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7 Reasons You Should Invest in a Mid-Term Rental

Mid-term rentals are a growing trend of investment properties that are rented for more than a week, but typically less than six to nine months. They have distinct advantages including addressing the housing needs of traveling healthcare professionals, as well as sidestepping restrictive regulations around short-term rentals. Here we discuss seven key benefits to add mid-term rentals to your portfolio.

 

 

According to the IRS, there are only two types of rental property.

If the average length of stay – when averaged out over an entire year – is seven days or less, they classify it as a short-term rental. When it’s longer than seven days, it is considered a long-term rental.

Those two categories may be fine for tax purposes. However, in response to specialized consumer demand, an unofficial third category has emerged.

Mid-term rentals are those where the average length of stay is longer than seven days but generally less than six to nine months.

Why was this intermediate category needed?

There are actually quite a few good reasons. Let’s explore a few.

 

1. Cater to specific needs

There are many situations where a renter may wish to stay far longer than seven days. But the six to twelve months of a typical long-term rental lease agreement may be too long.

Traveling nurses and other healthcare professionals are just the start. Others who travel for their profession or studies include visiting professors, grad students, corporate executives, digital nomads, government contractors, military personnel, and more.

Aside from these categories of professionals, think about people renovating their primary residence. You might also look into insurance company tenants undergoing home repair. House hunters looking for a place to stay between selling one residence and buying another, and those relocating to the area, are another possibility.

There are myriad groups who might be interested in renting for this intermediate time period where seven days is not long enough but a year is far too long.

 

2. There are times when a short-term rental (STR) is impossible or doesn’t make good business sense

Municipalities and homeowner’s associations across the country are enacting rules to restrict or prevent short-term rentals.

Largely, this is in response to the constant turnover of guests and bad behavior on the part of some guests.

You may find yourself with a property in an area that is hostile to short-term rentals. Mid-term rentals may offer a viable alternative with similar income potential and flexibility as STRs.

 

3. Savings

The typically higher income of short-term rentals also comes with higher expenses.

Booking websites such as AirBNB and VRBO charge fees for each new booking, regardless of the length of stay. So more frequent guest turnover equates to more booking fees being charged.

Beyond that, there is considerable difference in the wear and tear from short-term guests versus longer-term ones. Furniture, fixtures, kitchenware, even septic systems all need more frequent servicing and replacement with higher guest turnover.

So accommodating longer-term guests helps reduce these factors.

 

4. Income consistency

Seasonality may cause fluctuations in occupancy or in the rates you can charge. The bottom line is, most short-term rentals experience slow times.

You can even out these fluctuations by keeping your space filled with mid-term renters during slow times.

The good news is that both short-term and mid-term rentals are typically furnished and offer many of the same amenities. So switching back and forth seasonally is easy and can be done with little or no adjustment.

 

5. Overcome lack of short-term rental demand for your property

Sometimes a property is not in a tourist destination. Or it may be too small to appeal to families on vacation. Or it could have some other reason that makes it unsuccessful as a short-term rental.

For the types of traveling professionals listed above, such concerns are generally not an impediment.

There’s no need to suffer with low occupancy or slash your rates to attract vacationers. Offer your place as a mid-term rental instead.

 

6. Furnishings and decor do double-duty

As noted, both short-term and mid-term rentals come furnished and offer similar amenities. While you can switch back and forth easily, there are subtle differences.

Most notably, those traveling professionally may need a work space. That might include a desk, a good desk lamp, an ergonomic chair, etc.

While vacationers are looking for a recreational experience, traveling professionals place more emphasis on safety and a quiet environment. Especially for those with nonstandard sleep and work schedules. 

Another selling point is proximity to their reason for being there. So highlight your proximity to a university, hospital, military base, government office, and other locations that attract mid-term renters.

Ultimately, it should not be difficult to make your property appeal to both groups. You get wider audience appeal from a single investment in furnishings.

 

7. As a sort of dry run for a newly-listed property

Whether it’s a newly-acquired property, or one you’re repositioning to become a short-term rental, there are things that must be done to make it suitable for its new role.

Even relatively small issues may prompt vacationers to leave a negative review.

Worse, a short-term renter staying at your property for only a few days is unlikely to discover everything that needs to be addressed.

So you risk multiple guests each having problems and leaving multiple negative reviews. This will invariably impact your property’s success as a short-term rental.

Side-step that issue by renting to one or more mid-term renters for several months first.

Mid-term renters are typically more forgiving of little things that need to be fixed or could be improved. As long as you are responsive and prompt about addressing them, of course.

This way, you can work out all the bugs without risk of negative reviews on the STR sites.

In essence, you are getting someone to pay you to beta test your new rental property. They can give you invaluable feedback for improving it before releasing it to the much less forgiving audience of vacationers.

 

Conclusion

It may or may not be your primary goal to offer your property as a mid-term rental. However, there are good reasons to not fully discount the idea.

It can be beneficial to keep the mid-term rental option open as a backup plan. You can also use it to fix a short-term problem like a seasonal slowdown.

There are so many ways mid-term rentals can be an asset to your portfolio.

Who knows? Once you try it, mid-term rentals might even become your go-to strategy!

If you want to learn more about the nuts and bolts of owning and running a mid-term rental, check out Boost Your Cashflow: Mid-Term Rental Mini-Course.

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

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Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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