This article is written from the perspective of pre-acquisition. Once you own a property, the decision is a bit different.

Room for rent
Photo by Alex Block / Unsplash

Which one makes more money?

In most situations, short term rentals will make more than long term.

Which one takes less time to manage?

On the surface, long term rentals are much more passive than long term rentals.  With Airbnb, have to communicate with perspective guests, communicate with existing guests, constantly market the property, constantly turn the property, maintain utility contracts, replenish consumables, maintain the property, and maintain the furniture.  All of that on a fairly consistent basis.  

With longterm rentals you have to do many of these processes, but most of them are on an annual or quarterly basis.  
With good systems, the management starts to approach parity on a per unit basis.  

Do you like dealing with people?

Short term rentals are a hospitality business as much or more than a real estate business. As such, you will be interacting with people more and in more interesting ways.  

Do you have time for a Longer setup?

With long term rentals you can pretty much get a place habitable, and then lease it out.  The level of required amenities is quite low.  I don’t recommend offering a bottom of the barrel product as a rental but it is possible.  With Airbnb, there is much more setup involved.  You have to meet certain community standards at minimum.  The property must be furnished, it must be clean, and guests are going to expect a nicer fit and finish than a long term renter might.
These things all take time.  Lots of time.  

How Important is Scalability?

If you are planning on quickly adding capital to your real estate investment pool, then scalability might be very important.  If you are growing your portfolio at a few units per year, scaling short term probably will not present any major management problems.

To keep a handle over the STR business as you scale, you will need to implement robust business processes much earlier in the cycle than long term rentals.  

If you handle cleaning yourself, the time commitment of an SFR is more than 10x that of a long term rental.  If you delegate cleaning, it is still probably about 5x that of a long term rental. This actually can be an advantage though.  

Because each unit has higher expenses, you can hire a quality employee to help quicker.  If the analysis for hiring a full time manager shows you need 100 units to justify it, the number of STR is closer to 10-20.  

Short term requires higher startup costs

It's probably no surprise that renting a place completely furnished, with a few sets of linens, and a stocked kitchen would have higher startup costs.  

On the total asset basis, it might not seem like a big deal, but when comparing to equity it can be huge.  Consider this example:

Purchase price: 100k
Equity: 20k
Furniture/STR startup expenses: 10k

In this example, the STR would cost an extra 10k out of pocket to get started.  This is because most loans are not going to lend on furniture.

Difference in headaches

I am sure you are aware of the broken toilet at 2 am objection that most people have to real estate investing. While I have actually never had that particular issue come up, there are fires that the owner or manager has to put out on a routine basis.

The hiccups that come along with a short term rental are usually different. By the nature of going in and cleaning between each stay, fewer maintenance items build up over time. However, there are a lot of communication related tasks which require work.

Property Management

The property management industry for long term rentals if fairly robust.  A reasonably well networked investor should be able to find a few well recommended property managers with an extensive track record in their asset type.

In many markets, full service STR managers are much harder to come by.  In my market the options seem to be nationwide companies or individual real estate agents.

It would seem much easier to convert long term rentals that are self managed into professionally managed ones than it would be to turn over the reigns to an STR management company.  

Other Income Opportunities

Going the other direction in from hiring 3rd party management.  If you are grinding and looking to earn more money in a field you now have experience in. You can expand your company into property management. With long term rentals and the way market compensation for property managers are, you need a lot of units to make a healthy amount of income. This will come with lots of work as well. It is challenging work to do and the market for property management companies is pretty tough.

With an STR, you cam offer cohosting or property management services.  You can also grow quickly by doing rental arbitrage. Which is where you lease a place on the long term market and then create a business around renting it short term.  Both of these seem to compensate much better per hour of work.

So which should it be? Short term or long term?

On the small scale, I definitely see the value in short term.  Especially if you are comfortable leveraging some of your time for the added returns. STR is a great vehicle to make additional money, which can be a huge help to growing an investment portfolio.

On the larger scale, or if you do not have any desire to leverage time, long term is probably the way to go.  

If you are looking to build a business in real estate that can offer more options for growth than only from acquiring more units, then STR may be for you.