Registration requirements

Long-Term - Simpler tax calculation - Standard income tax (9%) - Fewer declarations - Easier to manage remotely

Management Options

Self-Management - Keep more profit - More time investment - Need local presence - Best for: hands-on owners

Property Management Company - 15-25% of income - Handles everything - Professional service - Best for: remote owners

Hybrid - Use management for short-term high season - Self-manage low season or long-term - Balance cost and effort

Making Your Decision

Choose Short-Term If: - [ ] Property is in prime tourist location - [ ] You can manage actively or afford management - [ ] You want to use the property yourself occasionally - [ ] You're optimising for maximum income - [ ] Property is 1-2 bedrooms

Choose Long-Term If: - [ ] Property is in residential area - [ ] You prefer passive income - [ ] You're not local - [ ] Property is larger (3+ beds) - [ ] You want stable, predictable returns

Consider Both: - Long-term October-May - Short-term June-September - Best of both worlds - More management complexity

The Verdict

For Maximum Income: Short-term in prime locations can yield 2-3x long-term rates, but requires work.

For Passive Income: Long-term offers similar net returns with less effort.

Our Recommendation: Match strategy to your situation, not just potential returns.