We compare the benefits and drawbacks of mid-term rentals vs. short-term and long-term leases, and share key success factors for this real estate investment strategy.
As a seasoned landlord, making informed decisions about your real estate investments is crucial to maximizing your return on investment. One promising strategy that has been gaining traction in recent years is mid-term rentals, offering a compromise between short-term and long-term leases.
Mid-term rentals strike a balance between flexibility for tenants and steady income for landlords. This article will delve into the pros and cons of mid-term rentals, compare them to short-term and long-term leases, and identify who can benefit most from this option.
Mid-term rentals refer to rental agreements with a lease duration that falls between short-term and long-term rentals. These leases typically range from several months to a year, allowing tenants to rent for a shorter period than a traditional year-long lease while also providing landlords with a more stable income stream than short-term rentals.
Real estate investors should understand how tenants of mid-term rentals differ from other lease types. While a short-term rental may attract more vacationers and business travelers, mid-term housing options tend to attract longer-term visitors, such as college students, professionals on temporary assignments (e.g., traveling nurses or seasonal hospitality workers), or people relocating to a new area who haven’t found a permanent home.
Mid-term rentals have been gaining popularity in recent years among tenants for a number of reasons:
Overall, mid-term rentals' convenience, flexibility, and affordability make them an appealing option for renters.
In this section, we will explore the advantages for landlords in comparison with other lease types and how they can help maximize the profitability of your rental property portfolio.
Because of the tenant benefits listed above, mid-term rentals provide real estate investors an opportunity to cater to a growing renter demographic.
Compared to short-term rentals, mid-term rentals can provide landlords a more stable rental income and less tenant turnover. The flexibility of mid-term leases allows landlords to adjust rent prices and other terms more frequently than long-term rentals, so you can respond to evolving rental market conditions.
Mid-term housing tends to attract responsible professionals with steady income, often making them ideal tenants. And because they’re staying longer than a quick vacation, they’ll likely take better care of the property. Consequently, landlords can hope to anticipate fewer issues related to late rent payments, property damage, and other concerns. And if you do end up with a troublesome tenant, you won’t have to wait out a long lease before they leave.
Unlike short-term rental properties requiring extensive and frequent cleaning and maintenance between tenancies, mid-term rentals offer a more manageable turnover process. This frees up valuable time for landlords to focus on other aspects of their business.
While offering mid-term housing has numerous advantages for landlords, it is also important to consider the potential drawbacks.
Short-term rentals, such as vacation rentals, typically have a more extensive pool of potential tenants, whereas mid-term rentals may require more targeted marketing efforts to attract potential renters.
Additionally, because mid-term leases require a more extended commitment from prospective tenants, they may be more selective in their search for housing, making it harder for landlords to find suitable tenants.
While mid-term rentals offer more stable rental income than short-term leases, they generally provide lower rental rates per unit than short-term rentals, which are usually priced at a premium to account for the higher turnover and vacancy rates associated with such rentals.
If your goal as a landlord is to minimize time spent on property management and keep tenants as long as possible, then mid-term rentals may not be right for you. Mid-term renters often won’t need to renew their leases at the end of the term, so landlords must be on the lookout for new tenants to avoid vacancy periods and lost rental income.
Mid-term renters expect the property to be fully furnished like a short-term rental. That means to make your mid-term rental stand out, you have to provide furniture for each room, appliances, kitchen utensils, and other standard amenities.
The mid-term rental market may be a good fit for landlords who own properties in destination areas like major cities or vacation spots, areas with seasonal variations in demand such as college towns, or high-growth job markets where perhaps a major corporation opened a new office.
Following are other factors to consider as a mid-term rental investor:
Mid-term rentals can provide landlords with numerous advantages, such as flexibility in lease duration, higher-quality tenants, and reduced turnover costs.
However, there are also some potential drawbacks, such as more time and effort to find tenants, the cost of furnishing the property, and less stability than long-term rentals.
Ultimately, whether this type of rental is a good fit will depend on factors such as the property’s location, the landlord's financial goals, and local laws and regulations. Investors should evaluate their rental options carefully to determine whether mid-term rentals are the right choice for their real estate business.