Why Savvy Investors are Targeting Mid-Term and Long-Term Rental Markets

Learn the benefits of investing in mid-term and long-term rentals, the types of properties that this strategy is best suited for, and the necessary steps to ensure a successful investment.

Last Updated
June 30, 2023
Why Savvy Investors are Targeting Mid-Term and Long-Term Rental Markets

The mid- and long-term rental market is a fast-growing, steady-income stream-producing real estate sector. Investors who are looking to increase their returns more quickly than traditional methods can offer should consider investing in these types of rentals.

In the past few years, investing in short-term rental (STR) properties has become extraordinarily popular, and for a while, it was a nearly surefire way to solid returns. Like most other investments, however, the good times couldn't last forever, and many STR investors are beginning to worry about their future returns. Today, investors must incorporate all available tips for successfully managing short-term rentals to have a fighting chance at long-term returns.

But that doesn't mean the dream of ensuring passive income through real estate investments is lost. You've come to the right place if you're a potential investor considering different real estate investments like mid-term and long-term rentals. The benefits of investing, the types of properties that are best suited for mid- and long-term rentals, and the necessary steps to ensure your investment are all found below. Done right, investing in rentals can secure your financial future. So, let’s dive into the exciting world of mid- and long-term rental investments!

Things to know about mid- and long-term rentals

Among the many different types of real estate investments, the standalone mid- and long-term rental market is a relatively new concept. It focuses on tenants who will stay for longer periods (3 months to 1 year), which differentiates it from short-term rental (STR) investments. Most people are familiar with these, which have been popularized by companies like Airbnb and VRBO.

Due to the lower turnover rate and still flexible terms that these types of rentals offer, there is high demand for mid- and long-term rental properties in many areas; demand is of the utmost importance to ensure a reliable income source. Since tenants are usually committed to longer rental periods, there's also more stability compared to short-term rentals.

Investing in longer-term rental properties can provide more control over your investments, as renters sign longer leases, allowing for better management, rent prices, and predictability.

Why mid- and long-term rentals make financial sense

The potential for a high return on investment (ROI) is, first and foremost, the primary benefit of jumping into the longer-term rental market. Renters are usually committed to a longer period of time, so you don’t have to worry about searching for new tenants as often. You can set rental prices that work for all parties, helping to ensure a steady stream of income.

In contrast to STRs, the longer-term rental market is more stable, which is advantageous to investors. You can better manage your rental property and have more certainty about how much money you can expect to make because tenants typically sign longer leases.

What's up with the short-term rental market?

The STR market has become increasingly competitive and saturated in recent years. With more people turning to platforms like Airbnb and VRBO, the demand for these types of rentals is declining — resulting in what some investors are calling “Airbnbust.” Savvy investors are therefore shifting focus to mid- and long-term rental markets as a more reliable source of income.

Plus, mid- and long-term rentals often offer greater flexibility in terms of rent prices, lease lengths, and tenant requirements — something that can’t always be said for short-term rentals. So if you’re considering investing in mid- or long-term rental properties, now is a great time to get started.

Factors to consider when choosing a location for longer-term investment properties

Location is vital to consider before investing in mid- and long-term rentals. Before you start searching for properties, it’s important to research the local housing market — considering factors such as rental demand, rental prices, vacancy rates, and more.

Another factor to keep in mind is tenant requirements. Different municipalities (and states) have different laws when it comes to renting out properties to short- or longer-term tenants, so make sure you understand the local regulations before you start searching for properties.

Finally, it’s a good idea to take into account the local amenities and attractions when choosing a location. This can help attract more tenants and ensure your property is desirable to prospective renters.

Types of properties suited to mid- and long-term rentals

The most common type of rental property is the detached dwelling, commonly known as the single-family home. They are ideal for people who don't want to deal with managing multiple tenants at once, and in the right rental market, they can be highly sought-after.

Apartments and condos have the benefit of having shared amenities like swimming pools, fitness centers, and laundry rooms, and they're also great options. Compared to single-family homes, these properties frequently have lower upfront costs — one of the primary reasons to buy a condo instead of a single-family home.

Finally, townhouses and duplexes can be great options for investors looking for more space or who want the potential for higher rental income. These properties usually require more effort in terms of upkeep and management but can also provide a great return on investment.

The benefits of investing in mid- and long-term rentals

Investing in mid- and long-term rental properties offers numerous benefits:

  • Higher ROI: Longer-term rentals usually produce higher returns than STRs since tenants are likely to stay for longer periods of time.
  • Tax breaks: Investing in rental properties can provide tax advantages for landlords, such as deductions for expenses related to the upkeep of their property.
  • Increased stability: With mid- and long-term rentals, investors don’t have to worry as much about turnover or vacancy rates as with STRs.

Long-term real estate investment success

A great way to profit from the current market and increase your returns is to invest in mid- and long-term rentals. Investors can make sure that their investments are profitable by carefully considering variables like location, property type, tenant requirements, and potential tax advantages. By researching the local housing market and familiarizing yourself with local regulations, you can find the best rental properties for your investment goals.

This guest post was written by RealFX.

Important note: This post is for informational and educational purposes only. This post should not be taken as legal advice or used as a substitute for such. You should always speak to your own legal counsel before taking action.

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