BiggerPockets Real Estate Podcast: "This Could Be Like Getting into Airbnb in 2012"

Release Date: November 29, 2024

In this insightful episode of the BiggerPockets Real Estate Podcast, host Dave Meyer and guest Henry Washington delve deep into the burgeoning world of midterm rentals (MTR). Joined by Jeff Hurst, CEO of Furnish Finder, the conversation unpacks the complexities, opportunities, and future prospects of MTRs, offering invaluable guidance for both novice and seasoned real estate investors.

1. Introduction to Midterm Rentals

The episode kicks off with an overview of midterm rentals, highlighting their rising popularity as an investment strategy over the past few years.

• Dave Meyer [00:05]: “Today's show is all about midterm rentals, which is a space where there's honestly just not a lot of good hard data available.”

Henry Washington and Dave Meyer set the stage by questioning the sustainability of the MTR market, pondering whether demand will continue to outpace supply or if the market will mirror the oversaturation seen in short-term rentals like Airbnb.

2. Defining Midterm Rentals

Jeff Hurst provides a clear definition of midterm rentals, distinguishing them from both short-term and long-term rental models.

• Jeff Hurst [03:28]: “Midterm rentals are rentals that are more than 30 days... during the pandemic and also because of regulatory changes that have made a lot of the short term opportunity evaporate.”

He explains that MTRs typically cater to tenants needing stays between 30 days and a year, filling the gap between nightly rentals (like Airbnb) and traditional leases.

3. Market Dynamics and Demand Drivers

The discussion moves to the factors driving demand for midterm rentals, emphasizing the diverse clientele and use cases.

• Jeff Hurst [04:36]: “On the tenant side, we see a few big use cases... traveling medical professionals, corporate relocations, and individuals trying before they buy a new home.”

Notably, Jeff highlights that the demand for MTRs has surged, with Furnish Finder’s inventory growing eightfold since 2019 and a 40% year-over-year increase in demand.

• Jeff Hurst [08:30]: “Airbnb’s percentage of long-term stays has grown since pre-pandemic, reaching close to 20% of all their nights.”

4. Ideal Property Characteristics for MTRs

Exploring what makes a successful MTR property, Jeff outlines the preferred property types and amenities that attract midterm tenants.

• Jeff Hurst [09:41]: “The sweet spot for midterm rentals would be more like $2,500 and under for monthly rent... studio through two-bedroom units are ideal.”

He notes that properties catering to single individuals or couples, often with a designated office space, perform exceptionally well in the MTR market.

5. Identifying Prime Investment Markets

Identifying the best markets for investing in midterm rentals is crucial. Jeff shares his insights on cities with high demand and unmet needs.

• Jeff Hurst [14:36]: “Our biggest and best markets are Seattle and Nashville... where you've got an intersection of corporations, academic institutions, healthcare, and leisure.”

He advises investors to look beyond the most popular cities to more rural and medium-sized cities where demand for MTRs is rising without the intense competition found in urban hotspots.

6. Assessing Market Saturation and Competition

Jeff provides strategies for evaluating whether a market is saturated with MTRs, ensuring investors can make informed decisions.

• Jeff Hurst [19:48]: “If you're going to compete with an Extended Stay America, you might want to be close to it rather than far away... There's a reason there are multiple hotels in a location.”

He emphasizes the importance of understanding local demand by analyzing hotel occupancy, corporate presence, and existing competition to gauge the potential success of MTR investments.

7. Operational Strategies for Successful MTR Management

Jeff discusses the operational differences between managing short-term and midterm rentals, highlighting the increased effort required for MTRs.

• Jeff Hurst [25:09]: “Midterm rentals are more of a hustle game... You typically need to engage more in referrals, networking, and direct lead generation.”

He points out that while MTRs demand more hands-on management compared to long-term rentals or automated short-term platforms, the potential yield can be significantly higher for those willing to invest the necessary time and resources.

8. Regulatory Environment and Future Risks

A critical part of the conversation revolves around the regulatory landscape affecting midterm rentals and how it compares to short-term rentals.

• Jeff Hurst [33:01]: “I don't think midterm rentals face the same regulatory risks as short-term rentals... Hotel occupancy tax typically stops at 30 days, providing more protection for MTRs.”

He argues that MTRs are less likely to encounter stringent regulations or community pushback that has plagued short-term rentals, making them a more stable and sustainable investment option.

9. Impact on Housing Supply and Affordability

Addressing concerns, Jeff clarifies the impact of MTRs on housing supply and affordability.

• Jeff Hurst [35:35]: “Midterm rentals, when done well, create more housing spaces tailored for mobility... They encourage the development of studio through two-bedroom affordable housing rather than oversized properties catering to short-term tourism.”

This insight reassures investors and communities alike that MTRs can enhance housing flexibility without significantly detracting from affordable housing options.

10. Future Outlook and Innovations in MTRs

Looking ahead, Jeff shares his optimistic view on the evolution and professionalization of the midterm rental market.

• Jeff Hurst [38:35]: “We're in the early innings of midterm rentals, similar to short-term rentals in 2012... The demand is set to increase, and early investors have a considerable advantage.”

He envisions a future where specialized property management firms emerge, software tools become more sophisticated, and the MTR market continues to grow robustly, offering substantial returns for those who enter early.

Notable Quotes

• Jeff Hurst [08:30]: “Airbnb’s percentage of long-term stays has grown since pre-pandemic, reaching close to 20% of all their nights.”
• Jeff Hurst [14:36]: “Our biggest and best markets are Seattle and Nashville... where you've got an intersection of corporations, academic institutions, healthcare, and leisure.”
• Jeff Hurst [25:09]: “Midterm rentals are more of a hustle game... You typically need to engage more in referrals, networking, and direct lead generation.”
• Jeff Hurst [33:01]: “I don't think midterm rentals face the same regulatory risks as short-term rentals... Hotel occupancy tax typically stops at 30 days, providing more protection for MTRs.”
• Jeff Hurst [38:35]: “We're in the early innings of midterm rentals, similar to short-term rentals in 2012... The demand is set to increase, and early investors have a considerable advantage.”

Conclusion

This episode provides a comprehensive exploration of midterm rentals, illuminating their unique position in the real estate market. Jeff Hurst's expertise offers listeners a roadmap to navigating the MTR landscape, from identifying lucrative markets to implementing effective management strategies. As the MTR market continues to evolve, this discussion underscores its potential as a robust avenue for building wealth and achieving financial freedom through real estate investing.

For those looking to delve deeper into midterm rentals, the episode serves as both an introduction and a strategic guide, making it an essential listen for anyone aiming to expand their real estate portfolio.