Choosing the Perfect Neighborhood for Your Medium-Term Rental: 8 Essential Factors

[Julie Gates]

Many factors go into the decision on which house to buy, and I’m not referring to number of bedrooms. Read below for my top factors in choosing where to place a medium term rental.

1. Find a location where medium term rental guests need to stay. Homes near hospitals, industry and universities do very well in this space.
2. The neighborhood is as important as the house itself. Photos are by far the most important aspect of attracting guests to your medium term rental. However, if your house is surrounded by boarded up houses and old cars in the lawn, your medium term rental will definitely suffer. Don’t even run numbers on a property until you “walk” it on Google.
3. Safety is in the eye of your guest. You might have wonderful memories of grandma’s house and know it’s incredibly safe based on fond memories of playing cops and robbers with your friends at night, but guests have their own point of view. Keep in mind that when you are putting a furnished rental out into the world, it needs to be in a location where a single female can check in alone at night and feel safe getting from her car to the front door. Is the home in a neighborhood where you would allow your mother to go alone at night had she never been there? If the answer is yes, you probably have the right street. If you cringe even a little at this thought, you probably need to keep looking.
4. Is there off street parking? I’ve seen many clients and property owners ignore this small detail, but it’s important. Most guests will bring a car, unless you are in a giant metropolis with amazing public transportation. Be aware that this is a big deal to guests. If the weather gets excessively hot or cold, covered parking is even more valuable, especially for men who tend to baby their automobiles. If the property you are looking at doesn’t have off street parking, are there free options nearby? A paid option is rarely desirable to a medium term rental guest unless the location is exceedingly desirable and homes are hard to come by there. Be prepared to solve the parking situation for your guests if the home doesn’t have it.
5. How tight are the neighbors? Neighbors can be your greatest asset and your biggest source of irritation. I own and manage medium term rentals with neighbors who will call us if there is ever an issue and have even helped my guests when they needed it. I also own and manage medium term rentals where the neighbors don’t like the changing guests and call the authorities to complain. In Savannah, GA where I invest, we have a home that has never been rented for less than 30 nights, but one angry neighbor keeps turning us into the city as an illegal short term rental. My team keeps having to explain to a neighbor the definition of a short term rental (29 days or less) and send bookings to the city to prove that we have never operated this home illegally. It’s hard to know much about your neighbors before moving in, but if you can get any information on them before you make an offer I strongly advise you to do so.
6. Is the home in an HOA? If the answer is yes, buyer beware. Never put in an offer on a home in an HOA without reading the documents yourself. These should be available in the MLS, simply ask your agent for them. My clients had a home under contract in a HOA last year and they wanted to have the medium term rental strategy as a backup for the home. I provided them with the documents and we quickly discovered that the minimum rental term in this neighborhood was 6 months. My clients did close on the home, but with all of the information in hand. I know of a condo facility here in Savannah that requires all tenants to be approved by the HOA board before being given a lease. This would never work for a medium term rental. I was the buyer on this transaction and quickly exited.
7. Will you be purchasing a nice home or rehabbing a home up to a high standard? The furnished rental market is incredibly competitive nowadays. Unless you can afford to have the house look nice, don’t do it. This includes landscaping and outdoor space if possible.
8. Use an agent that understands the investment strategy. Pretty agents who like to sell pretty houses don’t necessarily understand the investment strategy that you are employing. I went to a house once needing management and found a beautifully decorated home owned by out of state investors who bought it based on the photos only. What they didn’t realize (and their agent failed to communicate) was that the home was surrounded by Section 8 housing and neighbors were walking through the property multiple times per day. This home struggled as a medium term rental and we had to keep the price below what the owner wanted in order to keep guests inside. Sadly, the owner finally had to make the home into a long term rental. Had the investors used an agent who understood the ins and outs of medium term rentals, they would have avoided a very expensive lesson.

When placed in great neighborhoods, medium term rentals are excellent investments. Investors should always keep these items in mind as they search for their next investment. Please be aware that investing in medium term rentals involves a lot more than running numbers and buying furniture.

[Shannon Strickland]

Julie,

I just wanted to thank you for the valuable insights you shared with us. There was so much that resonated with us, so I wanted to confirm everything you said.

1) Our target locations are near hospitals, and our target tenants are traveling medical professionals, but we also have other industries such as Amazon, construction, and military operating in our area who have reached out to us through Furnished Finder (FF). Consider your target tenants thoughtfully.

2) Finding the right neighborhood near our hospital took time to determine the quality of the neighborhoods. Thankfully, we live nearby because that had a small learning curve, but now we can turn onto a street and almost know immediately. Hiring a real estate photographer is one of the best choices we made. Now people know that they get what they see—a good home in a good neighborhood near work. Choose the neighborhood wisely and do not skip a professional RE photographer.

3) It took about two dozen house tours until we found a house where a single female could check in alone at night and feel safe getting from her car to the house. It’s the exact first thought that crossed my mind in every driveway we parked. Again, consider your target tenants thoughtfully.

4) Parking can be a make-or-break factor. Some neighborhoods had all yellow curbs, and our MTR investor-friendly agent quickly taught us that restricted parking would be problematic (especially with us house-hacking and needing our spots). We didn’t even bother touring inside those homes. Do not overlook the parking situation.

5) Considering the neighbors is great advice. Once we recognized that some houses in the neighborhood are family-dense, we felt comfortable about our MTR in the neighborhood. The first opportunity we had to meet our fence neighbors, we told them we were trying to provide good homes for hospital workers, and they liked what they heard. They even started bringing over baked goods for all of us, and a review of our MTR mentions the kindness of our neighbors. A recent interview on FF with an MTR operator in Maine highlighted the need to educate neighbors if possible. Build bridges with neighbors as an advocate for your MTR tenants.

6) New construction was going up near a hospital and we made an offer on a new home, but it was the HOA that caused us to walk away because their rules were 6-month lease minimums. We asked the builder to consider lowering it to 3 months, and after they ran it by their attorney, they found out that there were too many owner-occupants to make changes. If we hadn't carefully read the long document, life would be tougher now. Read every line of every HOA document.

7) There are many offerings in my area on FF, but when I study their calendars, I see that most either have a small handful of random night stays (STR) or they're empty. Using the enemy method, it's clear that most either don't invest in professional design or professional photographers. We had saved ahead of time for both, and that helped us keep our room occupied. Operators can no longer just tidy up their son's bedrooms, stand at the bedroom door, take a photo on their phone, and quickly upload it. Setting up a quality MTR takes investment money.

8) By far, the most important first step we took during the BP Rookie Bootcamp was to find a BP investor-friendly investor who clearly understood house-hacking and MTR together for our strategy. He educated us everywhere we went and became the perfect team member. Team up with an investor-friendly agent who knows your strategy well enough to teach it.

You’re right, Julie, many factors make a great MTR investment. Thank you for caring enough to share and teach.

Shannon