Mid-Term Rental

What is a Mid-Term Rental?

A mid-term rental is a type of property lease that typically spans a duration of one to six months. It sits in a unique niche, offering a middle ground between short-term rentals (like vacation rentals, often less than 30 days) and traditional long-term rentals (typically 12 months or more). This rental strategy caters to a specific demographic of tenants who need temporary housing for an extended period but not a full year.

Common tenants for mid-term rentals include traveling professionals such as nurses, doctors, or consultants on assignment, corporate transferees relocating for work, students on internships or academic programs, individuals undergoing home renovations, or those in between buying and selling homes. These tenants often seek furnished properties with utilities included, making the transition seamless for their temporary stay.

Why Invest in Mid-Term Rentals?

Investing in mid-term rentals can offer a compelling balance of profitability and stability for real estate investors. This strategy allows for higher rental income compared to long-term leases while reducing the high turnover and intensive management often associated with short-term vacation rentals.

Advantages for Investors

• Higher Income Potential: Mid-term rentals often command higher monthly rents than traditional long-term leases due to the furnished nature, included utilities, and flexibility offered to tenants.
• Reduced Vacancy Risk: While not as stable as a 12-month lease, mid-term rentals typically have lower vacancy rates than short-term rentals, which can sit empty for significant periods between bookings.
• Flexibility and Adaptability: Investors can adjust rental rates more frequently to match market demand or seasonal changes, and they have more opportunities to inspect and maintain the property between tenants.
• Less Wear and Tear: Compared to the constant turnover and heavy use of short-term vacation rentals, mid-term tenants generally treat the property more like a temporary home, leading to less frequent damage and maintenance.
• Tax Benefits: Like other rental properties, mid-term rentals are eligible for various tax deductions, including depreciation, property taxes, mortgage interest, and operating expenses.

How Mid-Term Rentals Work

Operating a mid-term rental involves a blend of strategies from both short-term and long-term models. The core idea is to provide a fully functional, comfortable living space for a few months at a time. This typically means furnishing the property and including utilities in the rent, simplifying the move-in process for temporary residents.

Key Components of a Mid-Term Rental

• Furnished Property: Unlike traditional long-term rentals, mid-term rentals are almost always fully furnished. This includes essential furniture, kitchenware, linens, and basic household items. The quality of furnishings should match the target tenant's expectations.
• Lease Agreement: A specific lease agreement tailored for mid-term stays is crucial. It should clearly outline the rental period (e.g., 3 months), rent amount, included utilities, house rules, and security deposit terms. This differs from standard annual leases.
• Utilities & Services: Most mid-term rentals include utilities (electricity, water, gas), internet, and sometimes even streaming services in the monthly rent. This simplifies billing for temporary tenants and adds to the convenience.
• Marketing & Tenant Sourcing: Specialized platforms like FurnishedFinder, Airbnb (with monthly stay filters), and even local hospital or corporate housing websites are effective for finding mid-term tenants. Traditional platforms like Zillow or Craigslist can also be used.
• Property Management: Investors can choose to self-manage their mid-term rentals, handling bookings, tenant communication, and maintenance. Alternatively, a property management company specializing in furnished or corporate housing can handle these tasks for a fee.

Step-by-Step Guide to Starting a Mid-Term Rental

Launching a successful mid-term rental involves several key steps, from initial research to ongoing management. Follow this process to set up your property for success:

1. Conduct Market Research: Identify areas with high demand for temporary housing, such as near hospitals, universities, or corporate centers. Analyze local competition and understand any specific zoning or rental regulations that might apply to stays longer than 30 days but less than a year.
2. Prepare and Furnish Your Property: Ensure your property is clean, well-maintained, and fully furnished with all necessary items for comfortable living. This includes furniture, kitchen essentials, linens, and a reliable internet connection. Set up all utilities in your name.
3. Determine Your Pricing Strategy: Research comparable mid-term rentals in your area to set a competitive monthly rate. Consider factors like seasonality, local events, and the length of stay. Offer discounts for longer leases to attract more stable tenants.
4. Market and List Your Property: Create attractive listings with high-quality photos and detailed descriptions. Utilize specialized platforms like FurnishedFinder, as well as general rental sites like Airbnb (using monthly filters), Zillow, and social media groups targeting traveling professionals.
5. Implement Thorough Tenant Screening: Always screen potential tenants carefully. This should include background checks, credit checks, employment verification, and references. Even for shorter stays, a reliable tenant is key to protecting your investment.
6. Draft a Comprehensive Lease Agreement: Use a lease agreement specifically designed for mid-term rentals. Clearly define the rental period, rent amount, security deposit, included utilities, pet policy, cleaning expectations, and any other house rules. Ensure it complies with local landlord-tenant laws.
7. Manage Your Property: Once rented, ongoing management involves handling tenant inquiries, coordinating maintenance and repairs, and preparing the property for the next tenant between stays. Consider professional property management if you prefer a hands-off approach.

Real-World Example: Investing in a Mid-Term Rental

Let's consider an investor, Sarah, who purchases a single-family home in a city with a large hospital and university, making it ideal for traveling nurses and visiting professors. Here's a breakdown of her investment:

• Purchase Price: $300,000
• Down Payment (20%): $60,000
• Loan Amount: $240,000
• Furnishing Costs: $10,000 (one-time expense)
• Monthly Mortgage (Principal, Interest, Taxes, Insurance - PITI): $1,600
• Monthly Utilities & Internet: $300
• Monthly Cleaning & Maintenance Buffer: $150
• Monthly Property Management Fee (10% of rent): $250 (if using a manager)

Sarah estimates she can rent the furnished property for $2,500 per month on a mid-term basis. Her total monthly expenses are $1,600 (mortgage) + $300 (utilities) + $150 (maintenance) + $250 (management) = $2,300. This leaves her with a net monthly cash flow of $2,500 - $2,300 = $200. Annually, this is $2,400 in cash flow. Her initial cash invested (down payment + furnishing) is $60,000 + $10,000 = $70,000. Her cash-on-cash return would be ($2,400 / $70,000) * 100 = 3.43%. This example shows how mid-term rentals can generate positive cash flow, even after accounting for higher operating costs like utilities and furnishing.

Important Considerations for Mid-Term Rentals

Legal and Regulatory Landscape

Always research local zoning laws and rental regulations. While mid-term rentals typically avoid the stricter rules often applied to short-term rentals (like daily occupancy limits or special permits), some cities may have specific requirements for leases under a certain duration. Understanding landlord-tenant laws for your state and municipality is also crucial, as tenant rights can vary based on lease length.

Furnishing and Setup Costs

The initial investment in furnishing a property can be substantial. While it allows for higher rental income, it's an upfront cost that needs to be factored into your budget and return calculations. Focus on durable, comfortable, and aesthetically pleasing items that appeal to your target demographic.

Tenant Turnover and Vacancy

Although less frequent than short-term rentals, mid-term rentals still involve more frequent tenant turnover than annual leases. This means more time spent on marketing, screening new tenants, and coordinating cleaning and maintenance between stays. Effective systems for these processes are vital to minimize vacancy periods and maximize profitability.