Medium-Term Rentals vs Short Term Rental
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Investing in Mid Term Rentals (aka Medium Term Rentals) vs investing in short term rentals! What are the pros and cons of each. And what is the difference?
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Did you know there’s not *technically* (sometimes legally) no such thing as a mid-term rental?
In today’s video I outline what is a mid-term rental, what are the laws around mid-term rentals, and do you want to manage a mid-term rental or a short term rental.
Sometimes, they have different levels of work.
But like anything, it’s all down the system you build. If you don’t want to do the work to set everything up, oddly, you end up doing more work in the long run!
So legally, there’s only short and long term rentals. Why would you choose one over the other?
In the video, I go over the reasons.
I hear a lot that the biggest fear with short term rentals is how much work it takes.
We go over why this is a mistaken assumption.
I also share why I believe certain things you’re telling yourself really just means you bought a not-so-great property with low margin for error.
And finally, we go over some actual math on the time or times you WOULD want to turn your property into a mid-term rental.
Often for short term rental investors it’s only certain times during low season – but when does it make sense?
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What's up guys, it's James here. And in today's video, we're gonna be talking about Medium Term versus short term rentals, I want to break down the pros and cons of each of them what the differences are, so that you can have a better idea of what I mean, first off just what the differences even are, because I think a lot of people are pretty confused about the terms, but also which one is going to be the best strategy for you to pursue. So all that being said, let's jump right into it. Before we do though, I want to make sure that you hit that like button, because it really helps me out with growing this channel, it really helps the YouTube algorithm, I will give you a really big high five. If ever we see each other in person, maybe I don't know, I'll give you something, I'll give you something like a smile. If you just hit like button, hit like button. And then also hit the subscribe button because I post new videos on the channel every single week. 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So that being said, let's talk about the differences, the pros and cons between midterm rentals and short term rentals. Let's start with what the differences are. So basically what people tend to view as a mid term rental, this is up for a bit of discussion. But generally people look at anything from like one to maybe six months as being a mid term rental. And then generally long term rental that there's midterm and long term rental tends to get a bit hairier. But really it's generally like if you're signing a one year lease, that's a long term rental. And then under that if you're not expecting the person to stay there for more than a year or for for a full year. And generally it's going to be like a one to six month type thing that's going to be a midterm rental, where short term rentals are generally going to be under that one month mark, whatever whatever it might be 28 days, two days could be anywhere in there. And so that's generally the difference. It's a little bit vague in terms of there's no clear distinct lines for what constitutes short versus mid versus long. But those are the general kind of guidelines for how people view it. Now, there are some really important distinctions Legally speaking, for what constitutes a short term rental versus a long term rental, legally speaking, there actually is no such thing as a mid term rental. And that's one thing that a lot of people are shocked to realize is that, yeah, if you're doing a midterm rental and mid term rental, as we, as we call it, you're technically from a legal standpoint, actually renting the property long term. And so you're falling under all the same rules and regulations in your area that pertained to long term rentals. So that means that you're probably not going to be able to just get someone out of the property for trespassing, you're gonna have to go through an eviction process. Now, again, it totally depends on the area that you're in. But it also means that you're going to be subject to all the different, like tenant regulations. So the tenant rights that a typical long term tenant would have, they have those same rights, if they're doing a mid term rental, as long as that's over the threshold, what for what legally constitutes a long term rental. Now, long term rental is over anything over one month, and depending on the area that you're in, they'll define that as either 2829 30 or 31 days. So you'll want to look up the rules and regulations for your areas specifically, and see exactly when they you know, decide that it's a long term rental, but it's almost always either 2829 30 or 31 days that they use as that delineation point to say, Okay, this is now a long term rental now, does not mean that you have to sign a lease with that person. No, does it mean that they know that they have the same rights as a long term tenant does not necessarily, but it does mean that even without that in place, you still as the landlord, as the property owner, are subject to all of the kind of challenges and headaches that come along with that. So a lot of people think that if they book the if they have a guest book through Airbnb, that it's no longer going to going to give that that guest the rights that a long term guests would have. And the reality is that is absolutely not true. Even if someone books a long term stay on Airbnb, they're still going to be subjected to all the different rules and regulations that pertain to long term rentals, they're still going to have all the same rights that tenant would. Now you may have a case in arguing that with the courts and you may be able to go and argue that and win, but it's still going to be in really gray territory. And generally speaking, though, it may help you more to book it on Airbnb than to actually sign a residential lease with that person. It definitely does not give you a Get Out of Jail Free card where you can then just kick that person out of the property for trespassing and not have to deal with an eviction those sorts of things. So bear that in mind that whenever you're crossing that threshold, you are going to be dealing with the landlord tenant act, you're going to be dealing with tenancy laws. That's just the reality of it. You may be able to skirt around it in few circumstances, but you're going to be doing so in the gray area. So what does that mean? It means if you're doing midterm rentals, you want to be cautious. You want to make sure that you're screening people the same way that you would screen a longer term tenant, make sure you know why they're booking, make sure that you know what their alternative is like, what's their move out date, right? What is the move out date, and what is their plan for when they go and move out, do all these things, it might make sense to do a background check. Depending on the rules and kind of laws in your area, you're going to want to do as much digging as you can into this person to make sure that they're actually going to leave at the end of their stay. Because one of the huge advantages of doing shorter term rentals, in addition to the cash flow, is the ease of it is the peace of mind of knowing that, hey, I don't have to deal with all that stuff. Sure, short term rentals come with their own challenges of managing cleaning teams, managing guests communication, and mid term rentals can be a really, really good solution to that because you have to do way less guest communication with one guest over a 30 day period or a 60 day period, then with 1520, yes, over that same period, right. And so they can be a really good solution. But they can also introduce a whole bunch of additional headaches that you probably didn't want to deal with. So just be mindful of that. Be wary of that. So that's kind of the main differentiator. Now, what are some other pros and cons? Well, the pros of short term rentals are obvious is that you're going to earn more money generally speaking with short term rentals. Now, sometimes there can be exceptions to this where with a mid term rental, in a in an offseason month where you're only projecting 50 or 60% occupancy on a property, you can sometimes actually make a you know as much or a little bit more money with a mid term rental someone staying for that whole month, simply because even though they're getting a discount, they are going to be booking all 30 days. And so in a high season month, where you're projecting 100% occupancy as a short term rental, no, you're probably not going to get someone's going to pay that same $30,000 a month you might be earning for that property in the in the summer month. But in the winter month, when you're only projecting five or $10,000, you may find someone that's actually going to be able to, to do that as a monthly rental and want to so generally speaking, you will make more money with short term rentals. But that's not always true. Now, the other pro of short term rentals is that again, like I said, You maintain full control over your property, you're never going to have to deal with an eviction, you're never going to have to deal with someone staying in your property overstaying their welcome, you just call the cops get them out of there, they're trespassing, that's really easy, you don't have to worry about all of the other kind of tenant rights that people get. So I know that in certain places like Ontario, Canada, tenants have a tremendous amount of rights, they're really hard to get them out really hard to raise their rents, you can't raise their rents more than a certain specified amount. So all those sorts of headaches, you don't have to deal with when you're doing short term rentals. So that's another big pro with the short term rentals. The other big thing that's really great about short term rentals is that if you have the right system set up, they can be just as passive as midterm rentals. So I would say a big benefit to mid term rentals for a lot of people is how much more passive they are, you know, you're not dealing with a bunch of turnovers, you're not dealing with organizing, clean team communicate with a bunch of guests. And I would say that is a definite Pro, if you have your short term rental setup in such a way that you're actually the one managing that sort of stuff. But if you have your short term rental setup properly set up well, and you're not the one communicating with cleaners, you're not the one scheduling them, you're not the one communicating with guests, you have other people on the team managing all that, then it's really going to be the same thing, you're going to be doing the same amount of work on either one, it's gonna be just as passive for either one. So I'd say that the passive kind of pro or the passive advantage really depends on what your setup is for short term rentals. If you're really actively managing your properties yourself and don't have the teams and systems in place to have that stuff be very passive for you, then yeah, switching over to midterm rentals is gonna be way more passive. The other thing that I think a lot of people view as a pro is the the certainty of it. They really love the idea of okay, I've already booked the month is booked, I don't have to worry about pricing optimization, I don't have to worry about making sure that I actually get bookings, I just know my bills are covered. And that I kind of see both sides of the coin. So on the one hand, if you're willing to take a financial decrease, if you're willing to take less money just to have that security, it tells me a couple of things. One is that you probably bought not the greatest property, there's a good chance that if you're that worried about covering your bills, that you probably didn't have a lot of room for margin for error on this property to begin with. You know, if you've already cashflow 2030 $40,000 on this property this year, and you're going into low season now, you probably don't really care you're not that worried because you know that even if in the low season you cashflow Negative, you've got like a 30 or $40,000 chunk of change, that just sitting there cash flow from the property. So it's not the end of the world, if you don't meet your bills that month, because you've already got like, again, 30 $40,000 set aside. And that's generally the position that we're in is that we have 3040 50 $60,000 in a nest egg going into the low season. So you know, if we, if we fall a little bit shorter by numbers in the low season, specifically, that's to be expected. And that's totally okay. So either you're, you know, you're worried about hitting that number, because you're being reckless with your cash flow, not actually keeping it set aside not planning properly, or you're just worrying more than you need to. And it's just a mental thing, which again, I'll just have you have you remind yourself that you have that money in the bank for a reason, or you bought a property that doesn't cash flow really well, and you've got a very small amount of margin for error, so that you know, probably didn't actually buy the right property in the first place. So that I would say is not really the greatest argument in favor of midterm rentals is that you can have that kind of peace of mind. Now, the other thing is that if you have your if you have your pricing strategy dialed in, then you should know within a few dollars, how well your property is going to perform in a given month, even if it hasn't hit that. And so where I think that that mid term rentals really do make a ton of sense is in those offseason months, where you actually know and you can run the numbers and you go, okay, look, I know that as a short term rental, it's going to bring in this much money, right and I can get that number dialed in within a few dollars and know for sure exactly where it's going to end up. But if I have the opportunity to book it out to one person and make that much money or more for that one person, and they're going to stay for 28 days or less, or 27 days or less, or whatever it is that there's still a short term rental, then absolutely full steam ahead,
I'm going to do that midterm rental, because I'm going to make just as much money or more. And I'm going to do it without any additional headache, any additional downside, alright, but the moment that I have to take on that additional headache or downside, it becomes way less attractive to me. And the moment I have to make less money net. And it's important to look at your net numbers on this not just your gross numbers, right, because you are going to have less expenses, you're going to not have the cleaning fees of all kinds of different turnovers, you're going to have probably less operational costs for like sundries, things like that. So it's important to look at the net numbers, not just gross. But if I'm going to be netting less, that becomes less attractive. Or if I'm going to taking on additional headache, additional risk that becomes less attractive. If those things are still in sync, I'm going to be making as much net or more or I'm just going to you know, and I'm not also not going to be taking on additional headache, trickling into a long term rental, then full steam ahead. Let's go I'm all for that. That's where I think midterm rentals make a ton of sense. So that's my thoughts. I want to know yours as well let me know in the comment section down below what you think about mid term rentals, short term rentals, any other pros or cons that you see that I've missed any other thoughts you have for me, let me know in the comment section down below. Also make sure that if you liked this video, if you got value from it if it was helpful in any way, or if you just like me and want to help me and support the channel, hit that like button, it costs you absolutely nothing, I actually talk to you to ask them to make it free for you guys to hit the like button. So they've done me a solid, it's totally free, you can just hit it, you can actually just hit it up. And you know, hit it, tell your friends to hit it, everyone can just hit it hit like button, hit the subscribe button to while you're down there. Because you're already hitting buttons and you want another one to hit. Hit the subscribe button there, you'll get two new videos every single week to stay up to date with they're on the channel. They're here to help you. And last but not least, of course, check out the description and down below all the links in there. Just click like you're clicking buttons. You're out here clicking all sorts of things, click the links to while you're at it, hit those links, they're going to bring you to another page, it's going to have links and buttons that you can press to just have an absolute Fiesta hit that you're going to get all kinds of free training as a result, it's going to give you free trainings, free tools and resources that are all going to help you to build your cash flow and build your wealth from short term rentals whether you want to host your own place manage other people's properties or invest in short term rental properties. It's all there. Just check out the description hit the links, hit the buttons, hit everything and I'll see you in the next video.