While mid-term rentals have gained popularity, they may not always be as lucrative as long-term rentals. Property investors should carefully consider the potential downsides before committing to this rental strategy.
Midterm rental first became popular during covid, as there were more travelling nurses, but the demand has declined steadily since 2020.
Financial Drawbacks of Mid-Term Rentals
Inconsistent Rental Income: Unlike long-term leases that provide stable monthly income, mid-term rentals may have gaps between tenants, leading to periods of vacancy. The cost of professional property management for mid term rentals is typically much higher than long term rentals, and can be double or even triple.
Higher Furnishing and Maintenance Costs: Mid-term rentals often require fully furnished units, increasing upfront costs and ongoing maintenance expenses.
Frequent Turnover: More tenant turnover means more time and money spent on marketing, tenant screening, and property upkeep.
Management and Operational Challenges
Increased Administrative Effort: Mid-term rentals require more active management, including coordinating move-ins and move-outs, handling lease agreements, and maintaining furnishings.
Legal and Regulatory Hurdles: Some local laws and homeowners associations impose restrictions on short- and mid-term rentals, making compliance more complex than with long-term leases.
Uncertain Market Demand: The demand for mid-term rentals depends on niche tenant groups, such as corporate travelers or relocating families, which can fluctuate unpredictably.
Comparison with Long-Term Rentals
Steady Income Stream: Long-term rentals provide consistent cash flow with minimal vacancies.
Lower Maintenance Costs: Tenants in long-term rentals typically furnish their own homes, reducing the financial burden on landlords.
Simplified Management: With fewer tenant transitions, long-term rentals require less administrative oversight and lower marketing costs.
Conclusion
While mid-term rentals offer flexibility and the potential for higher rental rates, they come with significant financial and operational drawbacks. For investors seeking stability, lower costs, and less day-to-day management, long-term rentals remain the more lucrative and sustainable choice. If the sole factor in choosing between midterm and long-term leasing is unfurnishing the property, the upfront cost of clearing it out will save you a lot of money over time.
