Traditional vs. Short-Term Rentals in Buenos Aires: Which Offers Better Returns for Owners?

Property owners in Buenos Aires are weighing a crucial decision: whether to opt for traditional long-term rental contracts or embrace the burgeoning short-term rental market for their investment properties. While the immediate temptation is to compare gross income, a comprehensive analysis requires considering operational expenses, vacancy rates, property wear and tear, administrative time, and individual investor risk profiles.

As of June, the gross profitability of a traditional rental in the City of Buenos Aires hovered around 5.89% annually, according to Zonaprop data. This translates to an estimated 17 years needed to recover the initial property investment, a period that has shortened by 5.8% compared to the previous year. Rental prices have outpaced property values in recent months, with a 31.3% increase in rents versus a 1.6% rise in sales prices over the last 12 months, improving the profitability of traditional leases.

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The short-term rental can generate a higher potential income, but requires professional management. The traditional rental offers less effort, greater stability and a reasonable profitability today.

Short-term rentals, on the other hand, present the potential for higher returns. Depending on location, daily rates, and occupancy levels, these can range from approximately 6.7% annually to over 8% for well-managed units in high-demand areas with minimal vacancy. At first glance, the numbers strongly favor short-term lets. However, the gap between the two models has narrowed over the past year.

Daniel Bryn, head of Zipcode, notes that while short-term rentals can generate higher potential income, they necessitate professional management. Traditional rentals, conversely, offer less effort, greater stability, and a reasonable return. For owners prioritizing stability and reduced administrative burden, traditional leases are often the preferred choice. This model is particularly suitable for those who rely on rental income for their livelihood, possess a conservative investment profile, or prefer to delegate day-to-day management to a real estate agency. Eduardo Casasnovas of Century 21 Casasnovas adds that traditional rentals provide income predictability and allow owners to detach from concerns about occupancy periods.

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In traditional rental, income predictability is obtained and it allows to disengage from the occupancy time of the lease.