mid-term rentals: The What & why

You know about rentals: maybe it’s an apartment, a single-family home, one side of a duplex, or your parents’ vacant trailer behind their house. Either way, almost everyone has had the experience of renting a place to live for a period of time. Typically, these one-year leases are referred to as long-term rentals. For real estate investors (like my grandma) these are buy-and-hold investments that should cash flow consistently, even if it isn’t a huge amount, each month for many years. But what constitutes a medium, or mid-term, rental? And where do you begin if you think mid-term rentals could be a good option for you as an investor?

rental house
This was my grandma’s personal residence at the end of her life – we always joked that it was the worst out of all the houses she owned!

When I began to seriously deep-dive into real estate research I learned about all kinds of different strategies. I still learn about new strategies every time I look at one of the investor forums or listen to a Bigger Pockets podcast episode. Real estate makes sense to me as an investment because it is tangible. I have a lot more trouble wrapping my mind around things like cryptocurrency and stocks (although I do have both to add some diversity to my portfolio) and don’t fully understand the nuances of those things. I dabble carefully, or I rely on those who are experts in these areas to advise me. But, like I said, real estate is a thing that makes sense to me. It’s physically in front of me, it can be used as a resource for myself if I need housing, and historically speaking, real estate prices tend to rise over time (I’m leaving 2008 out of this generalization). But when I started making offers on properties last fall, my mind wasn’t headed in the long-term rental direction. This was difficult to explain to a lot of my friends and family, and I’m by no means an expert with only one mid-term rental property, but if my story can help clarify some things for anyone else then I am happy to share!

Short-term rentals

What do you think of when you think “short-term” rental? One night, maybe two? A rent-by-the-hour establishment? Or perhaps a couple of weeks? Any and all of the above, I suppose, but that can differ based on the platform the investor uses and their own goals and vision. Oftentimes, the term “short-term rental” is used interchangeably with the term “vacation rental,” and now with the insane growth of particularly popular platforms, we sometimes just lump them all together as “Airbnbs.”

vacation rental treehouse ozarks
My brother’s kick-ass treehouse that he rents through Airbnb

My first thought was that I wanted to go this direction. I loved the idea of curating a cozy space for travelers visiting a specific destination. Yet, it didn’t make sense for me based on my own desire to manage it. If I was self-managing and doing a turnover every couple of days, I wanted my first property to be close to home. But finding an affordable place that was also close to home? That’s just not a thing near Bentonville right now, at least not on my teacher’s salary. Plus, I feel like my area in Bella Vista, specifically, is getting a bit saturated with short term rentals. We also don’t have established regulations here yet, and I feel like it’s a matter of time before new rules are enforced and there will be changes in the air for current hosts nearby. If you’re curious about that, and interested in the short-term rental space, check out Avery Carl’s book. But I digress…

When I was under contract for a condo in Fayetteville (a college town), I was prepared to get the whole kit-and-caboodle with the place. They were selling it to me furnished, and I really liked the stuff (added bonus!) that it was filled with. It was as turn-key as it got! But, that contract fell through, and although I was quite disappointed it did get my brain-wheels spinning on the possibility of a furnished rental outside of the Airbnb or vacation rental space. For example, a 30-day minimum stay (with a lease) for traveling professionals. Cue the mid-term rental!

Furnished mid-term rentals

The typical mid-term tenant is a traveling professional who needs a place for a couple of months, or maybe just 4-6 weeks. Each situation may be slightly different, but often these are travel nurses on 13-week contracts with hospitals. When I first got this idea in my head, my realtor here in Fayetteville mentioned that professors at the local university, or maybe international students, might have a need for a furnished rental on an atypical lease schedule.

I also kept coming back to our experience last summer when we first arrived in Bentonville. Our house in Bella Vista wasn’t available for us to actually move into for about 7 weeks after we left Colorado, due to the sellers waiting on new construction to be completed. They were renting it back from us while we stayed in a little one-bedroom apartment with our piles of bikes and pets. It was challenging to find a place that would let us rent for only two months with pets. Both of those requirements were deal breakers for many property managers I inquired with. This showed me that there is a need in that space: buyers and sellers who are waiting on one thing or anther, and just need some place to land for a short period of time. Most of our non-essentials were in storage, and it would have been nice to just stay in a furnished place, versus having to move multiple times. If this was a situation we’d encountered, we knew others would, as well.

small rental apartment bentonville
This gives you an idea of how cramped we all were in our temporary housing. Mattress on the floor, cats all over everything, four or five bikes that needed to be rotated around the room if we did laundry….It was annoying, to say the least.

Sometimes mid-term tenants are construction workers who are on a project for a specified time period. Sometimes it is a corporate employee doing training for a different out-of-state office, and maybe the corporation itself is actually paying you instead of the individual. Sometimes it’s people between moves, like us, or even a local family who’s had a major disaster happen and their insurance company is paying for temporary housing. Travel nurses were the niche I planned to market toward, but there are plenty of options. Regardless of the reason behind the lease, there is a definite need for a middle-of-the-road time frame.

The Money Comparison

I go back and forth between wanting the long-term reliability and consistency, versus the short/mid-term creativity in rentals. There are plenty of pros and cons for each type of real estate you get into, and every investor has their own opinions on the matter. One big factor in my decision was the potential income. The house I purchased in Tulsa would’ve probably only gotten about $1,200 in monthly rent, as a long-term traditional unit (unfurnished, with tenants paying utilities). By the time I factored in the costs of maintaining an 83-year-old home, my actual profit at the end of the month would have been very minimal. But, if I furnished it and included utilities, the going rate on Furnished Finder and Airbnb for monthly rentals in my area was upwards of $1,900 per month. With my brand new bathroom (of course, that project was expensive and I’ll be paying it off for a while) and the renovations we were doing, my plan was to list it for $2,000 per month.

My biggest point of concern was the utilities. I had no idea what the typical monthly rates would be with several people living in the house full-time. We’d only been spending weekends there during the renovation, but I felt like the heat bill was already high. Keep in mind the efficiency of your HVAC system, age of pipes, etc. when you’re trying to plan for expenses. Also consider whether you’ll be renting to one professional, or a couple. Or, a couple plus a roommate! This can cause those utilities to vary quite a bit.

bathroom remodel plumbing
This was the bathroom after it was gutted completely. I felt good about having updated plumbing in most of the house, knowing that I’d be responsible for the water bill (the previous bathroom fixtures had a lot of leak issues. The HVAC vent in the bathroom was also damaged and wasting a lot of heat, which we didn’t realize until the walls started coming down).

Pros and Cons

I am still a newbie in this investment game. Very much so. I currently have my first tenants in the house and am still figuring out so many things. But, some things I did consider while deciding on my plan of action may help you if you’re considering a mid-term furnished rental.

  • Long-term rental:
    • Less turnover between tenants
    • No furnishings provided
    • No décor, few extras, etc.
    • Tenant pays utilities
    • Consistency with tenants
    • Lower rent rates in general = less cash flow
    • Potential for unknown home issues (infrequent visits)

  • Mid-term rental
    • “Airbnb” level furnishings and décor
    • More up-front expenses to prepare
    • Flexibility with pricing
    • Higher rental rates = potential for high cash flow
    • Tenants often have background checks done/contracts for work
    • Frequent inspections (during turnover) to address issues
    • I pay utilities

If you want to get into real estate investing but aren’t sure that traditional rentals are right for you, then take a look at mid-term rentals. Spend some time doing the research, look at prices on Furnished Finder (and Airbnb for monthly stays) and it might be a good option for you to dip your toes, like I am. I’ll definitely update as I go, since I’ve just gotten started in the mid-term rental game. If I love this type of investment after I have a few tenants this year, then I’ll probably try to do more of this. So far, there’s been enough stress (ex: a broken bed the first week the tenants were in the house!) that I am questioning whether this is something I want to do for the long haul. Only time will tell!

Random tip

I did discover one awesome little method of obtaining some good stuff for the house on the cheap that I’ll share with you. One of my coworkers told me about a website where returns/damaged goods/incorrect orders/etc. from online shopping sites get auctioned. She had purchased a brand new sink at a significant discount. I got pretty addicted to the bidding site, and quite quickly. There are a lot of little details you’ve got to pay attention to when bidding, and when picking up items. There are different sites all over the country for this kind of thing, so I’m not going to link the specific one I used, but it’s worth a Google if you want to potentially acquire some goods at a steep discount. Just be warned you may end up with a legless table…. or a coffee maker that is actually an ice maker….

furnished rental living room
I got all the rugs, the white chair, and the ladder shelf from the auction site. I call it “The Amazon Graveyard” warehouse.

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