Medium-term rentals (MTRs) are at the forefront of investing lately. Naturally, you may have a lot of questions. As the co-author of BiggerPockets’ latest book on the subject: 30-Day Stay: The Real Estate Investor’s Guide to Mastering the Medium-Term Rental, I’m here to answer your questions! Let’s dive in.
How Do I Choose the Right Market For an MTR?
There are a few ways to go about this.
First, you can look at the top indicators of a strong market, as one would recommend for a typical long-term rental—metrics like population growth, job growth, median salary, average home price, etc. I like using a site like Best Places to find these metrics.
Second, you can look into the hospitals. While traveling nurses will not be your only tenants, they are a quality, employed, consistent tenant pool that you don’t want to discount. I recommend choosing a location within a 20-minute drive or within five miles of two hospitals. If you want to get into the nitty gritty and see if the hospitals are likely to have traveling nurses, make sure one of the hospitals in your area is a trauma level 1 or 2 and has over 300 beds (all searchable information on Google). These hospitals are the most likely to employ traveling nurses.
While rural markets can work, I recommend focusing on urban markets as they will have the largest tenant pools. Remember that this location can be in cheaper third-tier cities, bringing you a higher cash flow ratio.
How Do I Figure Out How Much I Can Charge?
If you come from the short-term rental (STR) world, you may be familiar with websites like AirDNA, Rabbu, and Mashvisor. While Mashvisor is the only one currently displaying monthly income comparisons, AirDNA has the most robust free option, so I look there first.
There are a few tiers of MTR pricing. I used to say that STRs pull in 2x market rent, and MTRs bring in 1.5x. While this can be true if you solely market on Furnished Finder (FF), there are ways to build relationships to book direct contracts with placement agencies to get the same or more as what STRs earn!
I look up the free AirDNA projection from their Rentalizer tool, divide it by 12 to get the monthly price and keep that in mind as my upside. Then I pull up FF and search by city as a guest would. I use the map tool to see what price other units in my area are advertising and compare those to my unit based on how stylish the furnishings are (generally not very) and whether they have professional photography. Competition is still rather weak on FF, depending on your market, so you can often beat out other listings if you come into the market intentionally, like a professional. I always run my numbers conservatively so that I’m pleasantly surprised when I beat my projections. It’s also just a good accounting principle.
Where Should I Advertise?
MTR demand is high, so I have easily filled my units solely from listing on Airbnb and Furnished Finder. From there, depending on the time you are willing or able to dedicate to building a business, I recommend building relationships with placement agencies: medical, insurance, government, etc, to win direct contracts. The reason? Because they pay 2x+ market (long-term) rent.
If you are a real estate agent, another marketing channel I would recommend is Zillow, only because this casts a wide net and captures many families relocating to the area. I have been fortunate enough to host guests relocating and then become their agent, eventually selling them their permanent homes. It’s an excellent lead generation trick!
As STR regulations increase and the impending recession has people staying home to save money, there is a temporary decline in STR demand, making it a challenge for those hosts to maintain the occupancy required to turn a profit. That’s where MTRs come in.
Whether a temporary or permanent pivot, you can switch without too much effort. As long-term rentals are strapped for cash flow, the MTR strategy is here to save the day as its higher rental rates allow many more properties, even those found right on the MLS, to cash flow like a champ.
If you have more questions about how to make this strategy work for you, fear not because our book will give you step-by-step tips to get your next (or first) rental up and running fast. We cover everything from how to run numbers, build your team, and furnished in a stylish way to earn more bookings!
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Master the Medium Term Rental
The first-ever book on medium-term rentals, this guide will help you find the right markets, properties, furniture, and tenants to make you a successful medium-term rental host with maximum cash flow and minimum worries.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.