A medium-term rental is a furnished rental for anywhere between one month and six months. Usually the tenants are some kind of traveling professional, often a traveling nurse or visiting doctor. But all kinds of people need medium-term furnished rentals -- from student interns to people wanting to explore a city before settling on permant housing.
What we love about the medium-term rental model is that it feels like the Goldilocks of real estate investments. On the spectrum of work required and rental returns, it's just right.
And in hot real estate markets like Denver and Colorado Springs, where finding cash-flowing properties can be tough, the medium-term rental juices your returns a bit.
Here are the different ways you can operate a medium-term rental:
This was our first experience with investments. We bought a small studio apartment -- like 360sf small! -- furnished it and rented it out. Our all-in with utilities and repairs and cap X and all that was right around $1,200. And we rented it for between $1,650 and $1,800 consistently.
We repeated this model when we moved out of our first condo -- an 800sf 1br unit. Our all-in payment hovers around $1,550 and we routinely get between $1,900 and $2,000.
We've helped multiple clients repeat this model as well.
In this model, you buy a home near a hospital, school or military base, furnish it and rent each room. In this scenario, the sum of the parts is greater than the whole. (Or should I say the sum of the individual revenues is greater than if you were to rent the whole space to one party.)
As a brief example, we helped a client close on a 4br house near a hospital in December 2019. Their all-in monthly payment -- covering all utilities plus savings for repairs and vacancy -- was $2,050. They were going to rent each room for an average of $725 or $2,900 total. Now that's pretty good cash flow in the Denver market.
This model is similar to house-hacking, just without you staying there. (Check out our page on house hacking.)
How much does it cost to furnish a medium-term rental?
This obviously varies depending on the quality of the furniture you get. I had some clients who did everything through West Elm. ($$$$) Others do everything through Craigslist or Facebook Marketplace.
That said, for a larger 1br or a smaller 2br unit, we've found it costs around $5,000-$6,000 for everything. Each additional bedroom should add another $800-$1,000 to that cost, if everything is new.
Issues to watch out for
There are a few concerns to be aware of with medium-term rentals. First off, if you buy in a condo building, know that most HOAs have a minimum rental period for investment properties. It's often 60 or 90 days, but some condos are strict have a 1-year minimum lease, which would prohibit you from doing this model
Second off, all cities have law limiting the number of unrelated tenants that can live together in a single home. In Denver, for instance, you aren't supposed to have more than two unrelated tenants. In Aurora, the limit is four.
Variations on the theme
There are variations to the rent-by-the-room model. For instance, you could install one long-term tenant and then have them operate a short-term rental (or Airbnb) in a second room. You could just do a long-term tenant in one room for some stability and then do the other three as medium-term.
The options are there. It just depends on your goals and desire to work. Reach out to day to learn more!