The Goldilocks Lease–Real Estate Investors Find Profitable Work-Around To Increase Returns Despite Airbnb Bans

Airbnb (NASDAQ: ABNB) gave birth to a cottage industry of short-term rentals worldwide, and astute real estate investors dove in with both hands. High profits motivated property owners to become short-term rental specialists. Many local governments responded with short-term rental bans, but landlords have devised a new workaround: the mid-term lease. These goldilocks leases are now generating better returns than short-term rentals while simultaneously complying with local regulations.

This trend, which is a winner for real estate investors, but still has the potential to leave traditional renters out in the cold, was recently profiled in Business Insider. Property owner Zeona McIntyre discovered the potential of mid-term leases during the COVID pandemic. When the pandemic set in, the chaos caused by stay-at-home orders and travel restrictions led to her losing nearly all her Airbnb bookings.  

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“I was really open to doing whatever I needed to get my properties rented,” she told Business Insider. McIntyre found success on a website called Furnish Finder. The platform focused on offering leases longer than 30 days but less than one year to working professionals. It turned out to be the happy medium between Airbnb and being a traditional long-term landlord.

“I realized there are tons of people looking all the time for longer stays, and longer stays are kind of awesome because people don’t need as much from you. They’re OK to go buy their own toilet paper and change the batteries because they’re living there,” she said. It was a classic case of necessity being the mother of invention, and the mid-term rental business was so good to McIntyre that she converted all of her income properties to the new format.

“My bread-and-butter is these mid-term rentals,” said McIntyre. “I want a longer tenant in there, and I don’t want to have to think about it for three months.” Business Insider says she is not alone in discovering the potential advantages of mid-term rentals. Other landlords are beginning to realize that taking this middle-of-the-road approach offers a host of potential advantages.

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The flexibility aspect of mid-term leases and the fact that tenants tended to be working professionals make life easier for both the landlord and the neighbors of the rental unit. Working professionals are much less likely to throw the kinds of loud parties that renters on a two or three-week holiday might throw. On top of that, mid-term landlords are discovering that they have a lot more leeway to operate without government oversight.

According to Business Insider, many short-term rental bans or registration requirements apply to properties offering stays of less than 30 days. Short-term rental registration also often included high fees and tax surcharges. Other cities and local governments limited the number of short-term rentals that could exist in a given area. In most cases, mid-term leases are not subject to these kinds of restrictions.

That's why McIntyre told Business Insider she believes that mid-term rentals are the "sweet spot of real estate investing."  She went so far as to say she considers them to be “a whole different vibe from short-term rentals, and way less stressful.” Many short-term rental landlords can attest to the high levels of detail and stress that go hand in hand with the high rents.  When you factor that in with the reduced regulatory picture, McIntyre's point becomes even clearer.

“Short-term rentals have been under scrutiny, and the ever-tightening regulations are constantly changing,” she said to Business Insider. “But there is sort of this magic number that, as soon as a listing is over 30 days, these rentals get classified into a long-term rental bucket, and then you don’t have the extra taxes or have to have a short-term rental permit." Keep this in mind if you're a landlord looking to boost your returns without going the short-term leasing route. 

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