Medium Term Rentals - Next Big Thing?

Carolyn Fuller

Cambridge, MA · Member since 2015 · 651 posts · 736 votes

4y

I have 2 MTR rentals in Cambridge, MA. I turned to STR for one of those rentals to fill the gaps between the MTR leases. The MTR market is my preferred market. I can attest to the demand. Except during the height of the pandemic, both of our units are leased 6 - 9 months prior to the lease start date, which indicates to me that there is huge demand. The only reason I do STR is to allow some flexibility in the start and end dates for the MTR lease.

8 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

No. It's just a numbers game. There are millions of people travelling for fun every weekend, and only thousands of doctors, nurses and business people. (My guesstimate numbers just for discussion)

And I doubt the costs are that much lower. You will pay more in cleaning costs, that's true, but the constant wear and tear will make up for that....and when I've had longer term guests they tend to get too 'comfortable', moving furniture, leaving stuff all over like they do at home...

And the current trend to over-regulate (only in some areas) will settle down as time goes by and STRs become more common and self regulated.

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Sergey A. Petrov

Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes

4y

MTRs are gaining momentum. And a lot of it is market and location driven. A great MTR location is probably not a great STR location and is an ok LTR location. But yes the market is shifting as the STR markets are getting over saturated or over regulated and LTRs no longer pencil as well

Conner Olsen

Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes

4y

It's a great investment strategy and is less work than traditional STR. As Bruce said, there's a significantly smaller market. That being said, the demand far outweighs supply. I'm booked 90%+ with MTR.

11 Reply

Robin SimonBusiness Member

OP

Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes

4y

Quote from @Conner Olsen:

It's a great investment strategy and is less work than traditional STR. As Bruce said, there's a significantly smaller market. That being said, the demand far outweighs supply. I'm booked 90%+ with MTR.

It definitely varies by market, especially depending on the local regs. I know many that have had huge success with it here in Austin because of the uncertain/unstable STR regulatory regime

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Conner Olsen

Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes

4y

Quote from @Robin Simon:

Quote from @Conner Olsen:

It's a great investment strategy and is less work than traditional STR. As Bruce said, there's a significantly smaller market. That being said, the demand far outweighs supply. I'm booked 90%+ with MTR.

It definitely varies by market, especially depending on the local regs. I know many that have had huge success with it here in Austin because of the uncertain/unstable STR regulatory regime

Definitely, and Austin has tons of people moving into town so the need for MTR housing is absolutely there! When I first listed my place in Austin I got it booked out for 6 months in 24 hours with no vacancies.

5 Reply

James CarlsonPro Member

Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes

4y

Interesting post.

I think STRs and medium-term rentals are just two different things. We work mostly with clients buying Airbnb/STR rentals in Colorado. (Denver and Colorado Springs and the surrounding mountains.) Some want a pure investment, they like the money, and they don't mind the extra bit of work. I do still think the money -- if operated well -- is considerably better as a short-term rental than a medium term rental.

Then we also have a lot of people who want a second home in Colorado to use for vacations (and then rent it to travelers when they're not using it). For those buyers, an MTR wouldn't give them the flexibility to use it as they want.

But then there are other clients of our (and us as well) who do the medium-term rental. For us, personally, I just don't want to do any of the extra work for an STR, and also a few of our properties are condos in which they don't allow it.

There will always be travelers who want the Airbnb and make it a good investment model. And the traveling nurses and bigger population of remote workers can also make the MTR model a way for those owners who prioritize something else (namely time).

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

4y

Quote from @Sergey A. Petrov:

MTRs are gaining momentum. And a lot of it is market and location driven. A great MTR location is probably not a great STR location and is an ok LTR location. But yes the market is shifting as the STR markets are getting over saturated or over regulated and LTRs no longer pencil as well

LTRS can provide excellent cash flow with the least amount of effort. Mine are all paid for and each one rents for 1000 plus per month. Each time I get a new LTR I get a 1000 to 1500 raise each month.

4 Reply

Sergey A. Petrov

Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes

4y

@John Underwood - to each their own but you don’t really get a $1k raise, do you? If all yours are paid for and the next purchase is also all cash, then it depends on where that cash sits before you make another purchase. If in a low yield bank account you are actually losing 8% to inflation. If invested and earning 8% you are just breaking even. If invested, earning 15%, it is making money. Deploying it to real estate just changes the revenue stream from investments to rent collection instead of giving you a raise

Paul Sandhu

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

4y

Quote from @John Underwood:

I personally do not think so.

I agree. But the ironic thing is that in half of my places people have been there over 60 days and are paying the STR rate.

4 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

4y

Quote from @Sergey A. Petrov:

@John Underwood - to each their own but you don’t really get a $1k raise, do you? If all yours are paid for and the next purchase is also all cash, then it depends on where that cash sits before you make another purchase. If in a low yield bank account you are actually losing 8% to inflation. If invested and earning 8% you are just breaking even. If invested, earning 15%, it is making money. Deploying it to real estate just changes the revenue stream from investments to rent collection instead of giving you a raise

True, but then I get a 35% return on my money, house is paid for in 2.5 years and I'm getting 1500 into a Roth account that I pay no tax on. Just one example.

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

4y

Quote from @John Underwood:

Quote from @Sergey A. Petrov:

@John Underwood - to each their own but you don’t really get a $1k raise, do you? If all yours are paid for and the next purchase is also all cash, then it depends on where that cash sits before you make another purchase. If in a low yield bank account you are actually losing 8% to inflation. If invested and earning 8% you are just breaking even. If invested, earning 15%, it is making money. Deploying it to real estate just changes the revenue stream from investments to rent collection instead of giving you a raise

True, but then I get a 35% return on my money, house is paid for in 2.5 years and I'm getting 1500 into a Roth account that I pay no tax on. Just one example.

This one isn't a raise, but is fattening my Retirement account like crazy.
Yes I consider a 1000 extra cash each month a raise. I put that into the next deal so my money is making money and that money is making more money.

Retired from my job as an engineer and just let's the wheels I set into motion work for me while I'm sleeping or playing.
The wheels get bigger and faster.

3 Reply

Bonnie LowPro Member

Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes

4y

There is more and more discussion these days about mid term rentals, although there are still people who think it's "not a thing." It is a thing, just like any other niche investors specialize in. It has characteristics that are both similar and different from long term rentals and short term rentals, hence the distinction. Are they the next "big thing" as the OP suggested? I don't think so but, then again, they don't have to be in order to derive value. This also depends on your definition of a "big thing." To me that would equate to something like we've seen with the frenzy around STRs and I definitely don't think they're going to be that. They can generate higher rates than long term rentals ("can" being the operative word) and probably won't generate rates as high as short terms. But there's space in many markets for that middle ground and it's good to have options. It's a very interesting niche that I've been researching for a while now. People tend to equate MTRs with either travel nurses or digital nomads but, in fact, there are many customer types who want or need this option and savvy hosts will capitalize on that. I also think this market niche has gotten interesting because there was, for a time, more money to be made due to pandemic-level contract rates and stipends for travel medical professionals. Some markets have always been strong for traveling professionals but many got a big boost due to the pandemic and that has led to a lot of people jumping in. However, in many areas we're seeing the number of contracts reduced, rates lowered and in some cases contracts canceled abruptly so anyone looking to get into this space targeting medical professionals should do some due diligence to confirm demand in your area. That said, I like this niche and plan to do more. As rates continue to compress elsewhere, we all have to get creative.

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6 Reply

Choice Crosby III

Investor · Bonney Lake, WA · Member since 2022 · 7 posts · 0 votes

4y

Hi Bonnie, do you have any suggestions for performing the due diligence? I'm starting to investigate this niche myself.

Thanks in advance.

-Choice

Paul Sandhu

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

4y

Quote from @John Underwood:

True, but then I get a 35% return on my money, house is paid for in 2.5 years

That's pretty decent. But I'm doing better. But I have more problems with my rentals than you.

There has to be some sort of Problems to Profits ratio. Some dead guy wrote a song that mentioned "More money more problems".

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

4y

Quote from @Paul Sandhu:

Quote from @John Underwood:

True, but then I get a 35% return on my money, house is paid for in 2.5 years

That's pretty decent. But I'm doing better. But I have more problems with my rentals than you.

There has to be some sort of Problems to Profits ratio. Some dead guy wrote a song that mentioned "More money more problems".

You should come up with a problems to profit formula.

Andrew Street

Member since 2019 · 1k+ posts · 292 votes

4y

@Robin Simon I have found a lot of success through medium term rentals and believe they are another great option to have in the tool belt.

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

4y

The lines are getting blurred between STR, MTR, and LTR. People want convenience, flexibility, amenities, and to be able to handle things on their phones. There is an enormous demand for flexible housing. Most apartments can't or don't want short and medium term stays, and are very expensive. Traditional hotel rooms don't have kitchens and the ones that do have kitchens are mostly small studios (plus hotels have a bloated inefficient staffing model).

I have a colleague who has 500+ flex housing units and he is basically getting short-term rates with short, medium, and longer term stays. I am building similar communities.

9 Reply

Paul Sandhu

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

4y

Quote from @John Underwood:

Quote from @Paul Sandhu:

Quote from @John Underwood:

True, but then I get a 35% return on my money, house is paid for in 2.5 years

That's pretty decent. But I'm doing better. But I have more problems with my rentals than you.

There has to be some sort of Problems to Profits ratio. Some dead guy wrote a song that mentioned "More money more problems".

You should come up with a problems to profit formula.

I can do that. Studying financial ratios and coming up with formulas is what I did in grad school. What do I do now? Marketing.

Eliott Elias

Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes

4y

Here in Austin i go for 30 days+ only because I have to. Depends market to market and what the demand looks like. Destinations with nurses will probably like a 30 day + stay

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

4y

There are short-term rentals, defined as less than 30 days.

There are long-term rentals, defined as 30 days or longer.

The term "mid-term rental" was made up by someone and has no place in real estate lingo. Whether it's rented for two months or two years, it's a long-term rental.

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4 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

4y

Quote from @Nathan Gesner:

The term "mid-term rental" was made up by someone and has no place in real estate lingo. Whether it's rented for two months or two years, it's a long-term rental.

Depends on our lens. If we are just looking through the compliance lens, that is on point. If we are looking at it from a consumer perspective, the word MTR has a place and the demand is huge. As mentioned above, I have a colleague who has 500+ units that caters to the medium term market, I am building similar properties, and there are many others. People want to acquire their rental housing on their mobile phones, use the app of their choice, and they want flexible or no lease terms, gym/pool/laundry on site, digital keys, digital communication, and want to be located close to job, shopping, and entertainment centers. It's a hybrid apartment...similar to corporate housing properties. 50% of my colleague's residents/guests are living there full time and paying medium term rental rates. The main challenge right now is financing...the apartment lenders want certainty of multifamily zoning and the hotel lenders are tight...need relationships to get deals done.

6 Reply

Jared HottleBusiness Member

Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes

4y

I think one major draw to the medium term rental is the demand for them is pretty inelastic so they can work in a lot of markets that are not considered destination markets. I am unsure if I would want to play the speculation game of where people will chose to work from home on a month to month basis.

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Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

4y

Quote from @Mike Dymski:

And what has been gained? You could write a 90-day lease and call it a "medium-term" lease, or you could write a month-to-month lease and they stay one month at a time for three months. Calling it "medium-term" adds nothing to the mix.

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