June 19, 2020
The COVID-19 pandemic has flipped the vacation rental industry upside down, forcing many property managers to rethink their business models. One of the biggest changes has been a shift from short-term rentals to mid-term rentals as property managers navigate rental bans and capitalize on the current need for long-term accommodation. Switching to mid-term rentals, however, isn’t always easy. While both types of rentals bring in rental income, there are differences you need to consider.
Here are some tips on how to convert to a mid-term rental:
The differences between short-term and mid-term rentals:
The most notable difference between the two types of rentals is their length of stay. In most jurisdictions, short-term stays last 1-30 days, and mid-term stays last 1-12 months. Based on these terms, many cities have banned short-term rentals, but permitted mid-term rentals. In some cities this ban is a temporary response to the spread of COVID-19, while other cities have banned short-term rentals permanently, seeing them as disruptive to the community. Make sure you understand how your area differentiates the two.
Another legal difference between these two types of rentals is whether or not the occupants are covered by tenants' rights. In several states, occupants staying 30 days or less are not covered by these rights. But if your guests are covered by these rights, it’s important to clarify the intended length of stay so that you don’t have to deal with a difficult eviction process. Before switching to the mid-term rental model, familiarize yourself with your area’s tenants’ rights.
Types of guests
Each type of rental attracts different guests. Mid-term rentals tend to play host to people traveling for essential purposes, such as work, while short-term rentals attract people traveling for non-essential purposes, such as vacations or events. As a result, short-term rentals come with a higher risk of parties and a greater need for damage protection.
Pros of switching from short-term to mid-term rentals
While they may not bring in sky-high rates, there are advantages to switching from short-term to mid-term rentals, especially as property managers fight to recover from the pandemic:
- People looking for mid-term rentals are more likely to be traveling for essential purposes.
- You don't have to worry about hotel taxes or short-term rental bans.
- With fewer check-ins, turnovers are more manageable.
- You can reduce the frequency of cleaning, cutting costs.
- By dealing with fewer guests, you’ll be able to simplify your process.
Determine if your property is the right fit for mid-term stays
If you're interested in listing your property for mid-term stays, the first step is determining whether it’s a good fit. People in the market for a mid-term rental aren't on vacation; they’re looking for a place they can call home for a few months. This includes people in transition with work, students taking part in a co-op placement, frontline workers and so on.
These guests aren’t looking for the kind of amenities offered with short-term rentals, like a hot tub or ocean view. They want practical features, like larger square footage, a fully-operational kitchen, a laundry machine, separate bedrooms and friendly neighbours. To determine whether your property is an adequate mid-term rental, you need to be able to picture it as someone’s home.
Steps to set up your mid-term rental:
1. Market your property
Once your properties are set up for long-term guests, start marketing them by listing on the right booking channels. Sites like Airbnb and Vrbo can be effective, but they tend to cater to vacation rentals and shorter stays. If you want to specifically target long-term guests, you should list on platforms like Kopa, which specializes in listing mid-term rentals. Craigslist, Facebook Marketplace, and local Facebook groups are other good places to list. Be creative with your marketing strategy. Think outside the box to get the word out.
2. Tailor your listing
To get the most money for your property, it's important to make it stand out to potential guests. An easy way to do this is to create a description that's tailored for a mid-term rental. While a short-term rental description might highlight its skyline view or nearby attractions, a mid-term rental description should be more practical. Include the distance to the nearest grocery store and the closest bus stop.
Also, think about what type of guest might be attracted to your property's neighborhood. Is your property located within walking distance of a hospital or across the street from a subway station? Does it include a private entrance to limit encounters with other individuals? These are all marketable qualities a potential guest may be looking for.
3. Calculate your rental income
When deciding on a price for your property, make sure to list it within the local market range. Be aware that mid-term rentals typically earn less per night than short-term rentals. You should discount your mid-term rental rate by at least 25% of what it would cost for a month at your short-term rate.
For example, if your nightly short-term rate is $150, here's how to calculate your maximum mid-term rate:
- One month's rent at short-term rate: $150 x 30 nights = $4,500
- Twenty-five percent of one month's rent at the short-term rate: $4,500 x 0.25 = $1,125
- Maximum monthly rent at the mid-term rate: $4,500 - $1,125 = $3,375 (but don’t forget to account for tax and service fees!)
While it may seem like a decrease in revenue, remember that your property will be fully booked for multiple months.
4. Choose the best guest for you
With mid-term rentals, it’s just as important as short-term rentals—if not more important—to screen your guests. Afterall, these renters will be staying at your property for months, not days. Collect personal information and contact details to paint a better picture of your guest. To ensure payment, request first and last month’s rent. And for ultimate peace of mind, consider running a credit check or asking for a letter of employment.
5. Have the guest sign a rental agreement
Once you've found a suitable renter, have them sign a legally-binding rental agreement. This should outline house rules, the price of rent, when rent is due, and other important factors. Security deposits for mid-term rentals are standard—usually the equivalent of one month's rent. Having this agreement can also prevent guests from overstaying their welcome.
As with any rental home, it's important to follow up with renters to see if they have any questions or concerns with the agreement.
Weighing the differences
While mid-term rentals aren’t necessarily the most lucrative type of rental, they’re often easier to manage, especially when compared to the break-neck pace of short-term rentals. If you’re looking to carve out a bit more time in your operations, consider converting some of your properties to mid-term rentals. You can focus your time and resources on streamlining your business and perfecting the guest experience.
This blog was written by Kopa, a mid-term rental marketplace.