Just bought my first rental property - Should I do STR/MTR/LTR?

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Just bought my first rental property - Should I do STR/MTR/LTR?

Account Closed
Member since 2023 · 3 posts · 8 votes

Just bought my first rental property (1 bedroom condo) in the Walnut Creek, California area (SF Bay Area).

I bought it all cash so I don't have any holding costs other than HOA, and property taxes.

At this point, I'm not sure the best way to make money from it.

Long term rental (LTR) - Either 6 month or 1 year lease. Steady cash flow, but concerned with California laws around someone not wanting to move out when I ask them to. 

Medium term rental (MTR) - Furnish the apartment with some light furniture and start marketing it to hospitals (travel nurses) and corporate stays. Concern here is the apartment may have a high vacancy rate and I would not make as much steady money as renting it long-term. It could stay empty for long periods of time.

Short term rental (STR) - Put it on AirBNB and furnish it with light furniture. Same concerns as above around vacancy rate, and having to build my AirBNB business (have never done AirBNB before). Also, I'm not sure if the condo HOA allows AirBNB, or if they'd care. My plan is to only rent to people with high quality AirBNB profiles with many reviews.

Combination of Medium term rental (MTR) and Short term rental (STR) - Primarily use it for traveling nurses and corporate stays, and put it on AirBNB when it is empty. 

Which one would you choose? Would just renting it long-term with a lease be better? 

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Joe Scaparra
Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes
3y

@Account Closed, don't want to rain on your parade, but this question should be step one AFTER YOU DETERMIND YOUR GOALS and before you buy.

Are you investing for cash flow or appreciation, short-term or long term hold? Did CA recently change the rules for owners of investment real estate.......probably not that is the Major reason I would not consider investing in CA. Do you live close to the property? Do you have any experience with STR? It is not about how can you make the most money, it is more what is the best FIT, FOR YOU!!!!

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  • Lauren Kormylo
    Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
    3y

    Some things to consider: MTR and STR require furnishing the entire place, including kitchen stuff, linens, etc, and ongoing expenses keeping up a high standard of them. "Furnishing lightly" is not the way to optimal revenue. LTR does not require that outlay. MTR can have squatters just like LTR. Airbnb only allows you to decline 3 bookings a year, or you will be downgraded in listings or delisted completely. So you will not be able to rent to only high quality guests on Airbnb. Finding out about your HOA is extremely important - they may only allow LTR. Also find out about town or county STR laws.

    2Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    3y

    If it was me, I would check all and any regulations with the HOA, city, county, and state first then plan accordingly. You can make quite a bit more income with a STR and mid-term, not to mention the added benefits of regular weekly cleans etc., but I'm thinking you may have regulations that only allow long term rentals.

    [email protected]330-557-3021
    1Reply
  • Brooklyn McCarty
    Investor · Member since 2022 · 1k+ posts · 754 votes
    3y

    I would do A, whichever one the property is permitted for 

    B, whichever gives me the best return 

    2Reply
  • Joe Scaparra
    Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes
    3y

    @Account Closed, don't want to rain on your parade, but this question should be step one AFTER YOU DETERMIND YOUR GOALS and before you buy.

    Are you investing for cash flow or appreciation, short-term or long term hold? Did CA recently change the rules for owners of investment real estate.......probably not that is the Major reason I would not consider investing in CA. Do you live close to the property? Do you have any experience with STR? It is not about how can you make the most money, it is more what is the best FIT, FOR YOU!!!!

    5Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    You bought without knowing your intention with it?

    3Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Whatever makes you the most amount of money with the least amount of time spent is what you should choose.

    4Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y

    Nobody can seriously answer this question. We don't know all the numbers for each scenario. 

    As Joe pointed out, this is the wrong time to ask the question! You should have done all your research before making the offer, then purchased it for the purpose it is best suited for.

    Let us know what you decide and how it works out for you.

    The DIY Landlord Book4.7248 Reviews
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    2Reply
  • Ronald Fontenot Jr
    Contractor · Houston Texas · Member since 2023 · 43 posts · 37 votes
    3y

    Here's something to consider....location. 

    For STR, are you convenient to things that would attract short-term clients? If not, your vacancy rate could be very high.

    For MTR, are you convenient to hospitals, corporate headquarters, and other places that would benefit from your rental? No one wants to drive an hour or two to get to work.

    If neither of the above is adequate, then your only choice is LTR. 

    1Reply
  • Jennifer Volek
    Real Estate Agent · Arlington, TX · Member since 2016 · 151 posts · 54 votes
    3y

    I have had a lot of success renting out my properties as medium term furnished rentals. I market to traveling professionals - mostly traveling nurses. I have found that furnished rentals are oftentimes marketed for up to 3 times the typical monthly rent. I undercut that to keep them rented out, and I profit quite well! It also helps to cater to your audience! For instance, if you plan on renting to traveling nurses, add to your home what traveling nurses will want! 

    2Reply
  • Taylor DaschBusiness Member
    Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
    3y

    I'd run the numbers for each scenario with the knowledge that using them as a MTR or STR will be more costly on the front end and likely require more time throughout. Then see what makes sense for your situation, but as others have said, you should try to have a strategy dialed in prior to purchasing the property.

    [email protected]254-718-4249
    Taylor Dasch | EG Realty560 Reviews
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    0Reply
  • Dale K Poyser
    Rental Property Investor · Laguna Niguel, CA · Member since 2019 · 175 posts · 116 votes
    3y

    If you have no experience I would rent Long term for a year. Take that time to familiarize yourself with the process of marketing your property, renting your property, dealing with turnover, dealing with maintenance, etc. as well as putting systems in place.

    Once you have a feel for that then you can ease into MTR or STR. As someone else mentioned, if your property is not close to corporate headquarters or a hospital then MTR may not work for you. If it is not close to something appealing to STR tenants, your ONLY option may be LTR.

    Run the numbers and don't underestimate the cost of furniture and utilities. As a MTR or STR owner you are responsible for utilities and upkeep. You don't deal with these costs with a LTR.

    3Reply
  • Zach Edelman
    Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    I would say MTR into STR is probably a good bet. There is no question that both MTR/STR make more $$$ than LTR. The difference b/w MTR vs. STR just comes down to how frequent of turnover you're willing to handle, as well as the work put into marketing the property.

    0Reply
  • Nicole Balsamo
    Member since 2023 · 40 posts · 17 votes
    3y

    Agree with everyone else — definitely check restrictions (HOA, city/county, etc.), then run the numbers to see what works best for you and your financial goals. A good (and free) resource to figure out roughly what an STR can make you is data.rabbu. Can also research the broader market there.

    Either way...if you're going to furnish it either way, I'd def do a combined MTR & STR strategy. Doesn't hurt to cover all your bases.

    0Reply
  • Kevin G.
    Investor · Bay Area, CA · Member since 2020 · 72 posts · 43 votes
    3y

    Hi there!

    I think a medium-term rental might be a great option for you. The area is home to several hospitals, which makes it a convenient location for traveling nurses. In fact, I know of a few traveling nurses at JMWC who are renting out apartments right now. There are four hospitals in the area, two of which are located in Walnut Creek, so it's definitely worth considering.

    As for short-term rentals (STRs), I'm not entirely sure how strong the market is in Walnut Creek, since it's not a hugely popular tourist destination. However, I've heard from my real estate colleagues that STRs in the area have done well. Unfortunately, I don't have any concrete numbers to back this up. Whatever you decide, best of luck to you!

    0Reply
  • January Johnson
    Real Estate Agent · Emerald Coast, FL · Member since 2016 · 820 posts · 486 votes
    3y

    If you are near military bases or training facilities, renting on Homes.mil is great. You can advertise for STR, MTR, or LTR.

    0Reply
  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    3y

    @Account Closed

    Congrats on the first investment! That's the hardest one because you're not sure what you're doing. You'll learn so much from this first one.

    I'd check out the short-term rentals laws in Walnut Creek. We follow STR laws for our investor clients here in Colorado, and the rules vary widely. (Like, Denver doesn't allow non-owner occupied STRs, but three adjacent cities do, and then those three cities have variations on what is allowed as well.)

    If you're allowed to do STRs, you might combine the Airbnb/STR model and medium-term rental model. I see some of our clients succeed with this by doing STRs during the hot season and then filling in with a travel nurse/MTR over the slower season.

    If you end up going the MTR route, you might read Erin's Guide to Midterm Rentals. It's a quick read and has tips and checklists on how to set up your MTR and operate it best. 

    Good luck!

    0Reply
  • Bonnie Griffin KaakePro Member
    Real Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
    3y

    @Account Closed Once you determine whether or not you can have a STR, you will have more decisions to make. If you can, you will be depreciating it over 39 years. If you change to a LTR or MTR, you will need your CPA/tax professional do a 3115 change of accounting form to switch it from STR to one of the other methods or vice versa. The biggest hurdle you need to overcome immediately is what can you do? As others have said, STR or MTR give you better cash-flow but may not be permitted.

    [email protected]303-475-4459
    0Reply
  • Chris Willard
    Property Manager · Big Bear, CA · Member since 2023 · 10 posts · 0 votes
    3y

    STR for sure! Make sure you have the foundation and PMS all set up. If you are self managing, you need a great cleaning crew, on site manager and supervisor!

    0Reply
  • Julie Gates
    Real Estate Agent · Savannah, GA · Member since 2018 · 122 posts · 141 votes
    3y

    I genuinely wish you the best and I don't have an opinion on what you should or shouldn't do, I have an opinion on the timing of your ask. I always buy my real estate with a very clear plan for what I will do with it. I always have other exit strategies if my plan doesn't work out, but I don't think it's a good idea to buy a property and then take time to figure out what I'll do with it later. I am usually painting or meeting contractors within a few hours of closing. Time is money!

    2Reply
  • Osazee Edebiri
    Realtor · San Jose, CA · Member since 2015 · 318 posts · 154 votes
    3y
    Quote from @Account Closed:

    Just bought my first rental property (1 bedroom condo) in the Walnut Creek, California area (SF Bay Area).

    I bought it all cash so I don't have any holding costs other than HOA, and property taxes.

    At this point, I'm not sure the best way to make money from it.

    Long term rental (LTR) - Either 6 month or 1 year lease. Steady cash flow, but concerned with California laws around someone not wanting to move out when I ask them to. 

    Medium term rental (MTR) - Furnish the apartment with some light furniture and start marketing it to hospitals (travel nurses) and corporate stays. Concern here is the apartment may have a high vacancy rate and I would not make as much steady money as renting it long-term. It could stay empty for long periods of time.

    Short term rental (STR) - Put it on AirBNB and furnish it with light furniture. Same concerns as above around vacancy rate, and having to build my AirBNB business (have never done AirBNB before). Also, I'm not sure if the condo HOA allows AirBNB, or if they'd care. My plan is to only rent to people with high quality AirBNB profiles with many reviews.

    Combination of Medium term rental (MTR) and Short term rental (STR) - Primarily use it for traveling nurses and corporate stays, and put it on AirBNB when it is empty. 

    Which one would you choose? Would just renting it long-term with a lease be better? 

    Hi Khail,

    Congratz on purchasing your first investment property all cash in the Bay, may people cannot do that, so it is of worthy note.

    People already said many things around developing your Strategy in advance of the purchase, so I am curious did you use a realtor to purchase this property and one that was investor friendly? Because they should have helped your formulate a Strategy prior to your purchase. 

    With that being said you purchased all cash, therefore if you feel the need to sell, just do so when your value is up. 

    As far as the strategy you chose, your concerns all seem to be around a person squatting in your home indefinitely without paying rent, rather than how much money you will actually make. So what I would do from that standpoint, is take the time to vet a high quality long-term tenant who will only move should you need them to (sale of the home or owner occupy) and one that you can continue to increase their rent reasonable each year. 

    If you rent long-term you are exposing yourself to less risk because you will deal with less tenancy. 

    Here are some tips for vetting potential tenants:

    1. Require a rental application: Have all potential tenants fill out a rental application that includes personal and employment information, references, and a consent to run a background check and credit report.
    2. Check their credit report: A credit report can give you insight into a tenant's financial history, including their payment history, outstanding debts, and credit score.
    3. Run a background check: A background check can reveal any criminal history or past evictions, which may be red flags.
    4. Verify income: Make sure to ask for proof of income to ensure the tenant has the financial means to pay rent.
    5. Contact references: Reach out to previous landlords, employers, and personal references to get a sense of the tenant's reliability and character.
    6. Conduct an in-person interview: Meeting the tenant in person can give you a sense of their personality and demeanor, which can be important factors in being a good tenant.
    7. Trust your instincts: If something seems off or you have a bad feeling about a potential tenant, it may be best to pass and keep looking.

    By taking these steps and thoroughly vetting potential tenants, you can increase the chances of finding a quality tenant who will be a good fit for your rental property.

    Good luck and keep us posted on what you decided to do!




    0Reply
  • Josh Edelman
    Real Estate Agent · Las Vegas · Member since 2018 · 197 posts · 143 votes
    3y

    Mid term rentals are a great option in that city I believe. At least in Las Vegas MTRs are great as we have many traveling professionals who only are here for several months at a time. For example my mortgage is $1600 but I charge $2900/mo for my rent. You can bring in more profit per month than long term with less hassle than AirBnB. 

    0Reply
  • Josh Edelman
    Real Estate Agent · Las Vegas · Member since 2018 · 197 posts · 143 votes
    3y

    I like MTRs. I am in Las Vegas Mid term rentals are a great option in this city as the legislation with AirBnB is ongoing and makes it difficult, plus competition with Casinos. MTRs are great as we have many traveling professionals who only are here for several months at a time. For example my mortgage is $1600 but I charge $2900/mo for my rent.

    1Reply
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