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.

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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.

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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.

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Here are the different ways you can operate a medium-term rental:

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Small space

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.

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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.

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We've helped multiple clients repeat this model as well.

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Rent-by-the-room

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.)

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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.

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This model is similar to house-hacking, just without you staying there. (Check out our page on house hacking.)

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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.

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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

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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.

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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!

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