Your home is first and foremost a home, but sometimes it can double as an investment opportunity. And for some buyers, the property is simply an investment and not a home at all. So how do properties make money for the investor and the homeowner who has a portion of a property to rent? First, there were long-term rentals. The model still works for many, but there are drawbacks. What if it’s a second home and you want to stay there sometimes? What if rent control laws do not fit your profile because this is also your home? Or do you want more flexibility? Or simply want to offer a more hosted accommodation?
Short-term rentals (STRs) are very popular, often referred to as AirBNBs to describe the whole category by the name of this popular platform. In resort areas, this can be a great fit. Some cities and neighborhoods allow STRs, and you can provide a service to guests visiting family or in place of a hotel. On the other hand, many municipalities have been passing legislation that limits short-term rentals in an attempt to protect rental stock. Overall, the sector continues to grow, and on average, owners get a 7% annual return on their investment. But STRs are declining in areas that prohibit them, and that includes many large cities. In urban areas, there has also been an oversaturation driving prices down.
Enter the mid-term rental (MTR). The leading platform was Furnished Finder, set up for traveling nurses. AirBNB has been in this sector for some time now, letting hosts offer listings for 30+ days. Since most limitations have been for rentals under 30 days, this was a good workaround for owners offering furnished properties. With COVID and the rise of ‘digital nomads,’ MTRs have become a growing and successful part of the real estate investment market. There are roughly 10.2 million digital nomads globally, and they visit and live in three or more countries or areas per year. This creates a huge opportunity for mid-term rentals of 3 to 12 months.
