Compared to STR, MTR isn't a huge, expanding market
I purchased a new primary residence in Asheville, NC in 2018, and the property included a 1-bedroom cottage. The cottage was an STR, in defiance of Asheville's rules, and I immediately converted it to an MTR (i.e., furnished monthly). At the time, the concept was rather unheard of, so it was an experiment. It's gone well though. After 4 and change years, one conclusion that I find myself sharing often is that even in a market like Asheville, a magnet for relocation, the number of potential tenants is rather small, and likewise that that pool is not as elastic as that of STR. Meaning, with STR, growing awareness of the concept has created more and more customers (i.e., more and more people are trying out the guest experience). With MTR, however, I don't believe the pool of potential customers can grow as dramatically, even with increased awareness. With STR, anyone with the money can be your next guest. With MTR, the next guest is only someone who is leaving their current home, for a while or more often for good; and is someone who wants a furnished place, who is okay storing personal belongings elsewhere, who wants the place for just a few months or so (and typically doesn't know how long), and who is comfortable with the risk that the landlord is likewise month-to-month in their commitment. Thus, I wouldn't be too quick to assume that MTR is a great idea for the next property in the market you're targeting, and would research the competition quite a bit before making the plunge. Many underwhelming STR's have been converted to MTR lately, after all. And in your market that trend may continue.
What is a MTR? I don't get it, it's either a short-term/vacation like rental or a long(er) term. You'll still have to do the same vetting as LTR, so just call it a LTR.
@V.G Jason Medium Term Rental is the terminology the investor community have adopted to refer to this concept (i.e., renting out a furnished property on a month-to-month basis).
@V.G Jason We have all three (STR/MTR/LTR) and MTR & LTR are different. The screening criteria for our MTR tenants (AirBnB + can you afford it?) is a fraction that of our LTR, and we rarely furnish our LTR properties. In the last 24 months our MTR netted us double the return compared to if it were a LTR, and occupancy has been close to 100% (travel nurses & remote workers). We didn't think that was sustainable going forward (and as Mitch mentioned, we also think the pool of MT renters is smallest of the 3, and perhaps shrinking) so we rented it long term starting next month.
Quote from @Mitch Davidson:
I purchased a new primary residence in Asheville, NC in 2018, and the property included a 1-bedroom cottage. The cottage was an STR, in defiance of Asheville's rules, and I immediately converted it to an MTR (i.e., furnished monthly). At the time, the concept was rather unheard of, so it was an experiment. It's gone well though. After 4 and change years, one conclusion that I find myself sharing often is that even in a market like Asheville, a magnet for relocation, the number of potential tenants is rather small, and likewise that that pool is not as elastic as that of STR. Meaning, with STR, growing awareness of the concept has created more and more customers (i.e., more and more people are trying out the guest experience). With MTR, however, I don't believe the pool of potential customers can grow as dramatically, even with increased awareness. With STR, anyone with the money can be your next guest. With MTR, the next guest is only someone who is leaving their current home, for a while or more often for good; and is someone who wants a furnished place, who is okay storing personal belongings elsewhere, who wants the place for just a few months or so (and typically doesn't know how long), and who is comfortable with the risk that the landlord is likewise month-to-month in their commitment. Thus, I wouldn't be too quick to assume that MTR is a great idea for the next property in the market you're targeting, and would research the competition quite a bit before making the plunge. Many underwhelming STR's have been converted to MTR lately, after all. And in your market that trend may continue.
I literally just posted before I saw this questioning the reality of how good MTR actually sounds. The way it is pitched more often than not makes it sound as if this is absolutely the only way to rent out a property these days. Not as much profit as an STR and easily more than an LTR so why the hell would you not.
I am looking to see how realistic this honestly is.
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I agree, you definitely need to look in your market and see what the demand is for a mid term rental. There are markets where a long term rental would be the better option than mid term. And obviously markets where a short term rental is better than mid term. It would be wrong to say mid term is better everywhere for any property.
That being said, if you do find the right market with high demand for mid term rentals, I believe there is great potential for growth. It seems to me these are most likely going to be in urban markets with high population. We're in Los Angeles and whether it's traveling professionals, families renovating or repairing their homes, or people moving to the area for the first time I can't imagine there being a shortage of those types of tenants anytime soon.
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Quote from @Mitch Davidson:You’re correct. The market for STR is HUGE because the market includes everyone renting a hotel room. Just look around at the number of hotels built in the last 20 years.
I purchased a new primary residence in Asheville, NC in 2018, and the property included a 1-bedroom cottage. The cottage was an STR, in defiance of Asheville's rules, and I immediately converted it to an MTR (i.e., furnished monthly). At the time, the concept was rather unheard of, so it was an experiment. It's gone well though. After 4 and change years, one conclusion that I find myself sharing often is that even in a market like Asheville, a magnet for relocation, the number of potential tenants is rather small, and likewise that that pool is not as elastic as that of STR. Meaning, with STR, growing awareness of the concept has created more and more customers (i.e., more and more people are trying out the guest experience). With MTR, however, I don't believe the pool of potential customers can grow as dramatically, even with increased awareness. With STR, anyone with the money can be your next guest. With MTR, the next guest is only someone who is leaving their current home, for a while or more often for good; and is someone who wants a furnished place, who is okay storing personal belongings elsewhere, who wants the place for just a few months or so (and typically doesn't know how long), and who is comfortable with the risk that the landlord is likewise month-to-month in their commitment. Thus, I wouldn't be too quick to assume that MTR is a great idea for the next property in the market you're targeting, and would research the competition quite a bit before making the plunge. Many underwhelming STR's have been converted to MTR lately, after all. And in your market that trend may continue.
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I think MTR supply is up and demand is falling since this was inflated by covid demand. MTR demand varies more then STR. If you are counting on traveling professionals expect ups and downs to follow the need for those professions. I think people think of it as an easy in to the market without the demands of STR. I also think you get alot of owners renting inlaw suites and such in MTR which increases supply and decreases price.
Great description. I have been hearing a lot of new investors asking about MTRs lately. We have an LTR and two STRs but the STRs are also rented monthly during the winter months to make some money. But we do not have any that are solely MTR.