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Updated 9 months ago on . Most recent reply

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Bruce Tieu
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What makes a good mid term rental market?

Bruce Tieu
Posted

Hi everyone,

I am on the hunt for my second house hack. I've been doing some research on different rental strategies. It seems in order of increasing profitability:

LTR < MTR < STR

Given that I'm based in the Denver metro area, unless I'm occupying the property as my primary residence, STR is out the question, as Denver has cracked down on the short tern rental laws. Long term rentals are tough to cash flow unless I implement a co-living / rent-by-the-room strategy, which I've done before, but I'd prefer to not do again. This leaves me to consider mid terms rentals as a way to generate above average cash flow while having a reasonable amount of management. 

However, these are the questions I have:

- What makes a good mid term rental market?

- What are those submarkets in the Denver metro area?

- How would one run the numbers on a mid term rental when it comes to startup costs, rental rates, and operating costs?

Any insight on this subject would be greatly appreciated.

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James Carlson
  • Real Estate Agent
  • Denver | Colorado Springs | Mountains
2,751
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James Carlson
  • Real Estate Agent
  • Denver | Colorado Springs | Mountains
Replied

@Bruce Tieu

Denver's about as good a medium-term rental market as there is. You've got to know that rents are down across the board all over the country -- be it LTR, MTR or STR. Don't let that discourage you. It's just cyclical.

What makes a good midterm rental in Denver (or Colorado Springs or just about any city)? Great design, professional photographs, great location.

Don't get hung up on micromarkets or submarkets. People are coming to Denver for all kinds of reasons. Remote work, travel nursing, school. Our MTR in the Capitol Hill area has been filled with every kind of tenant, so don't get bogged down trying to target some niche.

All of these groups of people have chosen a more nomadic life because they want to experience different cities. So MTRs that are close to the "action" are great.

Also, I think the MTR market is getting more and more like Airbnb in Denver and Colorado, in that it's not an amateur's game. You've got to professionalize your place. The design and furnishings need to be solid and photographs have be plentiful and professional. 

In terms of running numbers, I find that using Rentometer's LTR estimate for your location plus 30% is a good number for right now. Our MTRs in Denver and Colorado Springs fluctuate between 1.2x and 1.4x the long-term rents. 

Good luck!

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James Carlson Real Estate

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