Welcome to The Property Management Show podcast, where we delve into the ever-evolving landscape of property management, entrepreneurship, and marketing.
This show is presented by Fourandhalf Marketing Agency. Since 2012, Fourandhalf has been helping residential property managers get more owner leads by helping with their website, SEO, online reputation, video and blog content, social media, and paid ads.
For this podcast episode, we were fortunate to have Jessica Schirmeister and Jason Zimmerman from Trend Property Management in Texas join us for this discussion. With their extensive experience in the field, they brought a wealth of knowledge, particularly in managing and optimizing mid-term rental properties. Their insights are especially relevant for real estate investors and property managers looking to expand their portfolios and increase profitability.
As you can imagine, there was a lot of information to unpack which is why we divided the interview into two episodes. This is Part 1, where we explore the rising trend of mid-term rentals and their advantages over traditional rental models.
Understanding Mid-Term Rentals
With economic and regulatory factors pushing both short-term and long-term rental property owners and managers to panic, it makes sense to start looking for more lucrative and sustainable alternatives in the market. This is where mid-term rentals come into play, offering a sweet spot between short-term and long-term rental properties. But what exactly makes a rental, well, mid-term?
What is a Mid-Term Rental Property?
Traditionally, short-term rentals are fully furnished properties renting for less than 30 days, whereas long-term rental properties are typically unfurnished and covered by a 12-month lease. Mid-term rentals are those that fit somewhere in the middle — fully furnished properties that can be rented for 30 days up to a year.
If you’re a bit confused, you are not alone. I (Marie) was confused as well. You see, the label “mid-term” makes it seem like the term or the length of the lease defines what category the rental property belongs to. But if a mid-term rental can be rented for up to a year, then doesn’t it fall under the long-term rental category? According to our guests, that is a “no”.
As it turns out, even they don’t like using the label “mid-term rentals”. Instead, they prefer the label “furnished rentals”. This is because lease duration can easily be shifted, but renting a property as furnished vs. unfurnished offers a clearer way to categorize them.
Now you might be thinking, who would want to rent a furnished house anyway? Don’t people typically have their own stuff to fill a house with?
Let’s dive deeper into this.
Who Typically Rents Furnished Rental Properties?
In the world of furnished rental properties, the tenant pool is as diverse as their reasons for renting. From this podcast interview, we learned that furnished rentals are a hit among various groups — and despite what you may have heard before, it’s not just for travel nurses anymore!
Here’s a rundown of who these tenants are and why they choose furnished rentals:
- Traveling Professionals: Often on temporary assignments, these individuals prefer furnished rentals for their convenience and home-like feel compared to hotels. Yes, travel nurses fall into this category. But so do film crew, actors, and even digital nomads.
- Individuals in Transition: People relocating or in transitional life stages choose furnished rentals for their flexibility and the ease of not having to move furniture.
- Patients and Medical Visitors: In areas like Rochester, MN near medical facilities such as the Mayo Clinic, patients and their families opt for furnished rentals for the duration of medical treatments and even as they are recovering. Some people prefer not to travel right after a major medical procedure, and may seek comfortable accommodations near the medical facility. Typically, areas that have sought after medical services or facilities would attract a similar kind of group.
- Corporate Groups: Companies often find it more economical and comfortable to house employees in furnished rentals for projects or training programs.
- People Affected by Insurance Claims: Those undergoing home repairs due to insurance claims may need temporary housing, making furnished rentals an ideal solution.
- Families: Larger furnished rentals are attractive to large families visiting extended family members and may need space and amenities that mimic a home environment.
- College Students: Jason also mentioned an increasing interest among college students in furnished rentals. This introduced additional ease and convenience in college housing, where furnishings are often included or can be added at a minimal cost. This trend is planting the seeds for future rental preferences, with students getting accustomed to the idea of not having to acquire their own furnishings for their living spaces. The implication is that this experience in college is influencing their future housing choices, making them more inclined towards furnished rentals even after college.
Each group’s unique needs make furnished rentals a versatile choice in the housing market.
Short-Term vs. Mid-Term vs. Long-Term Rental Properties
So now that you know who typically rents furnished rental properties, let’s explore how these types of rental properties compare with more traditional ones.
The landscape of property management has witnessed significant shifts, and understanding these comparative dynamics can empower property owners, property management businesses, and real estate investors to make informed decisions.
The table below offers an easy way to compare the mid-term rental properties against short-term and long-term properties:
|Typically <1 month
|1 month to <1 year
|1 year or more
|High with premium nightly rates
|Moderate stable monthly income
|Lower but stable and predictable
|High due to frequent guest changes
|Moderate fewer turnovers
|Low least frequent turnovers
|Wear and Tear
|Higher due to frequent turnovers
|Lower than short-term higher than long-term
|Lowest due to stability of tenants
|Often stringent with zoning and hospitality taxes
|Generally fewer than short-term
|Typically minimal regulations
|Tourists short-term travelers
|Professionals students transitional phases
|Families long-term residents
|High adjustable for demand and season
|Moderate set for the lease duration
|Fixed set for the lease term
|Dependent on tourist flow and events
|Varies based on local demand and conditions
|Steady less influenced by short-term market changes
|Intensive due to guest management
|Moderate occasional tenant interactions
|Least mainly maintenance and renewals
|High with peak and off-peak periods
|Moderate less influenced by seasonality
|Low typically unaffected by seasons
|Potential resistance from local communities
|Generally accepted and stable
Now that you have a better understanding of these three categories of rental properties, let’s talk about why property managers should consider managing mid-term rentals.
Should Property Managers Consider Mid-Term Rentals?
Mid-term rentals present a ‘blue ocean strategy’ for property managers. They fill a unique market gap, catering to clients like traveling professionals, medical patients, and people in transitional life phases. This market is less saturated compared to short-term and long-term rentals, offering new avenues for growth in the property management business.
Moreover, mid-term rentals offer higher profitability potential compared to long-term rentals. Property managers can charge a premium for fully furnished and flexible living options while avoiding the high turnover and maintenance costs associated with short-term stays.
Here is a list of reasons why venturing into mid-term rentals (aka furnished rentals) is a good idea for residential property management companies:
- Filling a Market Gap: Mid-term rentals cater to a diverse tenant base, bridging the gap between short-term and long-term rentals. These rentals offer a more economical option than hotels, especially for longer stays, appealing to both individual tenants and corporate groups.
- Reduced Wear and Tear: They experience less wear and tear compared to short-term rentals, leading to lower maintenance costs.
- Regulatory Benefits: Mid-term rentals often face fewer regulatory challenges than short-term rentals.
- Improved Neighbor Relations: Longer rental periods result in fewer neighbor issues due to less frequent turnovers and less disruptive behavior.
- Diverse Tenant Base: Attracts a broad range of clients, not limited to traveling nurses, but also including professionals, families, and individuals in transitional phases.
- Increased Demand Post-COVID-19: The rise of remote work has boosted the demand for flexible, mid-term living arrangements.
- Improved Lifestyle for Tenants: Provides a more comfortable and homely living experience compared to extended hotel stays.
- Profitability and Simplicity: While they may not generate as much monthly income as short-term rentals, mid-term rentals offer a more straightforward, profitable model in the long run due to minimized vacancies and reduced maintenance.
Getting Started in Mid-Term Rental Management
Mid-term rentals offer a more profitable alternative to traditional long-term rentals by charging higher rates and reducing vacancies. But is it all smooth sailing? Like any business venture, there are several factors to consider before diving into mid-term rentals.
Understand Your Local Market for Furnished Rentals
Effective property management strategies require an in-depth understanding of the local housing market, tenant demands, and supply trends. These factors play a crucial role in determining the feasibility and profitability of mid-term rentals in a particular location.
Property managers should conduct thorough market analysis to identify potential demand for longer term furnished rentals. To start off, you can ask yourself the following questions:
- Is my area a popular location to film movies or shows?
- Do I manage properties in “college towns” or near college campuses?
- Has there been an influx of “digital nomads” (tech workers who don’t want to be tied down into one place) in my service area?
- Are there local businesses or facilities in my area that would attract people who tend to rent furnished mid-term rental properties?
Moreover, understanding the rental rates and vacancy rates in the area is crucial for setting competitive prices and optimizing occupancy.
But knowing who your target market is is just once piece of the puzzle. Property managers should also consider what amenities and services their potential tenants would be looking for in a mid-term rental.
Understand Expectations of Mid-Term Renters
Property management strategies that work for traditional long-term rentals may not be as effective for mid-term rentals. It’s essential to note that mid-term renters have different demands and expectations compared to long-term renters. Therefore, property managers must adapt their management strategies accordingly.
What Amenities Are Expected of Mid-Term Furnished Rentals?
During the interview, there was a detailed discussion about the amenities typically included or expected in mid-term furnished rentals. Here’s a breakdown of what was mentioned:
- Comfort-Oriented Furnishings: The emphasis was on providing super comfortable furniture. And for rentals near medical facilities like the Mayo Clinic, furnishing that support recovery and relaxation, are especially important for residents who might be recovering from surgeries.
- Accessible Floor Plans: Properties with floor plans that minimize the use of stairs, like ranch-style homes, were noted as essential. This is particularly significant for tenants with mobility issues or health concerns.
- Cozy and Homely Additions: Comfortable blankets, pillows, and other such items that contribute to a ‘home away from home’ experience are crucial.
- Appeal to Working Professionals: In areas like Fort Worth, the target demographic includes working, traveling professionals. The focus here is again on comfort and convenience, offering a space where these individuals can unwind after a day’s work. Make sure you offer high speed wifi as well.
The overarching theme is creating a comfortable, convenient, and homely environment, catering to the specific needs of mid-term tenants, be they medical patients or traveling professionals. This approach differentiates mid-term rentals from the more transient nature of short-term rentals, which often cater to vacationers.
Do Residents Expect Kitchen and Bathroom Supplies in Mid-Term Rentals?
In the podcast, we also delved into the topic of amenities in rental properties, discussing the common practice in short-term rentals of providing essential items such as toilet paper, paper towels, shampoo, conditioner, and basic kitchen supplies like salt, pepper, and cooking oil. This led to an exploration of whether mid-term rentals should offer a similar level of provisions.
While there’s a recognized overlap in amenities between short-term and mid-term rentals, underscoring the importance of ensuring basic comforts for tenants, the conversation revealed that there isn’t a clear consensus on the extent to which these supplies should be provided in mid-term rentals.
So if the minimum stay is a month long, is the property manager expected to provide a month-long supply of toiletries and kitchen essentials? According to Jessica, although there is no hard and fast rule about this, it’s good practice to give your residents enough to start off. Providing a couple days’ worth or a week’s worth of supplies can go a long way. You don’t want your residents complaining because there was no toilet paper when they used the bathroom upon arriving, do you? Talk about starting off on the wrong foot.
Remember that in the mid-term rental business, residents are expecting a higher level of service and a positive experience. Speaking of which, let’s talk about housekeeping services.
Unlike long-term leases, which may involve minimal interaction with residents, mid-term rentals require more hands-on management.
People who choose to rent mid-term rentals or furnished rentals will likely have similar expectations as guests at an extended-stay hotel. So unlike long-term tenants who may tolerate minor inconveniences, mid-term renters may not. They are looking for a hassle-free living experience during their temporary stay.
That’s why having a cleaning crew regularly maintain the property is a key aspect of managing these rentals. This regular maintenance not only helps in keeping the house in top condition but also plays a significant role in preserving the property’s assets.
Jason and Jessica highlighted that furnished rentals, particularly those that are well-maintained and offer premium finishes, tend to attract tenants who are willing to pay a premium.
These tenants generally have higher expectations regarding the upkeep and condition of the home. This includes not only the standard maintenance but also responding to specific work orders, such as sweeping out the garage or changing a light bulb (Jessica wasn’t kidding. This really happens).
This level of service and attention to detail justifies the extra expense of maintaining such properties and contributes to long-term savings by preserving the property’s value and appeal.
Mid-Term Rental Properties: Investment and Returns
Investing in furnishing properties might seem like a substantial upfront cost, but the returns justify the investment. You can get higher rental income than in a long-term lease while getting less frequent tenant turnovers than short-term leases. These two things could nicely balance out upfront costs.
Moreover, the “higher touch” level of service can reduce ‘normal wear and tear’ because of the following:
- Residents are more likely to report even minor issues before they become big problems
- More frequent property visits let your team see the condition of the inside more often, and catch problems sooner rather than later.
- Residents are less likely to throw parties (and potentially trash the place).
- Residents are more likely to treat it as their temporary home and respect the space.
The Future of Mid-Term Rentals in Property Management
Mid-term rentals offer a unique blend of flexibility and stability, making them an increasingly attractive option in the property management landscape. They represent a significant opportunity for property management companies to innovate, diversify their portfolios, and enhance profitability.
As the property management industry evolves, adapting to new trends like mid-term rentals is crucial. They offer a fresh perspective on rental management, meeting the changing needs of tenants and providing a new avenue for property managers to grow their businesses.
Teaser: What is Part 2 About?
In our next episode, we’ll delve deeper into the operational challenges and strategies for managing mid-term rentals. We’ll discuss finances and the subtle art of balancing tenant rights with property management objectives. Stay tuned for more expert insights that could transform your approach to property management.
If you haven’t subscribed to our newsletter yet, head on over to https://fourandhalf.com/subscribe/ to make sure you don’t miss when Part 2 of this interview goes out.