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Medium-Term Rentals: High Rents, Low Risk, and Better Than Vacation Rentals?

The BiggerPockets Podcast
37 min read
Medium-Term Rentals: High Rents, Low Risk, and Better Than Vacation Rentals?

Finding cash flow isn’t easy, especially with rising interest rates, high home prices, inflation, and an economic crunch on everyday investors. Where is the best place to park your cash while riding out today’s economic unfolding? Some say vacation rentals—the highly popular (and even higher cash-flowing) real estate strategy many new investors have adopted. But what about medium-term rentals? They’re a cross between regular rental properties and short-term rentals, marketed mainly to traveling professionals, travel nurses, and digital nomads. How is this under-the-radar strategy faring?

Unfortunately, we can’t ask Dave this question. But, we can ask Sarah Weaver and Zeona McIntyre, two financially free medium-term rental experts and authors of the new book, 30-Day Stay. Zeona, a former short-term rental fanatic, changed her strategy after finding that medium-term rentals provide similar cash flow with far less work. Sarah Weaver, investor and real estate coach, lives her nomadic lifestyle thanks to a portfolio of high-performing medium-term rentals.

The most attractive thing about this strategy is that it can work almost anywhere, in less expensive homes, with far less work necessary. That means you get to keep traveling, investing, or whatever you like to do best, while your rental properties quietly pump out passive income. In this episode, you’ll hear all about this extremely lucrative strategy, how today’s housing market is affecting it, and what you can do to set your medium-term rental apart from a sea of others.

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Listen to the Podcast Here

Read the Transcript Here

Dave:
Hey, everyone. Welcome to On the Market. We have an excellent show today to talk about one of the most up and coming, most exciting new strategies in real estate known as mid-term rentals. For this interview, I am joined by Kathy Fettke. Kathy, how are you?

Kathy:
Great. So happy to be here. This is a really interesting topic that I think a lot of people want to learn about.

Dave:
Yes. It’s an amazing interview, which we’ll get to in just a moment, but I want to know about your weekend furnishing, your short-term rental. Kathy sent a text to the On the Market team, showing a giant shopping cart full of all sorts of stuff. What were you up to?

Kathy:
Oh, my gosh. Well, you know we have a development in Park City that our company syndicated, and Rich and I bought one of the town homes early on, so we got an amazing deal. Finally, it closed and we’ve been furnishing it, and it was such a pain. After our last show, you and I talked about, “Hey, if we would all just stop spending money just for a month, then maybe inflation would go down,” and then I send a picture of me with this huge shopping cart with all the things, all the things, and so I just thought, “Wouldn’t it be nice if someone would just do this for me?” I had hired my property manager to do it for me, but it just was taking too long and too slow.
Anyway, to have this interview today, just after I spent hours, days trying to furnish this thing, or finish the furnishing, the property manager did a lot of it, but not the final touches, and of course you want to come out of the gate strong, you don’t want your first review to be bad. So, I just thought, “Well, it would be really great to automate,” and that’s something you can really learn from this interview, is how do you automate this stuff to make it easier, so you can travel the world like they do.

Dave:
If you’re curious who they are at Zeona McIntyre and Sarah Weaver who wrote the new book for BiggerPockets, 30-Day Stay, and we’ll get all into that in just a moment. But, yeah, I think Kathy and I both had our minds blown talking about the automation of furnishing. I’ve only done it once, I shared the story, but it’s hard. It is not easy, and it’s something I completely underestimated when I was first doing it, and it is extremely time consuming, and it’s amazing to hear how Zeona and Sarah have created this lifestyle for themselves as really pretty automated, and sounds like it’s only going up from here. It sounds like the growth of this niche could be just at the beginning, we could see a lot more growth in the next couple of years.

Kathy:
Yeah, and how they automated the management of it too. Because in short-term rentals, the management fees are really, really high. If you use a manager, they can take 20, 25%. Oh, that’s a big old chunk.

Dave:
Oh, they could take 40%.

Kathy:
Oh, man.

Dave:
I talked to a couple places that do 40. It’s insane.

Kathy:
Yeah. So, to just that alone, to be able to automate like they do with… I don’t know exactly how they do it. I’m going to read the book again, and I’m going to hire them as a consultant, which they said they would do for me. So, yay.

Dave:
Well, I learned during the course of the interview that, “Kathy wrote the foreword for this book.” So, I think you get some free consulting in exchange for that.

Kathy:
Perfect.

Dave:
Well, with that, let’s not waste any more time. Let’s bring on Zeona and Sarah to talk about mid-term rentals.
Sarah Weaver and Zeona McIntyre, welcome to On the Market. Zeona, how are you doing?

Zeona:
So good. Thanks for having us. It’s very exciting.

Dave:
Sarah, how have you been?

Sarah:
Yeah, really good. Still recovering from BPCON, and excited to be here.

Dave:
Well, and recovering from being in Thailand, right?

Sarah:
Yeah, I’m in the future. 12 hours ahead.

Dave:
I think this is the most global podcast we’ve done. We have three continents represented. We have Sarah’s in Asia, I’m in Europe, and we have everyone else in the US. Pretty cool.

Kathy:
Amazing.

Dave:
All right. Well, both of you are here because you are the newest entrance into the BiggerPockets authors club. Congratulations on your book. Can you tell us a little bit about it, Sarah?

Sarah:
Yeah, absolutely. It’s called 30-Day Stay: A Real Estate Investor’s Guide to Mastering the Medium-Term Rental.

Dave:
How did you decide to write this book?

Sarah:
Yeah, Zeona and I met virtually, like you do most of your real estate investor friends, and we realized we had two things in common. We love to travel, and we both owned furnish rentals. After a few shared Ubers and a shared hotel at a conference, we kind of came up with the idea to pitch a book to BiggerPockets, and here we are exactly a year later with our book, not only written, but in the hands of investors.

Dave:
Wow, that’s amazing. That took one-fifth of the time it took me to write my book. So, well, congratulations.

Zeona:
We were on the fast track, for sure.

Dave:
That’s awesome. Well, Zeona, I know you’ve been in the short-term rental market for a while. How did you start getting into medium-term rentals?

Zeona:
It really happened for me in COVID. So, before then, of course, I’d had some longer requests and longer guests, but it wasn’t until that kind of time in March that was really intense for a lot of short-term rental hosts. I don’t know if either of you were hosting then, but it just happened that one day to the next, all of the reservations canceled, and so it seemed like it was fine, and we were ramping up for a great summer again, and then everybody freaked out around COVID, so it was early March. Then I had to collect myself and pivot and say like, “Well, I’m financially independent if these places are rented, but if they don’t rent, I got to figure something out here.”
So, luckily I saw bookings coming in that were longer, people started to come as relief workers and people needed more space for homeschooling their kids and working from home, and so it started to naturally happen, and I had a lot of places out of state, and so I was like, “Man, the biggest hurdle for me is how am I going to show these properties?” But, luckily I realized pretty quickly that a lot of these people are booking sight unseen, just like a short-term rental, and so I was able to really pivot and adapt and figure out everything online. Took a little bit of iterating.

Kathy:
What’s the difference between the guest? I mean, obviously with a medium-term rental, they’re not necessarily travelers, or are they?

Zeona:
Well, it kind of depends. I can also let Sarah answer this, but…

Kathy:
By that, I mean vacationers. I mean, obviously, it’s traveling people, but…

Zeona:
Yeah, so the typical short-term rental in my experience was three or four nights, and these are more three months, but I’ve seen a lot of digital nomads do one month. So, especially at the beginning, people were like, “I’m going to go to Denver, and then Austin, and then New Orleans,” and so they would just hop around like that. So, I’ve definitely had one month stays, but travel nurses are also big part of our tenant pool, and they’re three months, generally three to six months. Sarah, do you want to mention? I know you’ve had renovations and we’ve both had people from insurance claims, so yeah, what other tenants are you seeing?

Sarah:
Yeah, I think one of the things we want all of the listeners to understand is that it’s not just traveling nurses. The title of the book could have been traveling nurses if that was the only people that we served. But, we really… Medium term rentals can serve all different types of populations. So, I have a friend, she has a duplex in South Kansas City, she has been a hundred percent occupied, had even a couple turnovers in there where it was same day turnovers, and she’s never housed a nurse. I have another friend who has rentals or medium-term rentals in Waco, and she is renting two construction workers who are working on a job site for 60 to 90 days. I’ve housed a divorcee who just messaged and was like, “Can I move in tomorrow?”

Dave:
Wow.

Sarah:
So, we have people from all different walks of life, renting from us, not just traveling nurses.

Dave:
Sarah, did you get into medium-term rentals in the same way? Or, had you been doing it prior to COVID?

Sarah:
Actually, my first furnished rental was a medium-term rental, and so I posted my own unit that I was living in, on Airbnb, and in my mind I was like, “Oh, it’ll get rented on the weekends and then I’ll just go travel, or go visit my grandparents,” and my very first booking was for 30 days, and so I became homeless overnight. For a normal person, that would be a problem, for me, I was like, “Woo hoo, I’m going to Mexico.” So, that’s what I did, and so I actually got into medium-term right away, and then I do what’s called the hybrid model. So, my units are in markets that still allow short-term rentals, meaning municipalities don’t limit the nights of stay. So, I will switch it to a short-term rental in the summer, and kind of utilize those shorter term stays to net more money. But, then I noticed a trend come September, October, no one’s going to Omaha on a Wednesday night, and so I switched from short-term to medium-term to keep my occupancy rates high.

Kathy:
Well, that begs the question, why are people vacationing in Omaha during the summer, or are they?

Sarah:
I had the same question, and I own eight units in Omaha, and I was scratching my head too. So, what I have is in the summer there’s the College World Series, so I can make an entire mortgage payment just by renting a couple of days in June for the College World Series. Then a really interesting trend is that people use Omaha as a stopover on their road trip from Chicago to Denver. At first I was like, “Oh, that’s so interesting.” I was like, “That makes sense, and I allow pets, so they might bring their dog, and they prefer to stay in an Airbnb over a hotel.” But, then it was great, I would have repeat guests. So, they loved my place so much that then they’d stay on the way back as well. Then this summer I had even more repeat guests, where they did that last summer, it worked out really well, so they did it again this summer, and so those are great because they’re staying on a Tuesday or a Wednesday, which really helps with my occupancy rates.

Dave:
I had no idea that was a common travel pipeline.

Kathy:
No.

Dave:
The Chicago to Denver road trip.

Sarah:
Yeah, I at least house, I think, 10 people like that, over the summer.

Dave:
Whoa.

Sarah:
Yeah.

Dave:
Wow.

Kathy:
They would stay in your home versus a hotel because you allow pets? Or, are there other reasons why… Obviously your competition is the hotel.

Sarah:
Yeah, it’s really interesting, especially when we’re talking about medium-term rentals. If someone’s going to stay for a month, they would prefer to stay in a home. We’re seeing a lot more families utilize medium-term rentals in the summer. Maybe one of the parents typically is bound to their job during the summer, but because of COVID they now have the ability to be untethered and work remotely, and so we’re seeing more and more families utilize houses in the summer, even as medium-term rentals, to get away from the city or just change location, because now one of the parents can work remotely or both of them can work remotely.

Dave:
So, as the title of the book suggests is that I assume the cutoff between definition between short-term rental and medium-term is 30 days. Is that sort of the-

Sarah:
Yeah.

Dave:
Okay, so I’m curious, Zeona, what about market conditions… You said you started in COVID, like what makes you think medium-term rentals are going to maintain this demand, going forward?

Zeona:
Yeah, there’s a few things. So, first, just the ability to work from home grew tremendously, and I know some places are bringing people back to work, but I think there’s just been a change in the culture and a lot of people are specifically looking for jobs that are location independent and they might be joining their partners on travels. So, we see a lot of traveling nurses that now bring their partner or their child along with them. So, we’re kind of seeing that trend some more, and then just a lot of people working from home. So, often I’m seeing people wanting two bedrooms so they can each kind of have an office during the day and then go explore on their off hours. I do this with my partner too, Sarah also does this, she lives in Airbnbs full time. So, that is also just a bigger trend. We see that a lot in the financial independence community. A lot of people just go from Airbnb to Airbnb and don’t actually have a home.

Sarah:
So, what we saw with COVID is that there are now 11 million digital nomads, and for those of you that don’t know what a digital nomad is, it just means that they work likely for themselves or for a company and they can live anywhere, and so that number was 7% of the workforce before COVID, and then it jumped to 42%, and so those are significant numbers. They’re not all are our tenants, for example, I don’t just house digital nomads, but it’s becoming more and more, so much so that 24% of Airbnb bookings were for 28 days or more this year.

Dave:
So, I guess the question then is, with medium-term rentals, does it sort of fall in terms of revenue per night? Is it less than short-term rentals but more than a traditional buy and hold year-long lease?

Zeona:
So, this is interesting because this kind of changed for me recently, but what I used to tell people is that there’s market rate, I find medium-term to be like one and a half times, and then short-term to be twice market rate, just as a very loose general rule. But, I found this guy just a couple nights ago that is doing contracts directly with nurse placement and with insurance companies, and although I’ve had some of those bookings, I just don’t necessarily go after them directly. But, he’s saying that, “There’s no reason why you shouldn’t be able to get the short-term rental rate of two times even in your medium-term rental,” and so that’s Jesse Vasquez, I think it’s Vasquez. If you guys want to look him up on YouTube, he’s just kind of getting started, but it seems like he has programs for going after them specifically and building those connections. So, I’m definitely going to try to learn that because that’ll bring up my revenue, which is already fantastic.

Kathy:
So, what markets does the strategy work in?

Sarah:
It seems cheeky to say, but every market. So, I’m seeing medium-term rental work in small town Iowa, in outside of Seattle, Washington. I own a few in the Midwest, Zeona owns some in Colorado, in places where she couldn’t do short-term rental, and so it’s really nice to be able to utilize this in markets that restrict short-term rentals, but then also in markets that you wouldn’t necessarily think to own a short-term rental like Omaha, Nebraska.

Kathy:
How are you managing them when they’re out of state? Do you use a regular property manager or are you still using services like Airbnb?

Sarah:
We both self-manage. So, both of us started out self-managing ourselves to keep costs down and really hit that financial independence number as quickly as possible. Then both Zeona and I now have what I call in-house property management. So, I have a virtual assistant and an executive assistant helping manage these, and neither of them are in the locations that my medium-term rentals are either.

Kathy:
Same for you, Zeona.

Zeona:
Yeah.

Kathy:
I mean, what about the cleaning and the things that a property manager would normally do?

Zeona:
Yeah. So, even when I was teaching people about short-term rentals, I said that, “You could start with a really bare bones team. Once you have the property, all you need is a cleaner and a handyman and you’re off to the races. So, it doesn’t have to be super complicated, and most of those contacts you can get from your agent, so if you’ve got a good investor-friendly agent in that market, they usually have a list of contractors and different people to reach out to.” Yeah, from there, we have taken on assistance and that really helps, but for a long time we were just doing it ourselves. It’s actually pretty management light because you’re only needing potentially four tenants a year. It sounds like a lot if you’re coming from long term rentals, but from short-term rentals it’s like, “Ooh, walk in the park.”

Kathy:
I know when we were at BPCON, I was asking about just what types of property, and it was pretty exciting that it could be not what would be normally a long term rental, so you can go after properties that maybe other people aren’t looking at. So, yeah, Sarah, tell me about that.

Sarah:
Yeah, all of my units are one-one or two-one units, and so what normally might not be as attractive to a long term buy and hold investor, I can go ahead and swoop in because it’s exactly what I want want.

Zeona:
Yeah, and I’ll say that I have a bunch of… Well, not a bunch, but I have a few condos, and so that’s usually the lowest on the totem pole for investors. They don’t want to touch an A2A, they don’t like condos, a one bedroom, no way. So, those I love, because actually they’re being looked over, and I feel like that’s the important thing as an investor, is like, “How can you make something that is overlooked, something really valuable?” So, the condos that I actually love are ones that one bedroom, that have shared utilities in the building, so those might be a shared boiler, shared water heater, so you don’t have to have a furnace and a water heater in your unit, and then even ones with shared laundry, because the longer term stays, they’re fine, they’re not living there forever, so they’re like, “Oh, cool. I’ll just…” As long as there’s laundry in the building, they’re fine with that, and so in my unit, there’s almost no maintenance, because all I have is a fridge and a dishwasher and an oven. So, there’s almost nothing that can go wrong.

Dave:
I was going to ask that because I own just one short-term rental, but just owning one is enough to know that you get some ridiculous tenant stories or guest stories, I guess you could say, how the houses get a little abused. Do you find that the wear and tear on properties is similar with mid-term rentals?

Sarah:
I find that it’s actually less, and so you have these tenants who really take a sense of ownership with the unit, also because they’re there for three months, like if they do break something, they’re going to tell you, and so that allows me to replace something even while that tenant is in the unit, which is less stress at time of turnover. Whereas when you have a short-term rental and you have turnover every two to three days, and then someone’s checking in that same day, it creates a lot of stress in my opinion.
Then to compare it to long term rentals, what I find is that my long term rentals, they move out and they’ve been living there for a year, they haven’t told me anything that’s wrong with the property, so then when I do finally do a walkthrough, it’s like, “How on earth are there scuffs on the ceiling, or silly string on the wall?” And then you have to clean that and paint that and maybe even redo flooring, and so it creates a lot of headache. But, my units, I own nine medium-term rentals now, and I can tell you maybe two stories where it was like, when we went in, there was a bad surprise. But, with all of the turnover that we’ve had, it’s usually really simple.

Kathy:
Yeah, it seems like a very different type of occupant or tenant. The short-term rental’s definitely going to be more of a party in most cases.

Sarah:
Well, and sometimes these nurses, they’re so tired after a long shift that they’re not even using the unit at all, and so I had a cleaner who messaged me, and the tenant had been there for three months, and the cleaner’s like, “I don’t even think she touched a dish. Nothing in the kitchen looked like it had been used.”

Dave:
All right. I want to talk about a subject that I’ve been very interested recently, which is the regulation of short-term rentals that seems to be becoming more and more common across the US, particularly in big cities. Do you think that, one, I’m just curious about your opinion about that, and do you think that trend is going to continue? If so, could that increase demand and maybe supply, like could more short-term rental people start getting into mid-term rentals? Zeona, I’m curious what you think.

Zeona:
Yeah, I mean, I do think that trend is continuing. It seems like most places have already outlawed it that are going to do it, but I still hear about like it started with the cities and then it kind of leaks out, right? Because people are like, “Well, if it’s illegal in the city, I’ll just be right on the border,” which I think is a great strategy. So, they’re starting to say like, “Oh, no. Now it’s the county,” or this or that. So, that is still changing. I see that a lot in Colorado where I live. So, that I think will continue.
I also think that there’s just a trend now towards more urban markets. Just the way that things are happening with a recession happening or on the rise, it just seems like people are scaling back on their travel. So, first they’re not going to do plane travel, so they might cut out Hawaii and Mexico or something, and then I think it moves towards the vacation rental markets where they’re like, “Let’s just drive. We’re going to drive to Orlando.” Or, “We’re going to go to the beach.” Then later, as they get a little more scared, which I’ve been seeing lately, people are saying, “I’m just going to do necessary travel. We have to see our family in Omaha, we’re going to go there.”
So, that ends up being more urban, and I just feel like that’s a little bit safer than buying in these markets where they may stay vacation rental friendly, but they don’t allow you to pivot your strategy. So, if you’re in a place where, I mean, for example, the Smokey Mountains, it’s like people that live there and work in the restaurants or cleaning ladies, they’re not going to rent out your place for $5,000 a month, which is what people’s mortgages tend to be. So, I feel more worried about buying something without a backup plan, right?

Kathy:
Yeah, it just seems like there’s not as much competition for it, whereas there is with STRs. That’s been one of the issues I’ve seen, and that Airbnb came out with saying that, “Yes, there’s actually more people using short-term rentals, but hosts are actually making less because there’s so many more units available.” But, would you say that’s the case with medium-term rentals too? There’s more and more people getting into it?

Sarah:
Well, it’s really interesting. I love talking about the competition because if you’re a listener thinking about turning one of your units into a medium-term rental, what I encourage you to do is go to a website called furnishedfinder.com, and look as if you are a renter, like you’re going to rent a place, and you’ll really quickly see that the units are, I don’t have a nice way to say this, they’re just not as aesthetically pleasing, whereas there’s a lot of beautiful listings on Airbnb, and so competition is so much higher on Airbnb for short-term rentals. Whereas Furnished Finder, which is where I find most of my tenants, I don’t have any competition in Omaha. “Come at me, you guys.” No.
But, what I find is that I’ve had tenants actually say that. So, I had a tenant who was willing to live in a hotel for two and a half weeks, waiting for my unit to come available, and so the first thing I asked as an investor was, “Oh, my gosh, are there no other units?” Meanwhile, I’m texting my agent like, “Must buy more MTRs.” And she said, “No, no, no. There are other units available, but they’re all granny units, none of them are cute like yours. I’ve been a traveling nurse for two years and I’m just sick of living in ugly places, and so when I saw your unit, I’m willing to wait for it to come available.”

Kathy:
So, how does Furnished Finder work? Do you just list your property there and is that the main site that you use?

Zeona:
That’s a great question, Kathy, because at BPCON I realized people don’t know how to use Furnished Finder, so I’m like, “Trying to get the word out.” So, the difference between Furnished Finder and a website like Airbnb is that Airbnb is a booking platform. So, people actually go on there and they book your place through the platform and they market it through there. With Furnished Finder, it’s more of a lead generation platform, and so what they’re doing is they’re capturing people’s information and then they just give you a list of potential tenants, and then from there it’s kind of your job to reach out to these people.
So, they can reach out to you, but you’re not going to see many requests coming through. There’s just like a lot happening. But, if you reach out to people and are proactive, you can have just a copy paste template that’s really easy and just blast that out when you’re doing your tenant searches. But, it’s not that labor-intensive because you’re only looking for tenants maybe a couple times a year. It could be twice a year, it could be three times a year. So, I find that that just makes it a little bit easier.

Kathy:
Sounds like an opportunity for someone to create an app. BiggerPockets, for medium-term rentals.

Dave:
Yeah. Well, we’ll get right on that. I’m curious, it’s sort of along the line of Kathy’s question. In the short-term rental market, there have been some companies that have sprung up with data about demand and pricing, like AirDNA or there’s some other ones. Does that exist for medium-term?

Sarah:
It does. That same website, Furnished Finder, if you go to furnishedfinder.com/stats, that’s where a lot of the data we’re using, we get. It was fun, I actually was using it just this morning before this podcast, because I had a consultation with an investor outside of Salt Lake City, and her area… Sorry, I’m going to go ahead and tell you the market, so now everyone’s going to go there, but it’s Ogden, so it’s just north of Salt Lake City. There were only four listings that rent the entire unit, whereas the other, I think it was eight listings are all only a room in someone’s house. So, that’s a concept we haven’t really touched on is that you can rent a portion of your house to a medium-term tenant as well, and that’s obviously really common, it’s more common in Ogden, for example, there were more listings where you just rent the room than the entire unit.

Kathy:
Wow.

Dave:
Yeah, this is pretty cool. I’m looking at it right now. It seems like if you are curious about this, you can go on furnishedfinder.com/stats, we’ll throw a link to that and you can type in a city and get some information here. I obviously can’t look at all this, but it does seem like there’s some really good ways that you can start measuring demand and seeing where there might be opportunities for you.

Kathy:
So, Sarah, on your Facebook page, I saw you were showing one of your latest renovations and what you do for decorations that attracts nurses and has them want to come back and stay and tell their friends, which I imagine is a thing, there might be some referral in there. So, what are the kinds of furnishings that you want to put in your rentals to make it cozy?

Sarah:
Yeah, absolutely. It sounds silly, but I have always have a $250 coffee table book budget. They are aesthetically pleasing, they photograph well, they’re easy to clean, they’re not going to break, and so I always recommend coffee table books. You want to create texture and depth in your photos, and so that’s a really easy, cheap, beautiful way to make your listing pop, and then the other’s throw pillows. So, many times I see a couch that has either no pillows or they’re just a solid color, no texture. That’s a really inexpensive way to do that. I prefer ones where you can take the cover off and wash them in between guests, but those are two of the most inexpensive ways to do it. Some staples that you have to have in a medium-term rental are blackout curtains in the bedroom, and then I really like using rugs.
So, I go to a store called At Home, and they actually have washable rugs for under $300, and so that really brings a room together, and then I beg everyone, “Please go bigger when you’re buying rugs.” I can’t tell you how many listings I see that have a little three by five in a 15 foot living room, and I’m like, “Oh, man. Why not a bigger rug?” People are so afraid to buy bigger rugs. But, those are some quick tips.

Kathy:
That’s a really good point. I know Rich and I looked up, you can actually look up online what your rug should look like to really make the room look bigger, or its own space, and there’s rules around that. So, yeah, follow the rules. Zeona, how about you? How much do you generally spend on the furnishings?

Zeona:
Oh, well that really depends on the size of the unit. So, I did a unit recently that was two bedrooms, and spent about 8,000, and that was also paying the two helpers that built all the furniture and put it all together. So, it doesn’t have to be crazy expensive. I’d say, again, I don’t like rules of thumb because it really depends, but you can probably get a one bedroom unit for about 5,000 if you’re doing it yourself and it’s all new, and then each bedroom after that might be an additional 2000. Then, yeah, there are companies, Sarah offers us, that will do the furnishing for you. So, they’ll either, on their highest tier, fly out there, on a lower tier, they might just give you a furnishing list, and in the middle, maybe they’ll design the room specifically, but then you have to put it all together.

Kathy:
Where on earth do you shop that you can get prices like that? Because I need to read the book a second time.

Zeona:
So, mostly, let’s see what we do. We do a lot of Wayfair, Amazon, Target, and then we love HomeGoods. So, Amy Levine is on my real estate team and she furnishes all the medium-term rentals in my market, and so we go together and do, she does all my units. Yeah, we love going to HomeGoods.

Kathy:
On a Wayfair, there’s a section that’s more like commercial use furniture. Do you use that, or just regular stuff?

Zeona:
I don’t know that we have, but honestly, Amy picks everything out, and then my assistant orders it. So, I just show up and it’s there. So, I can’t claim to be like that cool.

Kathy:
Because you’re in Hawaii, you’re in Thailand, you don’t have time to be furnishing. I got a lot to learn from you two.

Dave:
It is suffocating.

Zeona:
I know. Let me tell you a little story. So, the last place that I bought was in Denver, and the reason I bought it is because I had this 1031 exchange that didn’t happen, and I had it all planned out, I was like, “Oh, I’m going to buy this place, it’s going to be great, and I have all this time,” and then we ended up buying the place without using the 1031 exchange and then had to find a place fast, and it was just bad timing.
So, the place I found was in Denver, it was like two days before my exchange expired, and I was like, “Oh, my God.” So, I was like, “We picked Denver because it’s close to home. I could just go there and physically furnish it. It’s going to be so easy.” Well, I didn’t think, but actually I was going to be in Europe when I was closing on that place, so I was like, “(Censored) it.” So, I had two of my helpers go do everything, and it turned out beautifully. I still haven’t seen it furnished. Oh, actually I did once. But, yeah, it’s just one of those things where I don’t really know where I’m going to be, and I have helpers for that.

Kathy:
Do you just give the helpers a budget and they just pick out stuff? Or, do they send you… I’m saying this because I just went through it and it was not fun for me at all to do from a distance.

Zeona:
Yeah. Well, Kathy, if you pre-order our book, it comes with a furnishing spreadsheet, and so that’s a great guide. But, yeah, furnishing spreadsheets, I think, they’re like a general rule, and then you have to kind of think, “What is the style? What’s the age of my place? What is it kind of asking for?” And then you customize some of the things. So, we’re always changing things a little bit. But, yeah, I mean, happy to help you the next time you want to do something good.

Kathy:
Thank you.

Sarah:
Yeah, that’s really how my company came about is people saw that I furnished a place in Nebraska while I was living in New Zealand and messages started coming in saying, “Oh, my God. Can you do mine?” At first I was like, “No, because I’m busy, I got other businesses,” and then the entrepreneur in me was like, “Wait a minute, this smells like an opportunity.” So, that’s how Arya Design Services was born, and now just this year alone, we’ve done 27 units in 11 states. So, please tell everyone how terrible it is to furnish your own unit, so that I can get more people using our services.

Kathy:
Wow, that’s a great offer. Yeah, that’s a great service.

Dave:
Yeah, having done a short-term rental myself, furnishing, it’s absolutely miserable. Especially if you don’t know what you’re doing, which I definitely did not know what I was doing, getting into.

Sarah:
He’s texting someone like, “Okay, don’t let Sarah see my three by five rug.”

Dave:
No, I did. I was smart enough to hire an interior designer. I am horrible at design. But, then I went and picked up literally 183 boxes from Ikea, that was one of three runs, and did it all myself, and tricked my friends into helping me. It was absolutely miserable.

Kathy:
And then putting all that stuff together, did you guys do that?

Dave:
Oh.

Kathy:
Oh, no.

Dave:
I did a build your own bed party. I invited my friends, but there were no beds so they could come stay at the house because it’s a cool house, but didn’t tell them that there was no beds. So, then when they got there, they had to build their own beds so they had a place to sleep.

Kathy:
Oh, [inaudible 00:35:01].

Sarah:
That’s amazing.

Dave:
But, seriously, that’s how you have to do it. You have to trick people into helping you.

Kathy:
Or, read their book.

Dave:
Or do it the professional way. Sorry.

Sarah:
Exactly. No, I have some things on the furnish list that they look great, it’s within my budget, but putting it together will make you want to throw the nightstand out the window, and so I never will buy that nightstand again. So, you can rest assured that everything I buy, I have put together myself, and I’m not saying putting it together is fun, but there are things that like never again will I buy that nightstand.

Kathy:
Zeona, how do you find people that they’ll just put the stuff together for you and they like that, that’s their thing?

Zeona:
Well…

Kathy:
I paid my kids to do it, but…

Zeona:
Well, so Amy is a machine. So, Amy Levine that I work with here, it’s crazy. You give her a drill and she just puts stuff together in moments. So, I am really bad at that. I am just not… I’m like, “I will unpack the boxes, I will put things where they live, but I’m not going to build anything.” I’ve seen her really upset around a credenza. It always seems like the credenza brings people down. But, now, yeah, I’ve had a few different assistants that help me with it. I have my showing assistant, she loves to build furniture, so that’s good. Sometimes you bring in a handyman, but I’d say Taskrabbit, if you’re just kind of in a new market and you don’t know people, Taskrabbit’s a great option. Just have them build everything at once, and then help you move it around.

Kathy:
Well, I just think we have to find out where the best place you both have gone to visit while you’re making all this money from your medium-term rentals.

Dave:
Good question.

Zeona:
That is a good question. So, do you have one, Sarah? I have to think.

Sarah:
Yeah, yeah. I keep going back to Antigua Guatemala. It’s great as a digital nomad because it’s Central Time Zone. So, the time zone’s a lot easier than Asia. The price is amazing. I can live like a queen for $1,100 a month, and the flights there, you can fly direct to Miami, Houston or LA for like $79, and so Antigua Guatemala has become my second home, or home away from being homeless.

Dave:
Sounds amazing.

Zeona:
Yeah, I spend a lot of time in Europe and Hawaii because that’s where… My partner’s from Europe, I’m from Hawaii, so we kind of go both of those places a lot. But, for ease of time zone, going down to Mexico, I like doing that a lot. So, Sayulita is a fun place. I like that there’s surf and then also there’s a lot of yoga and healthy food and things like that. So, yeah.

Kathy:
I love Sayulita. Yeah.

Zeona:
Good taste.

Sarah:
Okay. I am not a fan, so I went to Sayulita with Soli. I think you guys just had her on the podcast, Lattes & Leases. We both got a parasite.

Dave:
Oh, no.

Kathy:
Oh.

Sarah:
So, it’s funny how, as a traveler, some places are like, “Yeah, that’s great. I’m so glad you love it.” I’m like here with clinched teeth, like, “Never again will I go there.” But, obviously it’s not the entire town of Sayulita’s fault that we got sick, but…

Dave:
So, before we wrap up, since the show is On the Market, I need to ask you both a little bit about the housing market and how you’re preparing, or are you making any adjustments to your business based on some of the shifts that we’re seeing in the housing market? Do you think medium-term rentals are going to keep going up? Are you adjusting at all? Curious to hear your thoughts. Sarah.

Sarah:
Yeah, so I’m doing a mixture of two strategies. I’m doing out-of-state investing to keep prices lower, and then using the medium-term rental strategy to keep rents high. I find that that’s been the best way to battle inflation, rather than have my money in a money market account, or God forbid, in a checking account. I want to put as much money into real estate as possible. But, then we have these higher interest rates, and so I find that, with the increased cash flow and increased rental income that I’m getting from the medium-term rental, it’s one of the best ways to combat the higher interest rates.

Zeona:
I am a believer, I’ve seen a few trends now since I’ve been in real estate like 10 years, is that the rents are always lagging behind the mortgage prices, and so even though people are seeing softening in their markets, it’s not necessarily that buying a home gets cheaper, it’s just that the interest rates make it so expensive that actually the mortgage price that they’re paying every month is still really high and still getting higher in some places, and so rents have to catch up with that.
Of course, some places, people have owned it for 10 years and they can charge a cheap rent, but for new investors coming in the market, they need to cover their mortgage, and so this idea that like, “Oh, I’m going to save money and be in a cheap rental forever.” That’s not real, that’s not going to happen. So, for us, I see that there’s a lot of demand which helps low supply, and then rents are continuing to come up, and that’s just really going to help us grow. Then of course if you can specialize and get these really high contracts from insurance agencies, that’s going to be a huge bonus.

Kathy:
Yeah, yeah. My daughter experienced that with the California fires just by accident, where she had put her home on the short-term rental Airbnb market, and then when the fires happened in Paradise, California, just the whole city burned down, she was getting calls from insurance companies saying, “Please, this family will pay $3,500 a month,” when her rent had been, or her mortgage was 1200. So, she experienced that firsthand, and then built that relationship with the insurance company. So, when that family left, they had someone ready for her. So, I can see how you want to get to know the insurance companies.

Dave:
All right. Well, thank you both so much for being here. This has been a pleasure, and congratulations on the new book. Is there anything else, Zeona, you think our audience should know about medium-term rentals before you get out of here?

Zeona:
I can’t believe we didn’t mention this, but Kathy wrote the foreword to our book, so that was especially why we had her here. So, definitely go in and read that, guys. So, if you guys pre-order our book now, and that is at biggerpockets.com/pod30, I believe you can use any of our names for 10% off. You get a bunch of bonus content. So, we did some cool behind the scenes interviews with other investors, on furnishing, on whether you should turn your short-term rental or long-term rental into a medium-term rental, we’ve got the furnishing list, we’ve got an analyzer tool, and then there’s going to be a webinar with Sarah and I, in December, for everybody who pre-ordered. Then the last thing is that one lucky person is going to win a one-on-one call with both Sarah and I. We both do consulting on our own, and so that’ll be really fun. I’m excited about it because I don’t know how she consults versus how I consult. So, it’s really just like selfishly awesome.

Dave:
So, both of you’re going to be consulting with one winner?

Zeona:
I know. Their head’s going to explode.

Dave:
Wow.

Zeona:
It’s going to be crazy for us.

Dave:
That’s going to be very valuable. That’s amazing.

Kathy:
Yeah.

Dave:
Well, that’s definitely worth… I mean, the book seems great, so you might as well pre-order and get a chance to win that incredible additional value.

Sarah:
Oh, thank you, guys. We really appreciate it.

Dave:
Does Kathy get entered to win? She wrote the foreword. I mean-

Zeona:
Yeah.

Dave:
… she should probably get entered.

Sarah:
Kathy can call us anytime she wants.

Kathy:
All right.

Sarah:
Actually, for Kathy, I’ll fly to Malibu and do all of our strategy sessions in person.

Kathy:
Let’s do that. Okay.

Zeona:
That’s what I said too. I was like, “Hmm, let’s make this a little more attractive.”

Dave:
Kathy just has the trump card. Yeah, she just is like, “Anyone will go consult for Kathy. You just go get to hang out in Malibu. It’s amazing.”

Zeona:
Come on out, pick the date.

Dave:
Awesome. Sarah, what about you? Any last thoughts on medium-term rentals that our audience should know about?

Sarah:
I think, for investors out there that are thinking, “Oh, yeah. It sounds great, but…” Or, “I’ve always wanted to do that, but…” My biggest urge is to just try it. The best thing that I ever did in my twenties was just buy real estate. I didn’t have all the answers, I didn’t have community, I didn’t have masterminds and coachings and mentors. I just went for it because that’s my personality, and it’s the best thing I could’ve ever done. So, we joke about all the travel that we get to do, but my life is only possible because I chose to invest in real estate, and so if you’re listening to this podcast and you want to own more rentals, you want more cash flow, I urge you, don’t wait, just do it.

Zeona:
I second that.

Kathy:
Yeah.

Zeona:
Time. Time is what makes you wealthy. You can make all the mistakes and it’ll correct you over time.

Dave:
That’s a good way to put it, for sure. Well, Sarah and Zeona, thank you so much for being here. We really appreciate it. Congratulations on the new book. I’m super excited. I’m going to come to that webinar for sure.

Kathy:
Yeah, me too.

Dave:
I sort of swore off active investing when I moved to Europe, but now you all are inspiring me. Maybe I need to get off my ass and start doing things directly again. Thank you for being here, and we’ll post all the information about the book in the show notes as well, if you want to find a place to pre-order and get attached for all of that. Hopefully, we’ll have you on again soon when maybe next year we’ll learn more about what you all are up to.

Sarah:
Thank you.

Dave:
All right. Well, I guess I could ask you what you think, but now I know that you wrote the foreword to this book, so I already know what you think. You think this is cool, right?

Kathy:
I think it’s so cool. What BiggerPockets brings to the table is just so much youthfulness, so many new ideas, new techniques, and this is one of them that I had heard about. There’s been a few people out there talking about it and doing it. I just never really understood what kind of demand was out there for it. I knew traveling nurses, but how many are there, and then we heard that that number’s increasing dramatically. In fact, they said there’s almost more traveling nurses than full time. So, this is just great information. I love all the fresh ideas that BiggerPockets brings.

Dave:
Yeah, it’s super cool, and I think that the work from home thing really will add significant demand there. There is a lot of chatter about work from home declining a little bit, but if you look at the data, it’s pretty stable. It’s staying where it was six months ago, and if there’s a recession and the labor market really changes, that could make a difference. But, I’m guessing that we’ll still keep pretty high elevated levels of work from home for a while, and I think those people, it sounds pretty fun, right? If you had a family and you could work remote and rent a lake house or something over the summer, or go visit family instead of staying in a hotel. It is a really intriguing option for people who don’t… I guess location independent is the word I did not know, but people who are location independent.

Kathy:
Well, especially in this market. On today’s market where the employee has the power, because there’s just not enough employees out there for all the employers that want them. So, I’ve heard that employees are making the demand, “Yeah, I’ll work for you, but on these conditions. I want to be remote, I want to be independent.” So, it is a really exciting thing. We’ve been doing it at RealWealth. For 12 years, we’ve been a remote company.

Dave:
Oh, really?

Kathy:
Yeah. Yeah, because Rich and I wanted to live in Malibu, but we didn’t want to have an office here and our employees didn’t want to move, so it just made sense that… So, we’ve been doing the whole Zoom thing and it started with GoTo Meeting and so forth, and using online systems like Basecamp. So, yeah, I just think more and more companies learned that, “Wow, you can really broaden your pool of potential employees if you can hire anyone from anywhere and not have to move them.” So, a lot of stodgy companies learned some new tricks over the last two years that they might really like, and then cutting back on office space, why would you not? Companies are going to want to cut their budgets. So, yeah, I think the 30-Day Stay, well, it’s a great book, I loved writing the foreword for it and getting to know them better. I’m going to read the book a second time. You and I, I think we have a competition now. We got to go do this.

Dave:
One of us has to do it first. Yeah, I’m already thinking, I have some markets in mind.

Kathy:
Good.

Dave:
Maybe this will be… We’ve already all been talking about how On the Market, our cast, needs to buy something together. Maybe it’ll be a medium-term rental.

Kathy:
Yeah, either we buy together or even just looking at something maybe you own that’s underperforming.

Dave:
Oh, that’s true.

Kathy:
I have a Cleveland property that’s a really nice property. It just never occurred to me to…

Dave:
Oh, that’s a great idea.

Kathy:
It’s a decent income, but wouldn’t it be nice to double it?

Dave:
Yeah, yeah, that would be awesome. I really liked what Sarah is saying, because I guess in my head I don’t know a lot about mid-term rentals but I will read the book, is that I’m always just worried about the regulation. Because right now it’s like 30 days, and I kind of just worry about city’s just moving the goal posts. Like If everyone’s like, “Okay, 30 days,” then the city comes back, they’re like, “Okay, it’s 45,” and it just becomes this game. But, I really like what she said about doing this even in markets where short-term rentals are allowed, because sort of like you’re saying, repurposing an existing property, now that gives you three options. You could have short-term rental, medium-term rental, or a long term rental. It’s the type of maximizing your exit strategies we talk a lot about on BiggerPockets, this is just one more way you can make a lot of cash flow and just keep optimizing your existing portfolio based on current market conditions.

Kathy:
Yeah, and I don’t really worry too much about the regulatory part of it because you just can’t stop progress. People want to and they don’t want things to change. But, look at Uber and all the pressure from the taxi industry saying, “You can’t be here.” They’ve kind of learned to coexist, and I think that’s what we’re going to see here. That 30 day has been pretty common, the month to month lease is 30 days. So, I don’t know, I can’t imagine they can mess with that too much. So, it does seem like a great option if you want that higher income from a furnished rental, but don’t want to deal with regulations on the short-term.

Dave:
Yeah, for sure. It’s really interesting. I think in Arizona maybe, the Supreme Court ruled that the regulations on short-term rentals went against the state’s constitution. So, I’m curious that like it could go that way too and open up more short-term rentals. But, I think we’re just sort of at this weird pivot point now where regulations are coming, maybe they’re illegal, I don’t know. Or, maybe there’ll be more of them. But, I love that idea of just having a lot of optionality. Makes it pretty safe. All right. Well, thanks, Kathy. It was fun as always and appreciate it, and obviously I should’ve known that you wrote the foreword to this book, but it was fun to have someone who is so knowledgeable about this topic. Join for this episode.

Kathy:
Thank you. It was fun. I love being here.

Dave:
All right. Well, thank you all for listening. If you enjoyed this show, please make sure to share it. If you think there’s people you know who would be interested in medium-term rentals, send it along so they can hear about the book and learn from Zeona and Sarah directly. With that, we will see you next time for On the Market.
On the Market is created by me, Dave Meyer and Kalin Bennett. Produced by Kalin Bennett, editing by Joel Esparza and Onyx Media. Copywriting by Nate Weintraub. A very special thanks to the entire BiggerPockets team. The content on the show, On the Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

 

 

Watch the Podcast Here

In This Episode We Cover

  • The medium-term rental strategy explained and in which markets it works best
  • Medium-term rentals vs. short-term rentals and the differences you can expect in cash flow, occupancy, and property price
  • How high inflation and limited discretionary spending will affect the medium-term rental market 
  • The hands-off management style medium-term rentals provide investors
  • Furnishing your rentals for cheap and how to have a headache-free setup
  • Rental regulations and how new laws could affect medium-term rental investors
  • And So Much More!

Links from the Show

Book Mentioned in the Show

  • 30-Day Stay by Sarah Weaver and Zeona McIntyre (Use Code “SARAH” or “ZEONA” for a discount)

Connect with Sarah & Zeona:

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.