Pricing Rents for Midterm Rentals

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Pricing Rents for Midterm Rentals

Rae Targos
New to Real Estate · Fort Lauderdale FL and Sag Harbor, NY · Member since 2022 · 9 posts · 8 votes

Hi All,

I'm currently looking for a property to turn into a midterm rental in 2 different markets.

Both agents I'm working with are investor-friendly, but one has no experience with MTR and the other tells me I can charge 25% more for MTR.

With that pricing strategy, the properties I've looked at so far will actually yield better cashflow as an LTR. For example, one property we looked at would rent for $1100 per unit LT, but around $1300 for MT -- but utilities will be more than $200 per month. 

Unfortunately, there aren't any good comps on Furnished Finder. Many of them are a bedroom in an owner-occupied residence or a co-living type situation.

How do you price your midterm rentals? I'm beginning to think I can charge more than 25% extra.

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Ron Brady
Rental Property Investor · Burlington County, NJ · Member since 2019 · 540 posts · 771 votes
4y

We look at extended stay hotels rates and on Airbnb.  With extended stays, we pick the service level at which we seek to compete, e.g. Extended Stay America v Residence Inn by Marriott. On Airbnb, we search in our area for stays of no less than 30 days with all the amenities we offer--location, parking, number of bedrooms, etc.  Using all of the data above, we price our offerings at the point in the market where we think our value proposition is the highest.  It has worked so far, but we have so few that it's possible we've just been lucky, versus actually skilled, so far. Thus we ask that you take the above information with the appropriate grain of salt. 

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  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    4y

    I look at extended stay hotels. 

    6Reply
  • Sean Bramble
    Investor · United States · Member since 2020 · 202 posts · 284 votes
    4y

    I’ve been wondering about this myself. It’s hard enough to comp STRs bc less-than-optimized pricing can suppress total revenue significantly even if the property & mgmt are otherwise comparable to what you feel you can deliver. I wouldn’t even know where to start for MTRs. Seems like the Wild West when it comes to underwriting, but my hunch is there is profit waiting for you on the other side if you persist.


    I’m sure this will evolve over time as more municipalities ban STRs and operators convert them to MTRs. Hopefully the big data companies will start tracking statistics as that happens 

    0Reply
  • Sean Bramble
    Investor · United States · Member since 2020 · 202 posts · 284 votes
    4y

    Not sure if this helps, but I’ve seen a few furnished apartment companies pop up where I live (Brooklyn). That’s probably where I would start here since I would likely be buying an apartment to MTR, but not sure if your market has anything similar … NYC is a unique market for sure

    0Reply
  • Carolyn Fuller
    Cambridge, MA · Member since 2015 · 651 posts · 736 votes
    4y

    I think extended stay markets & platforms vary a great deal by locale. College towns have SabbaticalHomes for a platform. It gives us the same window into what our competitors are charging as Airbnb and VRBO provide for the STR market.

    Personally, I don't think it is likely that STRs will convert to MTRs in any great numbers. In fact, I've witnessed first hand what happens with STR listings when they get regulated out of business. Boston had over 3000 listings that were kicked off the STR platforms overnight. I was waiting for them to flood the MTR market and none of them did. I think originally a lot of them tried converting to over 30 night stays but they still listed on Airbnb and VRBO. I suspect that was a bust. The service fees that Airbnb & VRBO charge on MTRs is just too high to be sustainable.

    I don't know exactly what happened to those 3000 listings but they certainly did not show up on any of the MTR platforms I have used.

    The target audience for the 2 markets is quite different. Yes, during the pandemic, many people working remotely decided to take advantage of the opportunity to go to new and different places and rent STRs for longer periods of time. But this year all of my STR bookings are for typical vacation time slots of one week or less.

    If I did not have my visiting scholars, there is no way I would keep my MTR rentals fully leased. The two markets are not interchangeable. 

    3Reply
  • Rae Targos
    OP
    New to Real Estate · Fort Lauderdale FL and Sag Harbor, NY · Member since 2022 · 9 posts · 8 votes
    4y

    @Carolyn Fuller Thank you.

    0Reply
  • Ron Brady
    Rental Property Investor · Burlington County, NJ · Member since 2019 · 540 posts · 771 votes
    4y

    We look at extended stay hotels rates and on Airbnb.  With extended stays, we pick the service level at which we seek to compete, e.g. Extended Stay America v Residence Inn by Marriott. On Airbnb, we search in our area for stays of no less than 30 days with all the amenities we offer--location, parking, number of bedrooms, etc.  Using all of the data above, we price our offerings at the point in the market where we think our value proposition is the highest.  It has worked so far, but we have so few that it's possible we've just been lucky, versus actually skilled, so far. Thus we ask that you take the above information with the appropriate grain of salt. 

    7Reply
  • Rae Targos
    OP
    New to Real Estate · Fort Lauderdale FL and Sag Harbor, NY · Member since 2022 · 9 posts · 8 votes
    4y

    Thank you @Ron Brady. That makes complete sense. I definitely don't think 25% more for MTR makes sense at all. It won't cover the cost of utilities, let alone lawn care, advertising, vacancies, and the cost to furnish. The properties I'm looking at would need to charge about 50% more than LTR rates to cover the added expenses.

    3Reply
  • Jared HottleBusiness Member
    Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
    4y

    Have a few midterm rentals and this is difficult when not a lot of comps but I think it needs to be closer to 50-75% more. midterm rentals want their own place and have the money to afford it and the inconvenience for you (furnishing, utilties, extra cleaning, higher vacancy, etc) has to be worth it. I think if you cannot get 50% more it is better as a long-term rental or short-term rental more than likely. 

    [email protected]319-288-5382
    Jared Hottle Real Estate59 Reviews
    WebsiteView Page
    2Reply
  • Rae Targos
    OP
    New to Real Estate · Fort Lauderdale FL and Sag Harbor, NY · Member since 2022 · 9 posts · 8 votes
    4y

    @Jared Hottle Thank you for your response. Agreed. I was looking to do a rent-by-the-room strategy and only settled on midterm last week, so I, unfortunately, passed up a deal 2 days ago because I wasn't well-researched.

    Since then, my realtor has checked all of her utility bills and I came up with a range to expect based on number of people and square footage. I got estimates from landscapers. I did some more digging to find better midterm comps. The ones I've found in my market are charging about 60% more than LTR on average.

    Charging 50% more would essentially break even with LTR cashflow, but you'd still have the added expense of furnishing and extra vacancy. So at least 60% more seems necessary.

    0Reply
  • Nicole McCormick
    Member since 2021 · 6 posts · 2 votes
    4y

    If you are promoting a MTR on an AIRBNB how can you explain on line this isn't for a quick weekend? Is their a symbol or something you put next to it? 

    0Reply
  • Carolyn Fuller
    Cambridge, MA · Member since 2015 · 651 posts · 736 votes
    4y
    Quote from @Nicole McCormick:

    If you are promoting a MTR on an AIRBNB how can you explain on line this isn't for a quick weekend? Is their a symbol or something you put next to it? 


     No symbol. You set a minimum number of nights to be whatever your minimum is (e.g., 30 nights). Most people searching for an Airbnb will search for specific dates. If someone wants a weekend, the MTRs don't appear in the search.

    1Reply
  • Ron Brady
    Rental Property Investor · Burlington County, NJ · Member since 2019 · 540 posts · 771 votes
    4y

    to signal that the property is a mid-term rental we make the minimum stay 30 days and we note our ideal customer in the property title, e.g. "Philadelphia Upscale Condo - Perfect for Extended Stays"

    2Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    4y
    Go on some of the travel nurse facebook pages. People are constantly listing their available units so you can start to get a feel for what people are asking and how it compares to your space.
    [email protected]
    2Reply
  • Carolyn Fuller
    Cambridge, MA · Member since 2015 · 651 posts · 736 votes
    4y
    Quote from @Bonnie Low:
    Go on some of the travel nurse facebook pages. People are constantly listing their available units so you can start to get a feel for what people are asking and how it compares to your space.

     At least in the Boston metro area, I found the prices listed on Furnished Finder (a website used by a lot of traveling nurses) to be unbelievably low, so much lower that I wondered if they weren't mostly fraudulent listings. The prices were lower than equivalent unfurnished long term rentals.

    1Reply
  • Sara Frank
    Realtor · Baltimore, MD · Member since 2020 · 255 posts · 182 votes
    3y

    Look at airbnbs and extended stay hotels if you dont have a lot of FF comps 

    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    25% is highway robbery. Only way I would pay that is if they can guarantee i have no vacancy. Industry standard is 15-20% and thats on STR stays (more work).

    0Reply
  • Jesse Vasquez
    Investor · Modesto, CA · Member since 2020 · 32 posts · 19 votes
    3y

    There’s a few ways to do this, first is you can just look at FF comps and go from there. 

    Id look at both FF and Mashvisor/Airdna, find comparable airbnbs that have similar stature, size, etc. you can then at a variance ( most 30 day stays on airbnb offer discounts 10-15$ per mo .

    EX. If you see a comp on mashvisor that shows similar 3/2 rents for $1000 a mo you can expect to rent 10-15% especially if you connect with agencies and travel nursing companies. You go direct to agency b2b build a relationship. 

    1Reply
  • Jared HottleBusiness Member
    Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
    3y

    Rae, pricing has been difficult. I think you need more than 25% above to make it worth it. Especially if you are in a seasonal area and have any winter vacancy. To me the unknown of utilities and vacancy mean I need to build in more on the top end to justify. Especially with the increase in long-term rent availability. 

    [email protected]319-288-5382
    Jared Hottle Real Estate59 Reviews
    WebsiteView Page
    0Reply
  • Jim Hudelson
    Member since 2020 · 34 posts · 19 votes
    3y

    We have a rental that we offer as short term on VRBO.  It's in a college town/small city.  We offer roughly a 40% discount of our nightly rate for 1 month (plus).  We prefer one month (+) stays for multiple reasons and push this in our property write up on VRBO.  We get a lot of stays that match what we are looking  for and it works out great for us.

    So, talking numbers, we average about 3,000 per month.  It goes up in the summer and (way) down in the winter.  We could probably pull 1800-2000 with it as a long term.  With the lag time between stays we pull in 25k-30k annually.  This is fine for us because we also use the house and REALLy enjoy being there.  I think that if we didn't use the house ourselves it would be a lot easier to rent it Long term.  That said, we enjoy 'the game'.  Hospitality is a blast when it goes right!

    0Reply
  • Joseph Hammel
    Rental Property Investor · Lake Hallie, WI · Member since 2015 · 292 posts · 144 votes
    3y

    I bought a nice motel in sept 21. 10 rooms, 8 of them with kitchenettes. I have about 6 long term and get 665-700. For MTR I charge 795-945. They are all furnished and include all utilities. My vacancy is nearly nothing. Every room can be either long term or short depending on the tenant that wants it. 

    0Reply
  • Bonnie LowPro Member
    Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
    3y

    Sadly, most Realtors are not investors themselves and even fewer are familiar with the nuances of each market niche. Unless you are working with an agent who is a seasoned investor with direct experience owning properties in the same niche you're pursuing, I wouldn't use them as your sounding board. Use them to help you locate a property, to pull comps for the purpose of determining if the property is priced well, will appraise as expected and even for ARV if you plan on doing any improvements, but I wouldn't expect them to be able to accurately project rents. That said, some real estate brokerages also offer property management services. If so, they are likely to know typical long term rents for your area. But once you start deviating from unfurnished long term rentals, it becomes much more nuanced. Midterm renters run the gamut from college students to seasonal workers to travel nurses to digital nomads to corporate executives to insurance placements and they all have their own expectations and cost threshold. So first, determine what kind of customer avatar your property will appeal to. If you've got a very basic, utilitarian property you're at the lower end of the spectrum. You won't attract high paid digital nomads looking for experiential stays or corporate executives. You'll probably attract college students, laborers, and maybe travel nurses on a tight budget. If you have a very nice 3+ bedroom home in a nice neighborhood and good school district you're probably a great candidate for relocations, corporate rentals or insurance placements. Pricing between these two types of properties is going to vary GREATLY. That's why the metric of 25% more than long term rents is just not a good rule of thumb. Go on sites like Furnished Finder and see how properties comparable to yours are priced. Comparable in location, amenities and furnishings is key. Airbnb has a category for longer stays. Check out those properties in your areas as well. These resources will help you determine pricing and can help you understand demand, which will help you do your underwriting.

    [email protected]
    2Reply
  • Jesse Vasquez
    Investor · Modesto, CA · Member since 2020 · 32 posts · 19 votes
    3y

    There not reason why you can't 2x ltr - the beat ways to do this are by skipping the middle man (Airbnb, travel nurses) go directly to the companies

    3Reply
  • Wes D.Pro Member
    Investor · Northern Kentucky | Northern Virginia · Member since 2022 · 46 posts · 39 votes
    3y
    Quote from @Jesse Vasquez:

    There not reason why you can't 2x ltr - the beat ways to do this are by skipping the middle man (Airbnb, travel nurses) go directly to the companies


    I love this idea! Would going directly to hospitals or agencies work to overcome HOA rental restrictions of a minimum of six months? What's a typical lease for a hospital or agency, 12 months? Do you then sublet to the tenant?

    Thanks, 

    Wes Dyck

    Safety Margin Properties 

    0Reply
  • Jesse Vasquez
    Investor · Modesto, CA · Member since 2020 · 32 posts · 19 votes
    3y

    It really depends on the company you’re working with, theres a ton of variables but one thing that pretty awesome is being able to (most the time 2x LTR) sometimes more. 

    Most of our contracts range from 3 months to years depending on the corporation connection. 

    0Reply
  • Wes D.Pro Member
    Investor · Northern Kentucky | Northern Virginia · Member since 2022 · 46 posts · 39 votes
    3y

    Thanks, Jesse, that’s very helpful and exciting. I’ve just finished reading 30 Day Stay by Sarah Weaver and Zeona McIntyre and just now read your case study in the bonus chapter at the end of the book! It’s tremendously helpful. Thank you for breathing new life into my MTR plans!

    -Wes

    0Reply
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