Hi there,
I'm a rookie investor trying to understand the risk/reward characteristics of long term v short term rentals.
I have a hypothesis that the latter would be better for cash flow, but am unsure about that idea in this particular market.
Those who are well versed, can you share your insight? Thanks!
@Gloria N Gear That was very informative. What's your take on the mid-term rental market in Indianapolis? I have a duplex becoming vacant and am considering converting into STRs or MTRs.
I like them -- it is going to my next strategy personally. I have several friends that do it and many OOS investors interested in it. Look up IU Methodist Hospital -- they have a HUGE new hospital being built with 900 new beds that will be completed in 2027 -- I think that is going to bring a lot more MTRs to our area.
Realtor · Atlanta, GA · Member since 2021 · 239 posts · 120 votes
1y
Hey @Jared Michael Semana , that debate or comparison is very market-dependent. STRs and LTRs have their own "cash flow" dynamics, which really boil down to the specific city and neighborhood you intend to invest in.
STRs usually bring in a higher cash flow potential, but also come with higher operating costs, frequent guest turnovers, seasonal price adjustments, etc., etc. If you plan to operate in an area that's event-driven and has high tourism, it may definitely be worth it.
LTRs, on the other hand, may not bring in as much cash flow, but the returns are steady and predictable. Lower turnover and less variable expenses = less volatility. If the RTP in your market is strong, then an LTR should be able to deliver competitive and reliable cash flow.
I look at STR as a hospitality business where you own the building and are unlikely to be able to profit from selling the business portion. It is a lot of work to set up and maintain even with a PM. Starting with LTR may be less out of pocket also because you won't have to furnish and stock it.
Realtor · Indianapolis IN · Member since 2018 · 464 posts · 339 votes
1y
For Indianapolis, STR are going to be mostly for sports and the convention center. During the month of May for the Speedway race, everything in town is booked. We have Caitlin Clark (WNBA), Pacers - made it to the finals, Colts don't look too bad this year so far. The NCAA headquarters are here, so we host a lot of Big 10 and other tournaments. NFL Combine brings in a lot. Olympics swim trials was great. For the convention center, it is smaller but because of our central location, it is booked solid. We are not a resort town though -- there is no mountain or ocean. One of my friends that manages STR says that you have to plan on 47% vacancy because of that. (you may have a convention all week or booked for a football weekend, but not always both).
LTR will always be steady in Indianapolis. Very diverse economy with plenty of blue collar jobs.
@Gloria N Gear That was very informative. What's your take on the mid-term rental market in Indianapolis? I have a duplex becoming vacant and am considering converting into STRs or MTRs.
@Gloria N Gear That was very informative. What's your take on the mid-term rental market in Indianapolis? I have a duplex becoming vacant and am considering converting into STRs or MTRs.
I like them -- it is going to my next strategy personally. I have several friends that do it and many OOS investors interested in it. Look up IU Methodist Hospital -- they have a HUGE new hospital being built with 900 new beds that will be completed in 2027 -- I think that is going to bring a lot more MTRs to our area.