Short-term rentals (STR) on platforms like Airbnb and Vrbo generate headlines with stories of landlords tripling their rental income overnight. But the reality is more nuanced — and heavily dependent on your market, property type, and how much of your time you're willing to invest.
The Core Trade-off
A long-term tenancy trades income upside for stability and simplicity. A short-term rental does the opposite: higher gross revenue ceiling, but more volatility, more work, and — in many jurisdictions — more regulatory risk.
The right choice depends on four factors:
- Your market's STR occupancy and ADR — Markets with 65%+ occupancy and strong ADR premiums (coastal towns, ski resorts, urban cores with tourism or business travel) favor STR. Secondary markets with 45% occupancy often don't pencil out once you account for platform fees, cleaning, and vacancy.
- Regulatory environment — Toronto, Vancouver, New York City, and many other cities have banned or severely limited non-primary STR units. Always verify local bylaws before buying for STR.
- Your operating model — Self-managing a STR can consume 10–15 hours per month per property. Property managers typically charge 20–30% of gross STR revenue (vs 8–12% for LTR).
- Mortgage terms — Many lenders require owner-occupancy or have specific STR restrictions. Confirm with your lender before converting.
Real Numbers: Toronto Example
Let's compare a 1-bedroom condo in downtown Toronto:
| Metric | Long-Term Rental | Short-Term Rental |
|---|---|---|
| Gross Annual Revenue | $27,600 ($2,300/mo) | $42,000 (65% occ × $180 ADR) |
| Platform Fees (0 / 3%) | — | ($1,260) |
| Cleaning ($80 × 52 turns) | — | ($4,160) |
| PM Fee (8% vs 25%) | ($2,208) | ($10,500) |
| Vacancy / Seasonality | ($1,380) est. 5% | Included in occ. rate |
| Net Revenue | $24,012 | $26,080 |
The STR earns ~$2,000 more net — but only if you can maintain 65% occupancy and the market holds. Add the time cost and regulatory risk and the gap narrows further. In Toronto specifically, the city restricts STR to principal residences only, meaning this comparison only applies to an owner-occupier renting out while travelling.
Where STR Wins Clearly
STR outperforms LTR most convincingly in:
- High-tourism markets with strong seasonal demand (Muskoka, Whistler, Banff, Cape Cod, Florida keys) where peak-season rates can be 3–5× LTR equivalent.
- Furnished units in business-travel corridors — corporate travellers pay ADRs 40–60% above leisure markets and generate more consistent occupancy.
- Properties with unique attributes — lakefront, ski-in/ski-out, historic homes — that command listing premiums no LTR will pay.
Where LTR Wins Clearly
- Regulated urban markets where STR is restricted to primary residences (Toronto, NYC, many BC municipalities).
- Investors who value passive income — LTR with a good property manager is close to truly passive; STR is a hospitality business.
- Lenders and insurance carriers often have stricter — and more expensive — terms for STR properties, eroding the income advantage.
Running Your Own Numbers
Use our STR vs LTR Calculator to input your specific market's occupancy rate, ADR, cleaning costs, and management fees. The calculator compares net annual revenue side-by-side and shows the breakeven ADR at which STR starts to outperform your local LTR market rent.
Bottom Line
STR is not inherently better than LTR — it's a different business with different skills, risk profile, and regulatory exposure. Run the numbers for your specific property and market, verify local rules first, and don't rely on top-of-market occupancy projections when underwriting.