What are Mid-Term Rentals?

A Growing Opportunity for Real Estate Investors

In the ever-evolving world of real estate investing, many investors are seeking opportunities beyond the traditional long-term rental or short-term vacation rental models. One such option gaining popularity is mid-term rentals. If you’re an investor or homeowner in Austin, you may want to explore this lucrative and flexible rental strategy. A mid-term rental can provide the perfect balance of higher rental income without the turnover of short-term rentals or the extended commitment of long-term leases. Below, we’ll explore what mid-term rentals are, why they’re becoming increasingly popular, and how you can leverage this opportunity in the current real estate market.

What is a Mid-Term Rental?

A mid-term rental refers to a rental property with a lease term typically ranging from one to six months. It’s longer than a short-term rental (such as an Airbnb) but shorter than a traditional long-term rental. For example, while short-term rentals are typically for a few days to a couple of weeks, and long-term rentals are usually one year or more, mid-term rentals bridge the gap, offering flexible lease terms that attract a unique group of tenants.

Why Choose Mid-Term Rentals?

One of the main reasons mid-term rentals are growing in popularity is the flexibility they provide for both tenants and property owners. For tenants, this option allows for a temporary living situation without the long-term commitment of a traditional lease. This is ideal for individuals who are in town for a specific work assignment, transitioning between homes, or relocating for a new job. For landlords, mid-term rentals can help you avoid some of the hassles that come with both short-term and long-term leases. You won’t have to deal with the constant turnover of short-term renters, but you also avoid being locked into long-term contracts that may not suit your investment goals.

Benefits of Mid-Term Rentals for Property Owners

• Higher Rental Income Potential

One of the main advantages of mid-term rentals is the opportunity to charge higher rent than traditional long-term leases. While short-term rentals can have higher rates, mid-term rentals still offer competitive rental income with less turnover. Additionally, tenants who are willing to commit to a few months often pay a premium for the flexibility, particularly in cities like Austin, where the housing market is booming.

• Less Wear and Tear Compared to Short-Term Rental

Unlike short-term rentals, which may have constant guest turnover and frequent cleaning, mid-term rentals typically have more stable tenants who stay for a few months. This can reduce the wear and tear on the property, leading to fewer repairs and lower maintenance costs over time.

• Less Risk than Long-Term Rentals

Long-term leases lock tenants in for a year or more, which can be beneficial, but it also comes with its own risks. If a tenant doesn’t work out, it can be difficult and costly to remove them. With a mid-term rental, you have more flexibility to adjust the lease terms if necessary, while still maintaining a steady stream of rental income.

• Less Startup Costs and Lower Expectations Compared to Short-Term Rentals

Short-term rentals typically come with a very high expectation around furnishings, service, hospitality and the experience. The cost to build out properties like this is high and can be time-consuming. In addition, management is very hands-on and demanding. With mid-term rentals, furnishings and amenities can be simple - more like a hotel - and guests are not expecting an elaborate experience with lots of amenities.

How Mid-Term Rentals Work

Ideal Locations and Property Types

In Austin, mid-term rentals are particularly appealing in areas that attract business professionals, medical personnel, or individuals relocating for work. Areas near tech hubs, medical centers, and universities are prime spots for mid-term rental properties.

Target Audience: Business Travelers, Relocating Professionals, etc.

The most common tenants for mid-term rentals are business professionals, contractors, and individuals relocating to Austin. These tenants typically need a place to stay for a few months while they complete a project, attend work assignments, or transition into a permanent residence.

Mid-Term Rentals vs. Short-Term Rentals: Which is Better?

Both mid-term rentals and short-term rentals (like those listed on Airbnb) have their advantages, but they cater to different needs.

• Mid-term rentals tend to offer more stability and less turnover, which can be a more hands-off investment for property owners.

• Short-term rentals, on the other hand, may have higher income potential due to daily rates, but they also require more management and are subject to stricter local regulations.

In Austin, where the real estate market is dynamic, both options can be profitable depending on the area and the type of tenants you’re aiming to attract. Investors can even choose to employ both strategies with the same property to maximize occupancy rates.

Legal Considerations for Mid-Term Rentals

Before you jump into the mid-term rental market, it’s important to understand local regulations, taxes, and licensing requirements. While short-term rentals are heavily regulated in Austin (with rules around licensing and zoning), mid-term rentals tend to face fewer restrictions. However, it’s still essential to:

• Ensure your property meets city and county rental requirements

• Check whether there are any homeowner association (HOA) restrictions

• Consult with a tax professional to understand how rental income will be taxed and whether you qualify for any deductions

Setting Up a Successful Mid-Term Rental

To maximize the potential of your mid-term rental property, here are some tips for success:

• Furnish Your Property: Since mid-term renters are often looking for a fully furnished living space, make sure your property is equipped with everything they might need – from furniture to kitchen essentials.

• Advertise on the Right Platforms: While you can list your mid-term rental on traditional rental sites, platforms like Furnished Finder or Zillow can help you reach the right audience.

• Draft Clear Rental Agreements: A strong lease agreement outlining the rental term, payment schedule, and responsibilities of both parties will ensure smooth transactions.

Conclusion: Capitalizing on the Mid-Term Rental Market

As the Austin real estate market continues to thrive, mid-term rentals present an excellent opportunity for real estate investors to tap into a growing demand for flexible housing solutions.  Whether you’re new to investing or looking to diversify your rental portfolio, understanding the benefits and strategies behind mid-term rentals can set you on a path toward greater profitability. If you’re interested in learning more about the mid-term rental market or need guidance finding the perfect property in Austin, I’m here to help.