Airbnb vs Long-Term Rental Income: Which Strategy Makes More Money in 2025?

Investors and property owners constantly debate whether to rent out their properties on Airbnb or opt for long-term tenants. Both options offer distinct financial benefits and challenges, and the choice depends on your income goals, tolerance for volatility, and how much time you want to spend managing the property.

In this comprehensive comparison, we break down Airbnb vs long-term rentals by income potential, expenses, management effort, legal considerations, and overall profitability in 2025 to help you decide which strategy suits your investment style.

Income Potential: Higher But Variable vs Stable But Lower

One of the biggest draws of Airbnb is its higher income potential. Hosts can charge premium nightly rates, especially during peak seasons or special local events, and adjust prices dynamically based on demand. For example, in Los Angeles, an Airbnb host can earn up to three times more than a traditional long-term rental in high-demand neighborhoods like Hollywood or Venice Beach during peak periods. The average daily rate in such markets can be around $276 with occupancy rates near 46%, leading to annual Airbnb earnings of over $30,000.

In contrast, long-term rentals offer consistent monthly income. Rent is fixed by lease agreements, providing a predictable cash flow that doesn't fluctuate seasonally or with market trends. An average long-term rent might bring in around $2,000 per month, totaling roughly $24,000 annually, but this income is stable across all seasons and less vulnerable to vacancies.

Metric	Airbnb (Short-Term Rental)	Long-Term Rental
Income Potential	Higher, dynamic pricing, seasonal peaks	Lower, fixed monthly rent
Income Stability	Variable, fluctuates with demand and season	Stable, predictable monthly income
Example Annual Income	$26,000 - $30,000+ (varies by location)	$24,000 - $25,000

Operating Costs and Expenses: Higher for Airbnb

Airbnb rentals come with higher upfront and ongoing costs. Furnishing the property fully, providing utilities like internet and power, and maintaining hotel-like amenities add to expenses. Cleaning fees, frequent repairs due to higher guest turnover, and restocking consumables can bring operating costs to around 25-50% of revenue.

Long-term rentals have lower maintenance and operating costs — typically around 8-10% of rental income — since tenants take on some responsibilities like furnishing and basic upkeep. Property management costs tend to be lower as well due to fewer turnovers and less daily involvement.

Expense Category	Airbnb (STR)	Long-Term Rental
Upfront Setup Cost	High (furnishing, décor, utilities)	Low (basic maintenance only)
Ongoing Operating Cost	~25-50% of revenue	~8-10% of rental income
Management Effort	High (guest communication, cleaning)	Low (occasional tenant issues)

Management and Time Commitment

Managing an Airbnb requires active involvement or hiring a property manager since guests check in and out frequently. Hosts handle bookings, guest communication, cleaning, maintenance, and restocking, which can be time-consuming or costly if outsourced.

Long-term rentals demand less day-to-day attention. Once a tenant is placed, landlords mainly handle periodic maintenance and rent collection. Tenant turnover is lower, reducing management headaches.

Legal, Regulatory, and Tax Considerations

Airbnb rentals often face stricter and evolving regulations, including limits on the number of rental days per year (e.g., 120-day caps in Los Angeles), zoning restrictions, and licensing requirements. Compliance can be complex and location-dependent.

Long-term rentals benefit from stable, well-established landlord-tenant laws. However, tenants have strong legal protections, making evictions harder and sometimes costly.

On taxes, Airbnb income beyond 14 days annually is taxed as regular income with fewer deductions, while long-term rental income is usually treated as passive income with more tax write-offs available.

Insurance for Airbnb is more complicated, requiring additional liability coverage beyond what Airbnb offers, while long-term rentals typically have straightforward landlord insurance policies.

Return on Investment (ROI): A Close Race

Looking at real-life data, the ROI between Airbnb and long-term rentals can be surprisingly close. For instance, a property valued at $380,000 might yield:

Airbnb: 5.4% ROI after operating expenses
Long-term rental: 5.9% ROI after operating expenses

While Airbnb can outperform during peak seasons with monthly returns exceeding $3,000, long-term rentals provide steadier returns and lower risk of vacancy.

Pros and Cons Summary

Factor	Airbnb (Short-Term Rental)	Long-Term Rental
Income	Higher potential, seasonal peaks, flexible pricing	Stable, predictable, lower yield
Expenses	Higher setup and operating costs	Lower costs, minimal setup
Management	Hands-on, time-intensive	Low effort, easier to manage
Legal & Taxes	Complex regulations, variable taxation	Stable laws, favorable tax deductions
Vacancy Risk	Higher during off-season	Low vacancy risk
Property Wear & Tear	More frequent usage, higher maintenance	Less wear, longer tenant stays

Which Option Is Right for You?

Choose Airbnb if you want to maximize short-term income, can handle or outsource active management, and your property is in a high-demand tourist location.
Choose long-term rentals if you prefer steady cash flow, less hands-on management, and value predictable income over peak-season spikes.

Final Thoughts

Both Airbnb and long-term rentals have their place in a savvy investor’s portfolio in 2025. The best choice depends on your financial goals, property location, and willingness to manage the day-to-day demands. Careful analysis of your specific market, costs, and personal preferences will guide you to the right rental strategy.