Month to month or STR?

Question

I'm a realtor in the Portland, OR area.  With the current market, I often have clients sell their home quickly and need to rent 1-2 months while looking for a property to buy, or are moving here and need a place short-term.  Often they have dogs or kids and want a home with a yard rather than a condo.  Agents in my office are constantly looking for a short-term rental as well.  Would it make sense to buy a property that can be rented short term, or look for long term renters?  I have a vacation rental on the coast and am ready to buy my next investment property, but not sure which direction to go.  Is m2m rather than STR or LTR a viable business model?

Bruce Woodruff · Answer

People still want to move to Portland...?

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Dustin Allen · Answer

@Shannon Ilas

Monthly/Seasonal rentals tend to have some gaps in vacancy when you can only rent them out for a 30 day minimum.  It sounds like you have the option of going short term as well.  In that case, it would be easy to let the market determine how to fill your calendar.  Maybe book your clients or longer term stays farther out and then make shorter stays available for any vacancies in the next month or two?

We have both vacationers and temporary/seasonal workers that use these types of rentals.

Don Konipol · Answer

@Shannon Ilas

There was a time when most cities had what were referred to as apartment hotels.  They offered furnished suites with kitchenettes and weekly housekeeping.  No lease, month to month rentals with 30 days move out notice.

A number of things killed these apartment hotels.  The biggest thing that killed them in NYC was that the city government began renting them in bulk to house the homeless.  Discrimination lawsuits were filed against the apartment hotels that wouldn’t rent to the city “guests”.  The fate of the apartment hotels that did was that they lost almost all their other tenants.  They survived by becoming “flop” houses and renting rooms buy the day or by the hour, until they were acquired as part of a assemblage to be torn down and a new condo built on the site.

Recently, the shortage of decent month to month full apartments has become apparent, with companies positioning apps to fill the gap.  Whereas in the old days most month to month furnished rentals were people on the poverty line (Abbot and Costello TV show in the 1950s they lived in a furnished month to month rental) most know are people working in the area temporarily, longer term vacationers, people out patient medical treatment, or people between residences due to home sale, home disaster, or divorce.

Alex S. · Answer

Step 1: Call the city where you want to buy and ask to speak to the planning division.  Ask their rules for STRs.  Is 30+ days considered LTR?

Step 2: All things equal, less than 30 day stays are typically more profitable than 30 day stays, but 30 day stays are more profitable than LTR leases.  Research if your state infers tenant rights on the 30th day (some places do!)

Step 3: Open it up for 30 day minimum 1yr out.  At 3 months out, transition to 1 or 2 week minimum.  At 1 month out, make it available for a 1-2 day minimum.

Obviously general guidelines, but "it depends" is always the right answer.

Shannon Ilas · Answer

Love that quote!  I can do the rental as a month to month LTR, but was hoping to convert to STR as needed if there's a gap between rentals.  Have you hard large gaps when you've switched to LTR in the off season?

Shannon Ilas · Answer

It looks like I can only use it as an STR if I also live on the property within the Portland city limits and some other nearby cities, which isn't my intention.  Will need to keep digging.

Zambricki Li · Answer

@Shannon Ilas I have properties that I do str and switch to seasonal/work from home people as needed in off peak. I have others which are pure long term. Also an agent in CA/NV.

There is a great Mitch Hedberg quote “escalators don’t break they just become stairs”

I like to say “STR’s don’t break they become LTR’s”

The upside is worth the risk and setup. You can get 10X for str if it’s the right location.

Brad Hammond · Answer

@Shannon Ilas, I think you should do it, just make sure you know the rules and regulations inside and out.

Shannon Ilas · Answer

Dustin, you're in Lake Tahoe, so are you seeing monthly rentals that aren't vacationers?

Month to month or STR?

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