October 11, 2023

Mastering Mid-Term Rentals: Insights from the Bigger Pockets Author, Zeona McIntyre

Zeona McIntyre is co-author of the Bigger Pockets book “30-Day Stay”, has been a real estate investor since 2012, personally owns 12 properties (and counting), and is an investor-friendly agent based out of Boulder, Colorado.

Choosing the Right Property

Zeona shares her dynamic and seasoned perspective on how to choose the right property for mid-term rentals. At first, she was more interested in one- and two-bedroom homes because she thought they would be easier to rent out. But as time went on and she learned more about how different markets work, she realized that the size of a property isn't the main thing that stops it from being a good rental.

McIntyre learned that if you know the right people and make contracts with companies that need to house their employees, you can rent out properties of all sizes. Because of this change in her thinking, she has been able to add more properties to her portfolio and reach a wider range of possible tenants, which has given her more power in the rental market.

Along with the size of the property, McIntyre points out how important its features are. She agrees that houses with two bathrooms are more desirable on the market, but she also says that having only one bathroom doesn't always hurt rental income a great deal. This observation goes against the common idea that more bathrooms always mean more rent.

Zeona notes that "third-tier" cities seem to be the sweet spot right now in terms of the cost to purchase a property versus the amount of rent you can charge. Forbes recently listed Omaha, Lincoln, and Wichita, Kansas, as the three cities to watch out for in terms of growth and appreciation.

Proximity to Hospitals

Everyone knows that travel nurses account for a large portion of traveling professionals. Therefore, finding a property close to a hospital makes sense, but which hospitals and how close? Zeona tries to be within five miles of a major hospital, ideally two. Jesse Vasquez, a previous Landlord Diaries guest and fellow mid-term rental coach, pointed out that Tier 1 and Tier 2 hospitals have the highest demand for travel nurses.

Tier 1 and Tier 2 hospitals are typically large, well-equipped facilities providing specialized services. Tier 1 hospitals are often renowned medical institutions, typically in urban areas, are often associated with medical schools and universities and handle high patient volumes and complex healthcare needs. Consequently, they require a robust staffing solution, which travel nurses provide by delivering high-quality care during peak times, filling in for staff shortages, or covering for specialized services when necessary.

On the other hand, Tier 2 hospitals, though smaller, cater to a wide range of healthcare needs in their respective communities. Travel nurses serve as a bridge in these hospitals, stepping in to mitigate staffing shortages in general medicine, emergency care, and surgical services.

Financial Independence Through Rentals

Zeona’s story exemplifies the potential of short- and mid-term rentals as an investment strategy. She achieved financial independence in just two years by doubling the long-term rental rates on her properties. This technique significantly increased her rental income in a short period of time, rapidly improving her financial situation.

McIntyre, on the other hand, emphasizes the importance of taking a conservative approach to financial management in real estate investments. She advises investors to strike a balance between optimism and caution. While aiming for a high rental income is important, it is equally important to understand and acknowledge the potential risks involved.

She recommends that investors base their calculations on conservative estimates. This entails basing financial projections and decisions on a lower-than-expected return or rental income rather than an overly optimistic one. This contributes to the development of a safety buffer in the financial model, which protects investors from unforeseen events or market downturns.

The quick calculations she uses to determine if a property will likely yield the cash-on-cash return she's looking for are to look on Furnished Finder for comparable properties and see what they're getting per month in rent. With that monthly rent, multiply it by 12 to get the annual revenue for that property. Next, take that annual revenue number and divide it by the purchase price of your property. If it is 15% or higher, that property is worth considering further, as it will likely have a 15% cash-on-cash return.

Less Vacancy, More Stability, Higher Rent

Mid-term property rentals provide a unique set of benefits that combine the advantages of both short-term and long-term rentals, making them an appealing proposition for many property investors.

In comparison to long-term rentals, mid-term rentals offer more flexibility and the potential for a higher income. Long-term rentals, while providing consistent income, frequently have multi-week vacancies between tenants. This occurs when the property must be cleaned, repaired, or renovated before a new tenant can move in. These extended vacancies result in lost income. Mid-term rentals, on the other hand, can be completed more quickly, reducing the possibility of lengthy vacancies.

Furthermore, mid-term leases are typically more expensive than long-term leases. Tenants are willing to pay a premium for the flexibility that these rentals provide, resulting in a higher overall income for the property owner, even when vacancy periods are factored in.

In comparison to short-term rentals, mid-term rentals offer more income stability. Vacation homes and other short-term rentals can make a lot of money, but seasonal demand frequently affects their occupancy rates. During the off-season, for example, they may only be booked for one or two weekends per month, resulting in inconsistent income. Mid-term rentals, on the other hand, provide a more consistent stream of revenue. Because of their longer duration, they are less susceptible to seasonal fluctuations and provide more income certainty.

Mid-term rentals usually require less management effort than short-term rentals. The latter frequently require more cleaning, tenant communication, and booking management, all of which can be time-consuming and expensive. Mid-terms also combine the consistency and stability of long-term rentals with the earning potential of short-term rentals. They can be an efficient way to maximize returns while reducing the risks associated with vacancies and seasonal demand fluctuations.

Understanding Your Target Market

Zeona McIntyre, an experienced investor, emphasizes the significance of having a thorough understanding of your target market when investing in real estate. She has discovered that the travel nurses who make up her main clientele prefer a cozy, comfortable setting over one that is extravagant. This preference has strongly affected how she manages properties; rather than investing in expensive luxuries, she cultivates warm, welcoming spaces that feel like home.

McIntyre's strategy goes beyond the obvious aspects of property decoration. She places a high value on addressing her tenants' emotional needs, believing in the power of "home feeling" as a key attraction for prospective tenants. She uses the example of a tenant choosing her property over a more luxurious alternative to demonstrate how creating an atmosphere that emotionally resonates with tenants can often outweigh purely material considerations.

In addition to making a place feel like home, McIntyre stresses the importance of marketing properties to the right people. She tells owners to be particularly knowledgeable about both where their properties are and who might rent them. For example, a property in a rural area might not attract tenants who want to live in the city. This shows that if you have insight into what your target market wants, you can tailor your property and your marketing plan to attract the right tenants. When a property is well-marketed and has a warm, welcoming atmosphere, it can be appealing to the market segment you want to reach.

Partnerships and Financing

Delving deeper into partnerships and financing, Zeona offers practical advice from her own experiences. She advocates for partnerships that comprise two roles: an active partner and a silent partner.

The active partner's role entails hands-on property management, such as regular maintenance, responding to tenant requests, and dealing with day-to-day operational issues. The silent partner, on the other hand, is not involved in the day-to-day operations but provides funding or other resources as needed. McIntyre believes that this type of collaboration ensures role clarity and helps to avoid potential disputes caused by misunderstandings about responsibilities.

When it comes to financing, McIntyre describes an unconventional method she used to acquire her first six properties. Traditional mortgages, which are loans secured by the real estate being purchased, were not her primary source of financing. Instead, she used unconventional financing methods such as assuming existing mortgages and leveraging private funds.

Assuming a mortgage entails taking over someone else's loan agreement when purchasing a home, whereas using private money entails obtaining funds from individual investors or non-bank lenders. When compared to traditional mortgages, these alternative financing methods can often provide more flexibility, faster transactions, or lower interest rates.

McIntyre also emphasizes the significance of understanding local politics and tenant rights when investing in properties across states. State laws, such as rent control regulations, eviction procedures, and maintenance responsibilities, can have a significant impact on landlord-tenant relationships. Being aware of these factors can help investors make more informed decisions and avoid future legal disputes.

Tools and Strategies

Leveraging technology and data-driven strategies is critical for success in the property rental industry. Furnished Finder is one of the tools she uses to maximize her rental income. Furnished Finder enables her to monitor the competitive landscape by analyzing what other landlords in the area charge for properties with comparable features. She keeps her rental rates competitive and appealing to potential tenants by aligning her prices with market trends.

Pricing software that considers market seasonality is another useful tool for Zeona. Seasonal fluctuations in the rental market are common. For example, vacation rentals may be in high demand during the holiday season, whereas student housing may see an increase during the start of the academic year.

Zeona can dynamically adjust her rental prices in response to seasonal variations in demand by using such software. This strategy not only helps her maximize occupancy rates, but it also allows her to command higher prices during peak periods. Simultaneously, lowering prices during off-peak seasons can attract bargain-hunting tenants, ensuring the property does not sit vacant.

She emphasizes the importance of updating rental prices on a regular basis to reflect market shifts. An annual or biannual reassessment may not be sufficient, as demand patterns can shift quarterly or even monthly. Regular pricing strategy updates help ensure a consistent stream of income throughout the year, preventing revenue loss due to outdated pricing.

Listen to the Podcast here


Author : FF Team