May 23, 2023

8 Reasons for High-Income Professionals to Invest in Mid-Term Rentals

While not officially recognized by the IRS, Mid-Term Rentals (MTRs) are widely recognized throughout the rental industry as rental properties where the occupant stays a minimum of 30 days but generally no more than 6-9 months.

Here are 8 reasons owning MTRs makes sense for doctors and other high-income professionals who invest in real estate.

When a short-term rental (STR) is impossible or doesn’t make good business sense

Municipalities and homeowner’s associations have begun enacting rules to prohibit or restrict STRs. There are also places where an STR simply doesn’t make good business sense (i.e. it is not in an area where it will provide adequate cashflow).

While a careful reading of local rules will be required, offering the property as an MTR may be an excellent option. MTRs can be a way to get most of the benefit of the higher income associated with STRs in places that are not friendly toward STRs.

To even out seasonal income fluctuations

Even short-term rental properties often have seasonal fluctuations in demand. Renting as an STR during peak season and as an MTR during slow season could help to even out income fluctuations. This can be particularly valuable for keeping up mortgage payments when working with a tight budget.

Areas where this works well are markets that typically have one very high season for STR rentals, but lower seasons, where snowbirds or other longer-term tenants can stay. Another place this may work well are in areas where there are high-income nights during a few yearly events, but a lower average nightly stay between these dates.

Just be aware that average length of stay can have tax ramifications. So consult with a tax professional to make sure everything makes sense for your overall financial situation and goals.

To shake out all the kinks in a newly-listed property

For newly-acquired properties, one option is to rent it as an MTR for a few months first.

A short-term renter in 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.

Side-step that issue by getting a mid-term renter for several months first.

The class of renter who is looking for an MTR is typically more forgiving of little things that need to be fixed or could be improved. (As long as you are responsive and prompt about fixing them!) 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.

Save on booking fees

Vacation rental websites charge a booking fee for every new STR guest. With the high turnover of short-term rentals, these fees can really add up.

Not only can you reduce these fees by having guests stay for longer periods (i.e. MTR guests), but Furnished Finder doesn’t charge a booking fee to the rental owner at all.

There is simply an annual listing fee. This can save many hundreds of dollars. Travelers prefer the platform because they are not charged booking fees, either.

Reduce wear without reducing income

Having a large number of guests cycling through your rental takes a toll on furnishings and amenities.

Cleaning crews coming in after every STR guest might mean paying to clean the property multiple times per week.

While there are very good reasons to still offer cleaning service to MTR guests, the frequency can be reduced to once a week or even once per month. Plus, the cost of the cleaning service can often be charged back to the renter!

Your cleaning crews can check on the condition of the place and report damage so that it can be addressed promptly.

This reduced frequency in guest turnover also extends to logistics like guest communications, check-in, consumable amenities such as soap, and even your septic system.

In short, less turnover equals less work for you and your team. It also means less wear and tear on the property itself.

Less frequent turnover also reduces pre-acceptance screening expenses, as well as enables you to screen more thoroughly.

Better able to screen tenants

Horror stories abound of out of control parties or other undesirable events happening in short-term rentals. For example, one of our STRs was recently used to host a party that resulted in damage to much of the linens.

MTR renters are typically there for work and generally want to stay for weeks or months at a time. That makes them a better caliber of renter.

Some common populations of MTR guests include traveling nurses and other healthcare professionals, visiting professors or grad students, corporate executives, digital nomads, military, people renovating their primary residence, those looking for a place to stay between selling one residence and buying another, house hunters relocating to the area, insurance company tenants undergoing home repair, and more.

With Furnished Finder’s sister company, KeyCheck, you can screen each tenant for credit, eviction history, and criminal history. With MTRs, the tenant expects to pay this screening as they would a long term rental process.

When the property is too small to be attractive as an STR

Small properties (e.g. one bedrooms or studio apartments) tend to be more appealing as an MTR than as an STR.

Vacationers often travel as families or with friends. Not having enough space to accommodate more than one or two people limits the appeal of your property for short-term renters in certain markets.

However, because mid-term renters tend to be in the area for work, they are often traveling alone so a smaller place actually has increased appeal.

Cheaper to decorate and furnish

While both STRs and MTRs are offered fully furnished, vacationers often expect a luxury experience; something they can’t get in their day-to-day lives.

Mid-term renters, who are there for work, place a higher priority on comfort and functionality. So, while you can’t cheap out and offer substandard amenities, it’s unnecessary to go all-out in offering luxury.

This can save considerably on decorating and furnishing cost.

Conclusion

Given their similarities, switching between MTR and STR is relatively seamless.

Whether you want your property to do double duty, or you have an STR that has suddenly been forced out of business by new regulations, offering it as an MTR may be an attractive and sensible alternative.

About the Authors

Despite having full schedules as busy physicians, Dr. Letizia Alto MD and Dr. Kenji Asakura MD started investing in real estate together in 2015, and achieved financial freedom in just three years by investing in income-producing rentals.

This led them to launch Semi-Retired MD (SRMD). They now teach other doctors and high-income professionals how to use income-producing real estate to create another source of significant, reliable income, shield some of their taxable income, and find more joy and freedom in their practice of medicine and their lives.

If you want to learn more about how to profitably buy and operate all types of investment properties including mid-term, short-term, and long-term rentals, check out the online courses offered by Semi-Retired MD.

Author: Letizia Alto, MD and Kenji Asakura, MD