Medium term rentals are hot right now in the real estate industry. These properties offer flexibility and stability, transforming how investors approach property leasing. This shift is a growing trend and a profitable rental strategy you should consider.
What makes these mid term leases so appealing? How do medium term rental properties compare to short-term and long-term equivalents? And why is the medium term rental market growing?
An example would be…One of my friends has a cabin in the mountains that he hasn’t been able to use due to work schedules. He’s finding medium term tenants through the University of Arizona, which needs a place for college students to stay while doing internships at the local hospital.
In this article, I’ll share the advantages of medium term rentals, why this market is growing, why you should consider this strategy, and how to take advantage of this growth for your real estate business.
TL;DR:
- Medium term rentals are profitable, offering increased stability over short-term rentals.
- There’s a growing demand for these properties with the increase in nomad lifestyle.
- To succeed in this space, you must create a home-like experience and optimize your listing on popular mid-term rental platforms.
- There are additional costs to consider with this type of property that you need to factor in, such as utilities and amenities for your tenants.
The Ins and Outs of Rental Types
Medium term rentals — what are they? When you buy a single-family home as an investment, you can use this rental property for short-term, medium term or long-term tenants. Each type is targeted toward different people and has a different role in your investment strategy.
Shorter Term Rentals:
Favored by vacation-goers or business travelers seeking temporary accommodation for days up to several weeks, short-term housing options are known as short-term rentals. While these rental properties can be profitable due to high rental rates per night, they require frequent maintenance owing to constant tenant turnover.
Medium Term Rentals:
A medium term rental property is when someone leases the space for a few months to a year, usually for temporary stays or during a transition period, like studying abroad or while their home is being renovated. It’s like renting a place for a medium length instead of just a few days or years.
Long Term Rentals:
A long term rental is when someone leases a property for a year or more, providing a stable and extended place to live, like renting a home for a long time instead of just a short period.
I invest in hotels and long term rentals, but if my long-term rental properties become vacant, this is a strategy I would consider! I tried listing our hotel on some medium term rental platforms during the pandemic when we were desperate for bookings because no one in corporate America was traveling.
Unfortunately, I didn’t have much success because tenants looking for a medium term place to stay want to have the comforts of a home. That’s exactly why you should consider this strategy!!!
Diving Deeper into Mid Term Rentals
Medium term rentals are a popular choice for individuals or families who need a place to stay for a few months up to a year. This type offers more stability than short-term rentals, as tenants typically stay longer.
Here’s a scenario for medium term rentals that I experienced firsthand: I own single-family homes that I rent out as traditional long term rental. Interestingly, whenever I advertise for a new tenant, I often receive calls from insurance companies seeking medium term rentals for customers whose primary residence is undergoing repairs.
The monthly rent these companies offer is way higher 🚀than I usually ask for in my long term lease. And, the insurance company is responsible to pay rent which is stable and equates to a nice bump in cash flow!!
Benefits of Medium Term Rentals:
1. Consistent Income: With medium term rentals, you can enjoy a steady income stream for an extended period. This can especially benefit you if you want a more predictable cash flow than with Airbnb properties.
2. Less Tenant Turnover: Unlike short-term rentals, medium term renters have longer lease agreements, resulting in less frequent turnover. This means less time and effort spent finding new tenants and preparing the property for each guest.
3. Lower Maintenance Costs: Since tenants stay longer, there is less wear and tear on your rental property than with short-term rentals. This can result in lower maintenance costs and fewer repairs.
Steps for Success in the Medium Term Rental Market
1. Market Research: Before investing in a medium term rental property, conduct market research to understand the demand, rental rates, and competition in the area. You can do this by using sites like Mashvisor for research data but also looking at other economic factors in your local market, such as:
- Hospitals and health care facilities – for traveling nurses. As an example, Furnished Finder has a housing stipend research tool that you can use to see what types of rates employers are paying for nurse housing.
- Construction – for crews that may be temporarily in location.
- Corporate – HQ locations with consistent mid term renters attending training programs.
2. Property Preparation: Ensure your rental property is well-maintained, clean, and equipped with all the furnishings someone would need to live in your property, including furniture, bedding, appliances, kitchen utensils and more.
The Growing Popularity of Mid Term Rentals
Mid term rentals have gained considerable traction in the rental market, providing landlords and tenants with attractive benefits. The consistent rent payments of mid term rentals provide stability, often missing with vacation or long term leases.
When researching this article, I saw that someone on BiggerPockets posted in a forum that an insurance company paid them $30,000 for 4 months for a rental property that generally would have rented for $4800 total during that same timeframe. That’s 6.3 TIMES in rental income than the landlord would have made with long term rentals.
Recent data suggests month-to-month leases have grown to represent nearly 30% of all lease agreements across the US housing sector. This trend reflects changing preferences among renters and new opportunities for those looking at real estate investment strategies.
Who Is Mid Term Housing For?
Different demographics find mid term housing appealing due to its flexibility and convenience. Students who need accommodation during academic terms can benefit greatly from this arrangement since it aligns perfectly with their schedule without requiring a year-long commitment.
Professionals moving for work also gravitate towards mid term housing as they transition into new roles or locations. These individuals may require temporary lodging while settling down but do not wish to commit themselves to lengthy contracts – which makes medium term rentals an attractive option for just enough time period needed by them.
Traveling nurses also often become medium term tenants. There’s been a huge rise in contract nurses who take short contracts to live in different cities nationwide on temporary assignments. This nomad lifestyle has increased demand in the mid term housing market.
Besides students and working professionals, homeowners undergoing renovations or between homes due to buying/selling transactions might choose medium term rentals. These rentals offer advantages over extended hotel stays or unnecessarily long traditional leases.
This is especially beneficial when their timelines don’t align with typical leasing periods offered by most current properties.
Benefits for you as a real estate investor
- Rental rates: Compared to longer tenancies, mid term housing usually commands higher rents, thanks largely to being fully furnished plus utilities included, hence the ready-for-move-in condition.
- Tenant quality: This demographic generally takes better care of the rental property, given less wear and tear than typically seen with short-stay guests like tourists.
- Fewer vacancies: You’ll likely experience fewer gaps in occupancy, considering lengthier durations associated with agreement types, so you generate more regular income flow on the landlord’s side.
Transitioning from Short Term to Medium Term Rental Investments
The appeal of high rental rates often draws investors towards short-term vacation rentals. But, with increased competition for bookings in the vacation rental space, a growing trend in the real estate investment strategy is shifting focus toward mid-term rentals. This change has several key benefits that make mid-term investments attractive.
Filling Off-Season Income Gaps
One significant advantage these properties offer is their ability to fill off-season income gaps. Unlike short-term stay properties, which see seasonal demand fluctuations leading to vacant units during off-peak periods, mid-term rentals provide stability and consistent rent payments all year round.
Consider where I live – in Phoenix, as an illustration. Our off-season spans from May to August when the scorching heat makes it undesirable for anyone to be here. Consequently, during these four months, short-term rental properties generate no income.
By transforming these properties into mid-term rentals for renters such as traveling nurses, you can achieve consistent profitability at rates that are still higher than long term rentals.
These leases typically last between one and six months, offering more flexibility than long-term leases while providing reliable income streams for property owners.
The reduced turnover associated with this type of lease also means less management effort and maintenance costs than short-term stay accommodations – saving on operational expenses and reducing wear-and-tear over time on your property.
Better Tenants Lead To Better Returns
A common tenant profile for mid-term housing includes relocating professionals or individuals seeking temporary housing solutions and responsible renters who respect the terms outlined in their lease agreement.
These types of tenants usually pay on time and minimize potential damages caused by negligent use. That’s a huge win in my book!
With this type of property, you can increase your returns with the higher rental rates. While short-term vacation rentals may provide peak season prices, long term tenants with a good record of rent payment and minimal damage can bring higher returns for investors.
Navigating the Mid-Term Rental Property Investment Market
Mid term rentals are a growing real estate investment strategy, but like any other real estate investment, there are components to be aware of to maximize returns. A key factor is awareness of additional costs with furnished properties, such as TV expenses and higher utility bills (like air conditioning in Phoenix in the summer months!!)
The selection of your property listing platform also plays a big role. Platforms like Diggz have gained popularity among those seeking mid-term housing solutions due to their user-friendly interfaces and extensive reach.
Understanding Lease Terms and Options
There are a few different lease types in mid-term rentals. The first type is term leases, which typically span six months up to one year. The second type is month-to-month leases, which flexibility for the renter but cause income uncertainty for you.
Whichever lease contract you use should include the occupancy duration, rent amount/payment terms, and security deposit fees so that all terms are clearly documented.
Pivoting from Short-Term Rentals: The Case for Mid-Terms
A shift towards mid-term rentals can provide more consistent income streams than short-term vacation or long term tenants, where turnover rates might be high or low.
Making this transition requires understanding market dynamics – particularly within regions known for fluctuating demand like high corporate density and economic growth locations – so that you can determine the best possible use for your property.
Pros and Cons of Medium Term Rentals
Short-term leases offer stability and consistency that are often absent in vacation or month-to-month rentals. The flexible nature of these arrangements also allows you to adjust rental rates between leases more frequently than long term rentals while maintaining lower vacancy rates.
Tenant Turnover: A Potential Challenge
Despite their advantages, medium term rentals aren’t without challenges. Tenant turnover stands out among them – it’s less frequent than short stays but higher when compared to long term rentals. You need to plan for frequent upkeep inspections after each occupant moves out, bringing an extra burden.
For example, whenever a tenant moves out of one of my long term rentals, I have the property “refreshed.” This means repairs, painting, and deep cleaning. My tenants may have lived in my rental property for years, which means this “refresh” isn’t something I have to do often. With mid-term rentals, you may encounter these costs more frequently.
Navigating Extra Costs Associated With Medium Term Rentals
Beyond dealing with increased tenant turnover costs like cleaning services or minor repairs post-move-outs, there can be additional expenses unique to this kind of leasing arrangement, too.
For instance, properties furnished appropriately might incur TV costs or higher utility expenses since they typically come equipped with amenities included in the rent price.
Promoting your property effectively has costs to consider as well. You need visibility on popular platforms with fees to consider in your investment calculations.
However, these initial investments usually pay off by helping you find eligible renters quicker and reducing your vacancies.
Creating a Home-Like Experience for Tenants
In the mid-term rental market, one of the most successful strategies for drawing in and keeping good renters is making a space that feels like home. This involves more than just offering a clean space — it’s about adding warmth and personal touches to your property.
Furnishing is a huge factor here. A well-furnished apartment equipped with modern amenities can be why someone chooses your place over another option. Investing in high-quality furniture, appliances, and decor increases tenant satisfaction and adds value to your property.
Besides furnishings, you should consider providing additional services or features that enhance comfort for tenants. Examples include a reliable Wi-Fi connection, which is required by remote-working professionals or students needing internet access for studies.
Visibility on Popular Platforms
To find potential renters easily, you need visibility on popular platforms that are designed specifically for those looking for mid term rental housing options. Here is a list of platforms to consider:
Make your medium term rental listing stand out by using high-resolution photos showcasing different aspects of your property and detailed descriptions highlighting its unique selling points (USPs). This helps prospective tenants visualize themselves living there even before they visit in person.
Maintaining Good Communication
Last but not least, maintaining open lines of communication with tenants is equally important. Respond promptly to queries about mid term rentals, concerns, and maintenance requests, which renters appreciate, leads to longer stays, and helps you gain consistent rent payments from these short-term rentals.
Legal Considerations for Medium Term Rentals
Some legal aspects to consider for mid term rentals are regional and state regulations, rental contracts, security deposits, and occupant privileges. To help you with these details smoothly, here are key points to consider:
1. Understand Your Local Laws
The rules governing rentals vary from jurisdiction to jurisdiction – they cover health standards, rent control ordinances, and eviction procedures, among others. Knowing them helps avoid potential fines or litigation issues down the line.
Your first step should be acquainting yourself with your specific state landlord-tenant laws. Ignorance isn’t bliss in real estate investment strategy so you need to understand these local laws and regulations and how they impact mid term rentals.
2. Draft a Comprehensive Lease Agreement
A clear lease agreement is part of the mid term rentals business. It sets out explicit terms between landlords and tenants, which can prevent future disputes. In medium term rentals, term leases or month-to-month leases are commonly used.
This agreement must include occupancy duration (start/end dates), rent amount/payment frequency/methods, how the tenant should pay rent, etc.
3. Handle Security Deposits Correctly
In most jurisdictions, landlords require a security deposit before tenants move in. This serves as protection against damages caused by occupants during their stay. However, it’s important to handle these correctly according to security deposit guidelines.
These guidelines specify the deposit requirements, including the amount charged, storage of money received, and return of funds after the tenancy ends. Violating rules could result in hefty penalties. Stay informed to ensure compliance while protecting both you and the tenant.
Finding Medium Term Renters
I know the vacation rental market in many areas can feel competitive. In many areas, there are still limited regulations, so a lot of people have bought properties to rent out short-term. But you know what? Most rewarding things in business involve some healthy competition.
My husband and I own hotels, so we’re constantly working to stand out from other brands. You can’t just open up shop and expect bookings to roll in automatically.
The good news is that travel demand is strong right now – Airbnb saw 25% more bookings in Q1 2023 versus last year. People are eager to take trips!
If your short-term rental isn’t getting many bookings, spend some time looking at what your competitors are doing. What can you offer that makes you unique? How can you better showcase your property to potential guests?
Transitioning to medium-term rentals takes effort too. You’ll need to actively promote your listing on those platforms, not just post it. This is your business – put in the work to make it thrive!
The key is to stay positive and proactive. There are guests out there looking for rentals like yours. With some strategic effort, you can stand out from the competition. Wishing you success!
Here’s some ideas on finding renters:
- Do you have a local hospital? Call them and talk to Human Resources. Ask about ANYONE who travels regularly — not just nurses but all roles. Let them know you have medium term rental property available.
- Higher education. Ask about various departments that have people who travel. Ask how you can get on a list for providing housing with your mid term rental. Go to the school. Put up signs about your mid term property in public places.
- Call the large companies in your area. Ask about training programs where employees must be in the area for an extended time. Ask about employees being transferred, how this works, and if your medium term rental is a fit.
- Reach out to corporate housing companies. See if you can get on their vendor list to offer your mid term rental as an option.
- Call every homeowner’s insurance company and ask how you can get on a vendor list for your medium term rental.
This is an active campaign, and it is work — but it is worth it!!!
Tools for Managing your Medium Term Rental
If you are new to the market of leases that are less than one year, you may wonder what software tools you need to manage your property. Here are some recommendations:
- Property management software – This is a key tool you need. It centralizes all the tasks related to managing your rentals, like listing vacancies, screening tenants, collecting rent, creating leases, scheduling maintenance, etc.
- Accounting software – To track income and expenses, run reports, and handle taxes.
- Tenant screening services – To thoroughly vet applicants by running background checks and credit reports.
- Online rent collection services – To easily collect and track rent payments.
- Maintenance dispatch services – To log, assign, and track maintenance requests.
- Security camera systems – To monitor activity and protect assets. Install outdoor cameras and give tenants access to view indoor cameras.
- Smart home technology – To remotely monitor and control smart home devices like thermostats, locks, and lights. This allows contactless access for maintenance.
The key is finding platforms that easily integrate and provide end-to-end rental management, accounting, maintenance tracking, and security monitoring.
Final Thoughts on Medium Term Rentals as a Passive Income Strategy
The real estate investment strategy involving medium term rentals is gaining significant momentum. This hybrid approach combines the best of short and long term rental strategies while mitigating some inherent challenges.
Compared to corporate housing or short-term vacation rentals, for instance, medium term properties experience less turnover, which can translate into reduced maintenance costs. Consequently, landlords enjoy more consistent rent payments, potentially leading to higher overall returns.
In contrast to longer-term arrangements, month-to-month rental agreements allow landlords to adjust rents according to market conditions and appeal to a wide range of tenants, such as students or relocating professionals.
Medium term rentals also cater to a diverse tenant base, including students seeking semester-based accommodation or professionals needing temporary housing during job relocation periods.
Moving Beyond The Bay Area: Opportunities In The Wider Medium Term Rental Market
Certain cities like San Francisco are witnessing an upsurge in the medium term rental market. Tech companies often temporarily deploy employees there, creating demand for furnished apartments offering flexible lease terms.
However, this doesn’t mean that only metropolitan areas hold the potential for successful investments in medium term rentals.
With remote work becoming prevalent post-pandemic, people are migrating from traditional city centers towards suburban locales where they can find more space at a lower cost of living. This shift opens up expansion in the mid term rental market nationwide.
What are the best mid term rental markets? Typically, cities with universities, major hospitals, and business districts. Also, prioritize areas where people want to live, as they will need medium-term housing during their transition and search for a permanent residence. Additionally, if the area has a highly competitive short-term rental market, the competition for medium-term rentals may intensify if property owners switch to offering medium term options.
Leveraging Your Investment To Maximize Returns
- Acknowledging Additional Costs:
- To ensure your investment remains profitable, consider all aspects, such as additional expenses associated with fully equipped properties (like TV costs or increased utility bills) and setting competitive yet lucrative rates considering local conditions.
- Navigating Legal Implications:
- Your success will be largely determined by how well you manage these factors and provide a comfortable living experience that attracts quality tenants who value the stability of medium term leases over the typical transient nature of short-stay accommodations.
Conclusion
Mid term rentals are gaining traction in the rental market. As an investor, I would consider this strategy.
Some short-term rental owners struggle because of increased competition in this space. Changing your strategy to medium term rentals is a great way to capitalize on investments you’ve already made in the property, like furnishings, bedding, and kitchen supplies. 🎉🎉🎉
If you have long term rentals and feel like you missed the boat on the vacation rental boom…. consider moving to medium term rentals when your properties become vacant. You will have increased initial costs to furnish the property, but as you look at options, this could be a stronger investment strategy.
Medium Term Rentals FAQs
How many months is mid term?
A medium term rental typically spans one to six months, bridging the gap between short-term and long term rental leases.
Is leasing short, medium, or long-term?
Leasing can be categorized as short (less than 1 month), medium (1-6 months), or a long term lease (more than 6 months), depending on the length of the lease agreement.
What makes a short-term rental stand out?
A unique property, excellent location, high-quality amenities, competitive pricing, and stellar customer service make a short-term rental attractive to potential tenants.
Nic
Nic is an avid real estate investor who partners with her husband on hotel syndications. Prior to hotels, she owned apartment complexes and single-family homes. Her insider expertise makes her the ideal resource for those seeking to grow their income via property investments.