Beyond Traditional Rentals: Discovering the Magic of Long-Term, Medium-Term, and Short-Term Rentals

Welcome to our crazy world of not just buying and selling real estate, but also rental properties. Lately, we’ve been investing in a variety of exciting strategies in the rental space that are not nearly as passive as traditional long-term rentals, but offer lots of ROI. Hang with us as we walk through what we’re doing in this arena, the pro’s and con’s between rental types and why we are loving medium-term rentals lately.

What’s Our Rental Portfolio Look Like Today?

First things first, let’s talk about our collection of properties. Our collection comprises of three types of rental properties:

1. Long-term rentals: We proudly offer four properties designed for those seeking a more permanent or semi-permanent residence. Each of these properties are recently renovated and are perfect for individuals or families looking for stability and consistency.
2. Medium-term rentals: We have three rentals tailored to meet the needs of renters seeking temporary housing for one to six months. They are usually traveling professionals (think nurses) or homebuyers needing temporary living while they search for or build a home (hey, hey RL Jones Homes clients!). These properties are fully-furnished, all-inclusive, pet-friendly and offer a home away from home for those in transition or needing a short-term residence.
3. Short-term rentals: We recently converted one of our local short-term rentals into a medium-term rental which leaves us with our beloved river cottage vacation rental in the Northern Neck of Virginia. Located in Weems, this space is special for us because we get to enjoy it along with our guests. With three bedrooms and two bathrooms, it’s the perfect escape for two families to have a blast and enjoy all that the Rappahannock River has to offer. Short-term rentals are a WHOLE different world.

Long-term, Medium-term, Short-term, What’s the Difference?

Now, let’s dig into the nitty-gritty of rental types and what they have to offer. 

1. Long-term rentals are the steady giants of our portfolio, offering stability, reliability and mostly-passive income. 
2. Medium-term rentals are our spunky middle ground, attracting guests seeking a cozy home away from home. This is a newer space for us and we are still learning, but there’s SO much to be desired here.
3. And finally, short-term rentals are our adventure-packed darlings, serving up unforgettable experiences to thrill-seeking travelers and not-so-passive income.

Long-Term Rentals: The Steady Giants

Long-term rentals typically refer to lease agreements lasting for a year or more, where tenants rent a property for an extended period. We’ve been in the LTR game since 2015 and it’s always been our go-to asset class.

What makes them unique: Long-term rentals provide stability and consistent income as tenants usually sign a lease agreement for an extended duration. They are mostly passive, meaning if you provide a high-quality product, set up the right systems and processes for finding the right tenants, turning properties and collecting rent, it can be relatively hands-off.

Pros:

• Stable income: Long-term rentals bring in the moolah on a regular basis, thanks to those extended lease durations.
• Reduced turnover: When tenants commit to a longer lease, it means less turnover for you. Say goodbye to constant advertising and property turnovers.
• Fewer management tasks: Since tenants tend to stick around, you won’t need to channel your inner marketing guru as often. Less work, more play (or at least fewer headaches).

Cons:

• Limited flexibility: Once a lease is signed, it can be challenging to terminate the agreement or adjust rental rates until the contract period ends, especially in states that aren’t so landlord-friendly (VA is somewhere in between).
• Potential for problem tenants: Just like in any rental scenario, there’s always a chance of running into a problem tenant who thinks they rule the world. Screening becomes your superpower to avoid these folks.
• Less cash flow: The average monthly rent for a two bedroom apartment in Richmond today is $1,752 (wow!). That’s shot way up in the last few years and continues to rise, but that’s a different blog for a different day. While that seems like a solid number, it may only net you a few hundred dollars per month depending on your loan structure, money invested, expenses, utilities, etc. You can charge anywhere between 1.5-3 times that monthly amount with an MTR or STR, so there’s more to be desired there.

Medium-Term Rentals: Spunky, New Kids on the Block

Medium-term rentals strike that perfect balance between short-term and long-term stays. They typically refer to rental agreements lasting between one to six months, targeting individuals or groups seeking accommodation for a temporary stay, such as traveling professionals, corporate relocations, or individuals in between homes. They are likely to be renovated, furnished and offer additional amenities that long-term rentals don’t typically offer.

What makes them unique: Medium-term rentals are the best of both the LTR and STR worlds. They offer more flexibility compared to long-term rentals while providing a more stable income compared to short-term rentals with far fewer turnovers. The types of renters in this space are specialized, too. Think traveling professionals, corporate relocations, or even folks in between homes.

Pros:

• Higher income potential: Medium-term rentals give you that extra cha-ching compared to long-term rentals due to the flexibility they provide. For us, we can charge about 1.5-2 times more in rent per month by providing a fully-furnished, all-inclusive space for renters.
• Greater flexibility: Medium-term rentals allow for some flexibility in adjusting rental rates or terminating agreements after the agreed-upon duration. If you get stuck with a crappy tenant, it may only be for a month and allows you to course-correct more quickly for the next time you look for tenants. 
• Targeted market: There is a niche market of professionals and individuals who require temporary accommodations, providing a steady stream of potential tenants. In our opinion, not enough people have noticed the value that medium-term rentals can provide to both renters and property owners, so we’ve jumped into this space pretty hard in the last 6 months.
• Reduced turnover: Compared to short-term rentals, medium-term rentals much lower turnover. With longer stays, you’ll experience fewer frequent guest check-ins and turnovers, reducing the need for continuous marketing efforts and property turnovers. If you turn a medium-term property every 2.5 months instead of every weekend, you save hundreds in cleaning fees and hour of time managing those turnovers (plus, you aren’t giving a percentage to Airbnb or VRBO every time, either).
• Longer booking lead times: Medium-term rentals typically have a longer booking lead time compared to short-term rentals. This allows for better planning and forecasting of rental income, as bookings are made in advance, providing more stability and predictability.
• Less regulation compared to STRs: Many markets place many restrictions and are still figuring it out in the short-term rental space. Richmond City is actually in the midst of revisiting their 185-day occupancy rule (thank goodness) and regulations are changing all of the time for properties with occupancy under 28 days. However, there’s WAY less regulation on properties with occupancy rates over 28 days, putting MTRs basically in the same space as LTRs when it comes to regulations. Check your local regulations before getting into any kind of rental investments.

Cons:

• High startup costs: Startup costs for medium-term rentals are similar to long-term rentals, including property acquisition or purchase costs, property maintenance and repairs, etc. However, it can cost thousands to also furnish the place in a way that attracts high-quality renters and to buy furniture that lasts. We’ve furnished two medium-term rentals recently and have one to furnish coming up and we really can’t do it for less than around $7,000-$8,000 per unit (2 beds, 1 bath, about 900 sqft). Those in the industry claim you should expect to spend $20,000 to furnish a 3 bed, 2 bath MTR or STR properly. Hopefully, if your numbers work you’ll make that investment back in just a few months, but you still need the capital upfront to get it done.
• More management and tenant recruitment tasks: You have to “go get” these tenants whereas they are easier to find in the LTR and STR spaces through third-party services like Airbnb for STRs and Zillow for LTRs. Since MTR tenants have very specific needs, you have to look under more rocks to find them. We use Furnished Finder to market our property and word-of-mouth through One South Realty and our real estate connections and are looking for additional avenues such as travel nurse recruiting agencies. More to come on MTR recruitment strategies!

Short-Term Rentals: Adventure-Packed and All About Hospitality

Short-term rentals involve renting out a property for a brief period, ranging from a few nights to several weeks. Popular platforms like Airbnb and VRBO cater to the short-term rental market, targeting travelers, vacationers, and people seeking temporary accommodations.

What makes them unique: Short-term rentals focus on providing temporary accommodations for travelers, offering flexibility in terms of rental duration and attracting a constant flow of new guests. This space is all about hospitality and offering memorable experiences for “guest” (not tenants). The marketing and amenities provided are substantial if you want to be successful here and the guest expectations are completely different in the STR space compared to LTRs and MTRs.

Pros:

• Higher rental income potential: Short-term rentals often generate higher rental income per night compared to LTRs or MTRs. Possibly 3-4 times more depending on your market.
• Flexibility for owners: With short-term rentals, you have the power to use the property yourself when it’s not occupied. You get to enjoy the perks along with the rental income and we take full advantage of this with our river cottage in Weems. It’s like having your cake and eating it too!
• Ability to optimize pricing: As a short-term rental owner, you have the flexibility to adjust pricing based on market demand, seasonal variations, and special events. This can help maximize rental income during high-demand periods and is totally in your control.
• Constant influx of new guests: With shorter rental durations, owners have the chance to host a variety of guests, providing unique experiences and opportunities to meet new people.
• Scratch the hospitality itch: If you have a background in customer service, hospitality, or simply enjoy taking care of people, this is the industry for you. You get to provide more than just a property, you get to provide an experience for someone and make their day!

Cons:

• Higher management requirements: Short-term rentals demand more active management, including guest communication, cleaning between guests, understanding online travel agencies like Airbnb and VRBO, handling bookings, tending to guest issues and managing cleaning staff (I could keep going). THIS IS NOT PASSIVE. While there are systems and processes that you can create (and hey, why not use AI to help you), it’s still not for the faint of heart that want to sit back and drink my-tais by the beach. You are on call 24/7 unless you pay a property manager 15-20% of your revenue.
• Seasonal fluctuations: Rental demand can vary significantly depending on the season or location, leading to potential periods of low occupancy and reduced income. You have to run your numbers to accommodate for the low and high seasons if it applies to your market.
• High startup costs: Startup costs for short-term rentals include property acquisition or purchase costs, property furnishing and decor, professional photography for listings, marketing expenses, cleaning services, and potential platform fees or commissions charged by booking platforms. 
• Higher turnover and maintenance costs: With shorter stays, short-term rentals experience higher turnover probably several times a month compared to MTRs and LTRs. This means more frequent cleaning, restocking, and maintenance between guests, which can increase operational costs and workload.
• Regulatory and legal considerations: Short-term rentals are subject to local regulations, zoning restrictions, and potential licensing requirements that are changing constantly (Richmond is no exception). Some markets don’t even allow stays under 28 days. With this in mind, it’s important to stay informed about the legal obligations, tax implications, and any restrictions or limitations imposed by local authorities before you launch your STR.

Our Plans for the Rest of 2023

We’ve played in the LTR, MTR and STR spaces this year and have so many more plans to come! Here’s a sneak peek into what we’re aiming for in the coming months:

50 Five-Star Ratings for our Weems Vacation Rental

We’re on a mission to make our vacation rental shine like a diamond! Help us reach our goal of 50 five-star ratings by visiting our delightful abode at The Pearly Oyster. We are already Superhosts, but we’d love more Airbnb cred with 50 five-star reviews in our first year. 

Adding More Short-Term Rental Amenities and Optimizing our Digital Presence

We are adding more fun amenities to our river cottage to attract more guests. We’re spicing things up with awesome outdoor activities while also optimizing our listings on Airbnb and VRBO using our arsenal of online tools. Reach out to us if you’re looking for some recommendations on go-to hosting tools.

Setting up our Third Furnished Medium-Term Rental

We’re expanding our empire with a brand new medium-term rental, ready to be rented in mid-September. Get ready for the thrill of finding the perfect balance between homey and stylish. We can’t wait to design the place and welcome our first guests!

Establishing Processes and Systems for the MTR Space

Managing medium-term rentals (MTRs) can be a bit like herding cats and figuring things out one step at a time. We’re determined to establish foolproof processes and systems to streamline the MTR experience for our guests and create more efficient turnovers for us. 

Creating a Long-Term Strategy for a Consistent MTR Renter Pipeline

We believe that building a consistent renter pipeline for our MTRs is our secret weapon for success. We’re going beyond platforms like Airbnb and Furnished Finder and reaching out to travel nurse recruiters, connecting with local businesses, and spreading the word about our fantastic offerings so we can build a more consistent pipeline of MTR renters.

Let’s Wrap it Up

We’ve navigated the long-term, medium-term, and short-term rental realms with you and we have so much more to share, believe it or not. So, whether you’re a fellow host, an aspiring investor, or just want to grab a beer, we are happy to help you on your investing journey. Stay tuned for more rental property goodies this year!