We're in a first time situation, where we now have a rental property and aren't quite sure what to do with it. The home we recently purchased has a 1,130 sq ft, 1bd/1ba (with room for 2nd bedroom if we build an interior wall) guest house. It has it's own address, driveway and electric meter. The cost of the guest house and its taxes are all tied into our mortgage, which we can afford. I've contacted a few property managers and so far, the comps tell us we could possible do a long-term rental in the $800 - $875 range. Our plan is to hopefully net at least $500 and apply it as extra payments to our mortgage principal. Now our dilemma is whether we should rent this out as a long-term rental or a vacation rental. Our extra (matching) furniture is currently arranged in there and there's not much else we would need to add to make it fully furnished. The area we live in is quite popular for lake enthusiast and while out in the country, we're still centrally located to Austin and San Antonio and all of their touristy stuff. The cause for our dilemma is that we no longer have a guest room in our house for our out of town guests, which we have at least twice a year (most of our family lives in CA). What are your thoughts, experiences and recommendations?