Welcome back to episode seven of the Women Invest In Real Estate podcast! This week on the podcast we are diving into what changes we anticipate experiencing in the mid-term rental market and also how you can plan for and protect your real estate portfolio for those potential changes.
Amelia’s Take
Obviously, we know that the COVID pandemic is subsiding (fingers crossed). Some of the questions I’ve been asked are:
Personally, my answer is yes, I think it's changing. But is that going to stop me from continuing the midterm rental strategy? No. There are certain steps that I'm taking to mitigate some of this risk but I don't plan on converting any of my units, or dropping the mid-term rental units, anytime soon.
Grace’s Opinion:
My short answer would actually be, no. I have not seen a change in requests and I’m still being bombarded with mid-term rental requests, especially my one-bedroom units because a lot of people are solo travelers. However, as you said, am I going to go buy another 10-unit mid-term rentals to turn over right now? Probably not. (If it was the right deal I would, especially if it was one bedroom.)
But I still see a huge demand because I’m in a market where there really isn’t much competition for mid-term rentals. They are more scarce and there are a few big hospitals in the area. As I’ve mentioned in previous episodes, I have clients who drive 20-30 minutes to their hospital because there just isn’t anything nearby to their destination. I’m in a smaller, more rural area. However, I don’t see the market ramping up.
The Short Answer
We really don’t know. If we did, if anyone knew exactly what was going to happen with the economy, they would be able to make bank on that information. But in reality, no one really knows for certain.
Mitigating the Risk
The way we structure our lease terms to protect ourselves against cancellations is the specific terms we are including in the lease. This is to:
Grace requires that if her tenant cancels, they are only ‘on-the-hook’ for rent until she finds a new tenant to put into that unit. In the fine print, it also explains that I will work really quick to try to find another tenant. This is very fair because she already has more risk by offering 3-month leases, whereas most landlords lock you into a 6 or 12-month lease. This protects Grace because it ensures she has no vacancy and the only two times she has experienced this she has found new tenants to take over the lease in under two weeks.
Additionally, we collect a deposit from every tenant to ensure that we aren’t holding a unit for someone to not show up. This way, if they cancel their reservation without the required notice (or simply don’t show up) we aren’t completely out of pocket.
Both Grace and Amelia also invest in multi-family properties. Their units are diversified so if the mid-term rental market does slow down (or tank completely) they can convert some of the units back to long-term rentals.
Another unique place to look when looking to fill units is with insurance agencies. There are a lot of insurance agencies out there who are looking to house people for a medium term. Maybe a few months, six months to a year, who might need furnished housing because they have a client whose house burned down, the basement flooded, etc. By contacting the third-party company (who also furnishes the property - bonus for you!) they get you lined up to house those people who need emergency housing, and they take care of furnishing it. This is a bit less risky because the insurance company is the one responsible for the security deposit, the rent, etc., on the property. You are also helping out a family with very few options who would otherwise be stuck living in a hotel.
Final Thoughts
Traveling nurses have been around for way longer than the COVID-19 pandemic. The concept and practice is absolutely not going away.
But one thing that has truly shifted with the pandemic and we are still experiencing this massive shift is working remotely, vs being tied to a physical location. More and more businesses are emptying their physical office spaces, or downsizing to smaller locations, in favor of allowing their employees to work from where they are. So if those workers are looking for 3-month accommodations where they can experience different cities for short periods of time while working, they are likely going to be looking for furnished mid-term rental units.
While of course, we don't know for sure, that is where we think the mid-term rental market is headed. But if you're nervous about diving into mid-term rentals, just know that there are many ways to protect yourself and diversify your portfolio so that if there is a shift in the market, you will still feel good about your investments and be safe.
Thanks for tuning in, friends! We'll catch you next week!
Resources:
WIIRE 121: How to Combine Short & Midterm Rental Strategies with Kelsey Porter
WIIRE 120: What Should You Be Looking For When You Do a Property Walk-Through?
WIIRE 119: Balancing CEO and Stay-At-Home Mom Life with Kristen Witalka
WIIRE 118: What Financial Tasks Should I Be Doing Weekly, Monthly, & Yearly in my Rental Business?
WIIRE 117: Small and Mighty Real Estate Investing with Chad Carson
WIIRE 116: How to Use Free Marketing for Your Rental Business
WIIRE 115: How to Implement the Entrepreneurial Operating System in Your Business with Maya Bovshow
WIIRE 114: Our CEO Roles as Full Time Real Estate Investors
WIIRE 113: Fourplex From Hell: Resilience as a Rookie Investor with Katie Hofer
WIIRE 112: Legal Contracts You Need in Your Real Estate Business
WIIRE 111: Lessons Learned While Self Managing Rental Properties
WIIRE 110: Ask A&G: Midterm Rental Frequently Asked Questions
WIIRE 109: House-hacking New Build Homes Tax Free with Monica Fullerton
WIIRE 108: Best Tenant Screening Practices
WIIRE 107: Starting Your Real Estate Journey At Any Age with Liz Connelly
WIIRE 106: Increasing Your Profitability without Buying More Real Estate
WIIRE 105: Midterm Rental Operations with Jamie Banks
WIIRE 104: Handling Maintenance Requests Like a Pro
WIIRE 103: Midterm Rental Co-Hosting and Credit Card Hacking with Jaina Pallasigui
WIIRE 102: What Can You Expect At A WIIRE Retreat?
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