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Updated almost 2 years ago, 12/21/2022
Medium-term vs. long-term and furnished vs. not?
I will be moving out of state but would like to keep my primary residence as a rental.
I was contemplating leaving all the furniture and setting up a "room share" medium-term rental over a traditional lease agreement. BUT... it seems that with the increased management fees and utilities being "included in the rent" I may not really net any more than going the traditional route. Does anyone with experience in this space have any thoughts?
Follow-up question: I know leaving it furnished is the way to go with medium-term (or short-term) rentals... What about furnished long-term rentals? Is that a plus or a minus?
Denver property managers are welcome to contact me as well.
Speaking to the long term furnished rental. I know people that have done it. It's two sides of a coin in that you will have a much lower tenant pool looking to rent your property. On the other side, there really are usually not a lot of options for searching tenants, so you don't have much competition. This may be the route to go for you if you're going to be gone for a long time and don't want to move all your stuff out. You can charge more for furnished long term but not as much as you could for mid term. Have you considered short term rental? I don't know the Denver market but I would imagine there would be demand for it there.
- Jonathan Styer
Hi @Bob Foglia with the current state of the rental market (very tough to rent most things), I would strongly discourage attempting to rent the property out furnished (short, medium, or long term.) It's my opinion that the pool of tenants is simply too small to make the vacancy time worth the effort.
We have experience managing furnished "house hack" properties and within a couple of years, our clients nearly always decide to go the traditional route of an unfurnished property and a single lease. Many reasons for this (some of which you touched on), and I'd be happy to discuss them in detail if you would like.
The most competitive and profitable strategy, this time of the year and with current market conditions, is to have a vacant home in excellent condition, priced competitively. Hire a management company with excellent marketing and processes in place to rent properties quickly and to the best tenants. I may know just such a company :)
- Greg Weik
- 303-586-5560
Options:
STR - In Denver, you have the ability to STR your primary residence for 30 days. If you can fill it, this might be a good strategy to get some good margin before settling into your long or mid term leasing situation.
Mid-term vs Long-term - had a minute and as a very loose proxy looked up the margin difference in a couple properties posted for travel nurse housing (my proxy for mid-term pricing) and compared to our analytical rental pricing tool for long-term. There virtually isn't a difference in pricing (I'd be recommending a long-term price similar to what's posted for the mid-term lease proxy). No real margin difference in shortening the lease term, it appears.
So Agree with Greg above, that the risk probably outweighs the benefit. But happy to nerd-out with these tools and your situation to help you figure it out! :)
@Bob Foglia Short-term rentals and mid-term rentals require more hands-on management by you or a company you hire. The long term rental seems best in my opinion, especially if you are moving out-of-state.
If it is unfurnished, you will have a tenant before you know it. Of course, the property is in a reasonably decent area of town. There may be a market for a family moving here from another state for a furnished rental if their intent is to look for a place to purchase before they move their furniture. You will also have to consider the furnished rentals offered by places like the Marriott and others as competition. Just remember that tenants rarely take as good care of the furniture as you would. Your furniture could be at risk.
If you are even considering STR, be sure to check zoning laws and your HOA now and frequently. These laws and regulations are changing with frequency.
P.S. Don't forget the tax benefit and extra cash-flow you may likely be entitled to with cost segregation once it is listed for rent. It can be significant.
#1 Tenant Screening Contributor
- Property Manager
- Honolulu, HI
With regard to LTR, offering a unit furnished generally limits your market to people that are intentionally transient. You should expect they will move out in a year, if not less, likely resulting in some turnover expense. If instead, you offer unfurnished (or partly furnished, with appliances only, depending on what is more typical for your market), people will be going to the effort to move in their own belongings, making it their "home", and generally will remain for a longer term, thereby delaying your turnover expense...as long as you inspect annually to ensure they are taking proper care.
An additional factor when dealing with furnishings, you have more "maintenance" effort and expense cleaning or repairing chairs, sofas, etc. although some charges may go to the tenant, many will be "normal" wear and tear. If you do nothing with the damaged items, the overall quality of the unit's appearance will deteriorate and become a factor in attracting quality tenants.
With a room share situation, you significantly increase the risk of finding incompatibilities after move in, which can be very difficult to deal with long distance (or even if same area!). Even unmarried couples OFTEN split, leaving you shortchanged when the rent comes due.
Quote from @Ginger Pruitt:
Options:
STR - In Denver, you have the ability to STR your primary residence for 30 days. If you can fill it, this might be a good strategy to get some good margin before settling into your long or mid term leasing situation.
Mid-term vs Long-term - had a minute and as a very loose proxy looked up the margin difference in a couple properties posted for travel nurse housing (my proxy for mid-term pricing) and compared to our analytical rental pricing tool for long-term. There virtually isn't a difference in pricing (I'd be recommending a long-term price similar to what's posted for the mid-term lease proxy). No real margin difference in shortening the lease term, it appears.
So Agree with Greg above, that the risk probably outweighs the benefit. But happy to nerd-out with these tools and your situation to help you figure it out! :)
Are those MTR that you are looking at furnished? A general rule-of-thumb I have seen, furnished MTR's are usually at least 1.5-2x the monthly LTR. So I can't imagine people renting out furnished MTR's that are basically the same price as a LTR. But I can see an Unfurnished month-month or even a 3 mo lease being maybe only $100/mo more than a 12 month lease.
Thanks for all the input.
I will me moving out of state, so I won’t be able to self manage the property.
I rally didn’t want to move my furniture (new chapter, new stuff, right?).
Anyway, I thought the room share setup would cashflow better than than a LTR, but after a very limited amount of research, like @Ginger Pruitt said, that doesn’t appear to be the case here in Denver. I was hoping somebody was going to tell me otherwise, but the numbers just don’t seem to work out that way.
It may be time for a big garage sale!
Quote from @Chris Allen:
Quote from @Ginger Pruitt:
Options:
STR - In Denver, you have the ability to STR your primary residence for 30 days. If you can fill it, this might be a good strategy to get some good margin before settling into your long or mid term leasing situation.
Mid-term vs Long-term - had a minute and as a very loose proxy looked up the margin difference in a couple properties posted for travel nurse housing (my proxy for mid-term pricing) and compared to our analytical rental pricing tool for long-term. There virtually isn't a difference in pricing (I'd be recommending a long-term price similar to what's posted for the mid-term lease proxy). No real margin difference in shortening the lease term, it appears.
So Agree with Greg above, that the risk probably outweighs the benefit. But happy to nerd-out with these tools and your situation to help you figure it out! :)
Are those MTR that you are looking at furnished? A general rule-of-thumb I have seen, furnished MTR's are usually at least 1.5-2x the monthly LTR. So I can't imagine people renting out furnished MTR's that are basically the same price as a LTR. But I can see an Unfurnished month-month or even a 3 mo lease being maybe only $100/mo more than a 12 month lease.
I think your gut is what I was expecting to find but was surprised that it isn't the case. Could be timing/seasonality related because our LTR pricing tool is using rolling 3 months of transactions... but it's close enough that I didn't think we can say we're observing that assumed margin difference. Yes - the MTR's that I was searching were furnished.