"30-Day Stay: A Real Estate Investor’s Guide to Mastering the Medium-Term Rental" By Zeona McIntyre & Sarah weaver

Introduction

• HomeReady Program: "The big hurdle is you need to make LESS than 80 percent of the country’s median income.", "You do need a 660 or higher credit score."
• "Federal Housing Administration (FHA) loan, which allows owner-occupied loans of only 3.5 percent down."
• "A 1031 exchange gets its name form Section 1031 of the U.S. Internal Revenue Code. This exchange allows you to defer paying capital gains taxes when you sell and investment property and reinvest the proceeds from the sale within certain time limits. The property or properties you exchange into must be of like kind and equal or greater value."
• "Still, I highly recommend self-managing for those just getting started or hoping to maximize cash flow."

Chapter One: What is a medium-term rental?

• "The medium-term rental (MTR) strategy is a form of real estate investment where an investor furnishes a condo or home, usually in an urban market, to rent by the month to traveling professionals. This strategy is quickly gaining steam in cities where short-term rentals (STRs) are outlawed. In addition, this strategy works well in densely populated areas near universities, hospitals, and office parks, which may seem less desirable to longer-term tenants."
• "Eight to ten new prospects can be found on a given day on the lead-generating website Furnished Finder."
• Numbers for one purchase:
  • "Purchase price: $349,000
  • 3.5% FHA down payment: $12,815
  • Monthly PITI: $2,016
  • Rental income from one of the two units: $2,300"
• "For instance being an out-of-state investor requires you to manage a team of individuals who are local to your properties and can address any issues that may come up."

Chapter Two: Why MTRS?

• Regulation: "In most markets, renting more than thirty days put you in the long-term rental category in the eyes of the city, which might require a low-cost, straight-forward license or not require one at all."
• "The MTR strategy has less turnover than the STR Strategy, which means less coordination with cleaner and less guest interaction in general."
• "With MTRs, there is just less. Less communication means lower admin fees and less need for automation software. Less turnover means fewer cleaning fees to pay out and fewer cleaning supplies to replenish. We cover fewer of their supplies with extended stays, instead giving them a starter kit, which we will go over in Chapter Eleven. With MTRs, the rent is a bit less, so it is important to make sure the ratio still works."
• "Receiving a consistent monthly rate gives you a more predictable, steady income and may also allow you to combine all your rentals into one bank account."
• "On Airbnb boutique hotels and professional designers have infiltrated and dominated the space; the competition in Furnished Finder is less than fierce, so it is an easy place to outshine the rest."
• "For medium-term rentals, we have been pleasantly surprised to fidn that tenants are flexible and can move in at all times of the months. They will even get hotel rooms for a few days to wait for our places; this frequently makes our occupancy gaps as short as a few hours to a couple days."

Chapter Three: Who is the MTR strategy for?

• "The MTR strategy is for those who want to squeeze out a little more profit than would come from a traditional rental."
• "When a condo is labeled as non-warrantable, it does not meet conventional guidelines and will not be bought by government-backed entities like Fannie Mae and Freddie Mac. In addition, many lenders consider financing a mortgage for this type of property to be too risky, making it harder to get a loan."
• "If you invest in the state you live in and buy even one place a year, I recommend getting your real estate license."

Chapter Four: Financing the deal

• "The second-home loan, sometimes called the ‘vacation home loan,’ allows a buyer to purchase a home with a similar rate to a primary, owner-occupant loan while only requiring them to visit the house for fourteen days during the first year after they purchase the property."
• "One on is that you must qualify for this loan bas on your income and cannot use the potential income produced by the home to qualify."
• "If married dor in a business partnership, each partner can get one loan per area."
• "You can only own one second home in a market, but you can own multiple second homes, meaning an investor could purchase a second home in as many as seven to twelve different markets."
• "Lenders will consider 75 percent of your rental income as additional income, allowing investors to be eligible for more properties using conventional loans."
• "If you want to buy an investment property, you can put 20 or 25 percent down. However, if you want t olive in part of the property, you can put as little as 3 percent down as an owner-occupant."
• "However, the PMI drops off automatically when your home has 22 percent equity in it, or you can request an appraisal at 20 percent equity to have your lender remove PMI."
• "Commercial loans typically range from five years or fewer to twenty years, with the amortization period often longer than the loan term."
• "Commercial loan-to-value ratios generally fall into the 65-80 percent range."
• "Debt service coverage ratio (DSCR) loans have been all the rage recently; in essence, they allow investors to qualify for loan based on the cash flow potential of their identified rental property."
• "A portfolio loan may be a solid alternative for those having difficulty qualifying for a conventional or government loan. These loan products are held by the originating bank rather than sold on the secondary market."
• "The 203(k) loan is a type of FHA home renovation loan that lets borrowers bundle the ccost of the home AND the renovation into one."
• "Wrap mortgage is referring to a seller financing deal where the buyer takes over the seller’s existing debt."
• Seller financing: "I always tell my sellers that I will give a higher price at 100 percent principal payments (aka zero percent interest), which would, in the end, be the same payout as a lower price with interest."
• "Often, they are more than happy to keep the discussion on actual dollar amounts."
• FHA loan: "You can live in the property and put down as little as 3.5 percent."
• "Keep in mind that the FHA loan does require a strict inspection, so this is not a loan option on a property that does not meet FHA standards."
• "However, we recommend using the FHA loan on a duplex or triplex."
• "Fannie Mae guidelines require six months of ‘seasoning,’ or on-time consecutive payments, on a home (regardless of type) before the loan is eligible for a cash-out refinance."
• "Hard-money lenders can be private investors, but often they are companies that lend to investors."
• "Finally, it is important for investors to keep networking with lenders. Get to know both conventional and portfolio loan lenders. Shop small and shop local."
• Invest2FI podcast

Chapter Five: Market criteria: is your location right for MTRS?

• "To find data on a region and to get a sense of the area, we use a number of resources, including http://www.city-data.com, AirDNA, Google Street View, and Furnished Finder."
• "When Analyzing a long-term and medium-term rental, we look at siz metrics.
  1. Population growth
  2. Job growth
  3. Wage and income growth
  4. Rental rates
  5. Home values
  6. Crime rate"
• "As a general rule, we want to see a population growth of 20 percent over the most recent ten-year period in a market."
• "We want to see a 2-3 percent increase year over year."
• "When analyzing a city you want to invest in for long-term rentals, a good rule of thumb is to see rent rates increasing by 1-3 percent year over year."
• "Properties next to a university can attract short-term tenants as well as medium-term tenants."
• "There are several key elements we look for when investing in a MTR. They include:
  • Hospitals (traveling health professionals)
  • Corporations (corporate relocation, industry)
  • Research centers (temporary scientists and researchers)
  • Universities (graduate students, professors, students)
  • Filming destinations (see Julie Gates’s case study later in this chapter)"

Chapter Six: Deal criteria

• Possible criteria:
  • "Suggested offer price
  • Current rents
  • Market rents
  • Estimated rehab
  • Property taxes
  • Estimated insurance
  • Property management fee percentage"
• "Here are the key elements of crystal clear deal criteria:
  1. Purchase price
  2. Renovation budget
  3. Class of neighborhood
  4. Investing strategy to be used
  5. Cash-on-cash requirements
  6. Desired cash flow per unit
  7. Location"
• "I credit my success to three things.
  1. Relationships with investor-friendly agents
  2. Crystal clear deal criteria
  3. Confidence in analyzing deals (read more on this in Chapter Eight)
  4. Now let’s cover the elements of crystal clear criteria."

Chapter seven: MTR properties and strategies

• "After my first purchase, I knew I wanted to do what David Greene calls ‘the stack.’ According to David, the Stack is when you purchase a single-family home, then you purchase a duplex, then a fourplex, and after that, you purchase an eight-unit apartment complex. So on and so forth; you get the picture."
• "Medium-term rental are a different game. We have found that one- and two-bedroom units are the sweet spot."

Chapter eight: How to analyze an MTR deal

• "If the seller says that the utilities are all paid for by the tenant, you need to verify this with the lease. If the lease says the tenant pays for the water, you need to call the city and verify. Trust but verify"
• "First, do not be fooled by local real estate agents and property managers who tell you that vacancy rates are always 3 percent or lower. There is always a chance that vacancy rates could be higher. Thus, I am using 8 percent vacancy when underwriting my deals."
• "Physical vacancy is when your property is — you guessed it — physically vacant. This means there is no tenant occupying the property, and, as a result, you are not collecting rent."
• "I describe economic vacancy as there being a butt in the seat, but the butt is not paying. You have a tenant in your unit, and they are refusing to pay rent."
• "In essence, cash-on-cash return is the cash flow earned by the cash you invested versus how much money you had to put into the deal to create that cash flow."
• "Casch-on-cash return (CoC) = Total annual cash flow / Initial cash investment"
• "We have found that a stylish, framed sign with dos and don’ts can go a long way. We recommend those for your bathrooms and kitchens to prevent some recurring issues." I* "Net operating income (NOI) = Gross operating income – Gross operating expenses"
• "Capitalization rate = Net operating income / Current market value"

Chapter nine: Key players

• "Let’s begin by saying who needs to be on your team.
  • Investor-friendly real estate agent
  • Mortgage lender or loan officer
  • Property manager
  • Real estate attorney
  • Real estate-focused CPA
  • Contractors and general contractors
  • The cleaner"
• An investor-friendly agent: "Their No. 1 skill is in negotiating the contract and ensuring you make it to the closing table with agreeable terms."
• "If you are looking for an agent who works with investors, ask them how they find deals This will quickly tell you if they have a consistent deal flow."
• "When you are looking for a real estate agent to help you grow your real estate portfolio, remember that you are not simply finding the No. 1 agent by sales volume or listings. Often, these NO. 1 agents are not going to be the best match to find you your next value-add small multifamily tha tyou rent to traveling nurses."
• "Do no ask, ‘Are you selling anything else?’ or even, ‘Are you willing to sell anything else?’ These questions will immediately put the investor on the defense. Instead, ask ‘Do you own anything else?’ Investors have one thing in common: We are proud to talk about the real estate we own."
• "It is not an exaggeration when I say that my whole world changed when I read Matt Faircloth’s book, Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money."
• "It’s often not realistic that prospective agent will find a viable property on demand, so instead, I ask them to send me the last two to three deals they sold to an investor. I run the numbers, and if the deal is deal, I proceed with the relationship. I generally ask them what deal analysis spreadsheet they use and if they’re willing to use mine."
• "I also always ask an agent about their portfolio and what they are looking to invest in too. This helps me decide how savvy they are and if we are looking for the same deals."

Chapter ten: Your most valuable asset — the cleaner

• "If your agent has some experience or is on a long-standing team, they will have a spreadsheet full of vetted referrals."
• "A vacation rental cleaner is partially a stager; they need to pay close attention to details and know how to make a hotel-worthy bed and fluff pillows like a champ. A move-in/-out cleaner is working in a vacant space; they are detailed enough to wipe down shelves and baseboards, but they still might not be your person."
• "Taskrabbit is an excellent app that allows you to hire out odd jobs, such as moving a hevy piece of furniture, hanging some art, and cleaning. It can come in handy for furnished-rental owners like us who have found ourselves trying to move a couch or assemble a bed frame alone. The only thing to beware of is cancellations."
• "First, do they have experience with STRs or furnished rentals? (This is a must.)
• Are they available every day of the week?
• Can they be available during the cleaning window? (Typically, 11:00 a.m. to 3:00 or 4:00 p.m., depending on the size of the home.)
• Can they do a job on short notice? If not, how much lead tie do they need?
• Do they have a team (alternates to cover if someone else is sick or out of town)? If an individual cleaner, would they be willing to hire and train a friend to help them if you give them more business?
• Are they comfortable with technology? Can they sync to automation? Are they familiar with self-scheduling?
• If not, can you schedule with them by text or email? (This is important for automation.)
• Can they invoice you to get paid? This makes it easy so that you don’t’ have to keep track of when they cleaned and if they have been paid Make sure you set an expectation of how often you will pay; some people are antsy to be paid the same day, which doesn’t work for us. (We pay once a week, but we let them know we can do weekly, biweekly, or monthly payments. Then we let them choose.)
• Can they be paid via credit card (for an opportunity to rack up points and miles) or PayPal/Venmo? We are often not in the same state as our properties, so we must make payments digitally (rather than cash or check). This way is also much easier to keep track of for taxes.
• If it’s a team, what type of training do they do, and what is their policy around deep cleaning?"
• "Do they prefer to come to the home to give a quote, or can they do so over the phone?"
• "We tend to stay away from hourly pricing. But, even though our price will be a set rate, you will want to calculate that set rate based on an hourly wage. Here’s an example: A one-bedroom generally takes two hours to fully clean, a two-bedroom takes three, a three-bedroom takes four, and so on. By hiring single cleaners, you can pay $25-35 per hour. For cleaning companies, $45-55 per hour is standard."
• "Beware of paying too low or negotiating hard to the point where the cleaner feels slighted. Cleaners will cut corners if they don’t feel valued. You get what you paid for. This is not an area to skim."
• Cleaner fee: "This price also needs to include laundry. Whether they do it at the property, take it home, or do it at a laundromat, it is the cleaner’s responsibility, and we don’t want items mixed with other homes’."
• "We recommend you have three sets of towels and three sets of sheets per bed, just in case the cleaners get backed up on laundry."
• "Depending on the size of the home, you may ask the cleaners to inventory the number of sheets and towels in the house and, if laundry is not taken offsite, to have them count it every time. This may sound excessive, but sheets and towels disappear, and it allows you to know which guests to charge. This is worth it, even if you have to pay a little extra. Your cleaner should also notify you when the house is low on supplies (toilet paper, trash bags, etc.) so you can order more."
• "A good standard to set from the beginning is three complaints, and you’re out."
• See app Properly, which is an "Turnover app for hosts to schedule cleanings, make checklists and find cleaners"
• Deep cleaning: "Another thing that helps in this department is having different cleaners service your property. If it is the same person every time, they may get in a groove and always do it the same way; another person may deep clean different areas."
• "Our cleaners save us both money and headaches, and for that, we are eternally grateful. We make sure they know how much we appreciate them by sending small bonuses fo $20-$75 here and there. We also make sure they get a holiday gift around that time of year. Never forget that you are running a business, and your cleaner is a large part of your success."

Chapter eleven: Furnishing

• "To decide whether you’d be best suited hiring out the furnishing of your rental, you need to ask yourself the following questions.
  • Am I the best person to do this?
  • Is my time worth doing something else?
  • Is this why I got into investing in real estate in the first place?
  • Would my money go further if I hired a professional to do this? "
• "Keep durability in mind, and it will save you money in the short term and in the long run."
• "We recommend flying out to visit your unit or hiring someone to do this every two years. Items will not last through tens of guests, so you must have someone checking on the property at least once every two years."
• "Also request that your cleaner deep clean the rug every four to six months if you do not allow pets, and after every guest if you do allow pets.
• "You aalso need to include the basics that will making living in this rental a pleasant and comfortable experience. We call this the ‘MTR starter kit.’"
• "Unlike a vacation-oriented Airbnb, you do not need to provide a week or more supply of paper products or coffee. You want to give just enough that they can get by for a few days."
• "Here is what we include in the MTR starter kit.
  • Three rolls of toilet paper
  • A small box of trash bags
  • One roll of paper towels
  • New sponge or dish brush."
  • "Two dishwasher pods if you have a dishwasher, or a small container of dish soap if your tenants will be hand washing
  • Two laundry pods if you have a washer and dryer either in the unit or on the premises"
• "Thus, we encourage you to offer cleaning supplies, including:
  • A multi-surface vacuum
  • A mop or Swiffer
  • A bucket with washcloths
  • A multi-surface cleaner to wipe down counter tops
  • Glass cleaner
  • Toilet bowl brushes"
• "We recommend providing everything you need to cook a meal from beginning to end (minus the ingredients) for the kitchen. This includes plates, bowls, cups, pots, and pans. Think of it as including everything you would need to cook a pasta dish:
  • A large bowl
  • A strainer
  • A pot
  • A pan
  • Tongs
  • A banking pan in case they want lasagna (or brownies)"
• "Kitchen basics also include olive oil, coffee, tea, sugar, salt, and pepper."

Chapter twelve: How to price your MTR

• "In Omaha, her one-bedroom units rent for $1,775 while other furnished one-bedrooms in her area rent for $1,000. Why? The biggest difference si the level of furnishings."
• "AirDNA is an analytics and research tool for short-term rentals that many investors sear by. You can use them to create and download market reports, and they have a pricing tool, AirDNA Smart Rates, that dynamically adjusts your pricing strategy (and tells you way)."
• "If someone has the gumption to ask for a discount, we usually reward them by giving something, like 10 percent, or working with them to find a good middle ground."
• "we set the cleaning fee a bit higher than our monthly clean rate ($10-$20 more), as this helps us cover stoccking supplies and gives us a buffer if there is a rogue diaster clean that you wan tto give the cleaner a little extra for."
• Security deposit:"Zeona charges $1,000 and takes the cleaning fee out of that when she refunds them."
• "To make it easy on her tenants, Savannah ost Julie Gates charges a $500 nonrefundable deposit to hold the space at the time of booking and makes all of her guests buy a $75 travel insurance policy. Instead of holding the $500 as a deposit that can be annoying to remember to reimburse, it is credited toward the first month’s rent."

Chapter thirteen: Listing creation and advertisement

• "Furnished Finder is a lead generator for potential guests,not a booking sie like VRBO and Airbnb. Thus, when guests find our listing on Furnished Finder, they contact us, and then we set them up with a lease. Then, we must manually go into Airbnb or Hospitable and block those dates to avoid someone double-booking."
• "Once you have four reviews or more, we recommend you choose ‘Strict.’ This allows the guest to have a full refund only if canceled within forty-eight hours of booking and at least twenty-eight days before check-in."
• Your own web site: "Remember that you will no longer have the protection of Airbnb’s or Vrbo’s $1 million damage protection, so make sure to draft up a solid lease, take a deposit, or require that the tenant purchase a travel insurance policy."

Chapter fourteen: Screenig your tenants

• "You can find out more by researching your local law and reviewing the Fair Housing Act requirments set by the Department of Housing and Urban Development (HUD), but you cannot discriminate against teanants or potential teanants based on:
  • Race.
  • Skin color.
  • National origin.
  • Religion.
  • Gender or sexual orientation.
  • Familial Status.
  • Disability.
    • You also must, as a housing provider, provide reasonable accommodations to those with disabilities to ensure your poperty is accessible and habitable. You can learn from HUD."
• Serice and Emotional Support Animals (ESA): "Even if your listing clearly states ‘no pets,’ know that these owners are allowed to bring their animals and do not need to warn you. Service animals in all places are not subject to pet fees, but no all states and localities require the same of ESAs. Check your local policies for more."
• Airbnb tenant requests: "We review the guest’s verification and read that other hosts had to say about them. If they do not have a profile picture, we do not accept them. If there are no reviews or negative reviews, we decline their request."
• Furnished Finder tenant requests: "We recommend setting up a call with potential tenant–not just communicating via text. It can be a quick ten-minute call allowing you to gather more information on the potential tenant."
• "Things to pay attention to during the call:
  • Are they negative? Do they complain during the first call? If so, they will likely to quick to complain about the unit or the conditions of their stay.
  • What kinds of questions did they ask? We are wedding out anyone who sound high-maintenance, unrealistic, rude, or aggressive.
  • Did they hesitate when you ask about pets, their contract length, or when you asked fo references?"
• "we ask all tenants from Furnished Finder or Facebook Marketplace for the following.
  • A photo of their driver’s license
  • Proof of employment
  • Email and phone number of a previous landlord"
• "However, if the tenant is staying for another reason or is not a traveling nurse, we do require a criminal background check from a source like My Smart Move or Experian, paid for by the tenant."
• "When checking references, we ask the previous landlord the following questions:
  • Does TENANT have any outstanding rent due?
  • Did TENANT pay on time every month?
  • Did TENANT leave your property in an acceptable condition?
  • Would you rent to TENANT again?
  • Anything else we should know about TENANT? Anything regarding noise disturbances or cleanliness that we should know?
  • Would you recommend we rent to TENANT?"
• "That way, if the cleaner finds signs of a pet present, you can collect the unpaid fees. Just like many long-term rentals, Sarah charges her MTR tenants a pet fee (nonrefundable) and a pet deposit (refundable). The fee covers the additional cleaning that a unit turnover after a pet mandates. The deposit only gets used if there is additional damage."
• "If a rug is chewed up (an incident that has happened to both of us), the cost of replacing the rug is passed on to the tenants–as long as the lease indicates that as an option."

Chapter fiften: Leases

• "If it’s a short stay–under three months–we direct them to book through Airbnb. Sure, you are losing out on 3 percent, but those are fees you can write off on your taxes."
• "Many online legal sites–such as Rocket Lawyer and LegalZoom–provide official contracts drafted by lawyers at a much lower fee than if you had one custom made."
• "We recommend using an attorney who is familiar with laws in that particular county when making changes to a legal document such as a lease."
• "We love websites like Apartments.com and Avail. Not only they are free to use, but they are also automated."
• "We prefer automated ACH deposit over Paypal, Venmo, or –god forbid–check by mail, as the funds are deposited directly into your bank account without any other steps required by you."
• "We prefer a deposit upon signing and requiring rent to be paid three days before moving in. Another option is to ask for a nonrefundable amount (around $500) up front, which is then credited to the first month’s rent. Then you can require that they get a travel insurance policy and not have to deal with the extra responsibility of holding on to the deposit."
• "To make it affordable and straightforward, we only charge $1,000 as a deposit instead of the equivalent of one month’s rent. You will want to have in writing how long you have, after the guest checks out. to return the deposit. Seven to ten days is usually sufficient and fair. You will also wan tot clearly define how the cleaning fee is paid."
• "Most of your tenants will be reserving the property sight unseen. What do you do if they don’t like it? Zeona requires fourteen days’ notice to cancel so that she has time to find a new tenant."
• "All of our leases continue on a month-to-month basis if extended beyond the lease term."
• "Clearly outline the trash day, pickup location, and the fact that it is the tenant’s responsibility to put it out and bring it back in."
• "DocHub. A Google software that allows for five free signed documents per month. If you have multiple Gmail accounts, you can get five per account per month."
• "Hello Sign. Offers a free plan option with three signed documents per month."
• "DocuSign. Has a free edition with cloud storage, as well as a variety of plan options."
• "After the lease is signed, we send the future tenant a link to Apartments.com to sign-up for automated rent payment. This link includes the security deposit collection as well as a move-in or cleaning fee."
• "Please look up your state’s rules around holding deposits."
• "Travel insurance independently covers the tenant, and you can take the policy fee out of the first month’s rent. For a $70 fee, for example, Generali Insurance’s travel policy covers up to $3,000 worth of damages to the unit. Avail has a partnership with Lemonade, an insurance tech company that uses AI instead of insurance agents and offers low-cost insurance options for both renters and homeowners."

Chapter sixteen: Management

• "When vetting your options, asks them what software and systems they use, as well as how their cleaners report and document damage and replenish cleaning supplies."
• "Be sure to ask how often they would inspect your property–monthly, quarterly, semi-annually?"
• "Ask to see links to other properties they currently manage"
• "Ask for references from current and past clients"
• "Ask if they work with out-of-state investors"
• "Be sure to ask how they will ensure communication is clear even from hundreds of miles away"
• Cleaner Contact: "Send this on day seven (for guests staying longer than fourteen days). We want to encourage the cleanest home possible and help our cleaner get business, so we share their contact information with guests."
• "Do not write ‘Let me know if you have any questions’ in your replies. Asking this makes guest look for questions they may not ask otherwise. You are not aiming to prolong the conversations. Instead, make your ad and house manual super thorough so guests won’t have questions."
• "If you do use a light property management software like Hospitable, we recommend only managing calendar and emails from there. You want to make sure that you don’t block dates directly in Airbnb and forget that on Vrbo those same dates are wide open!"

Chapter seventeen: Move-in and move-out

• "Medium-term rental tenants almost always book sight unseen. Similar to booking a short-term stay on Airbnb, guests do not have the option to tour the property first. Most traveling nurses wee house come in from out of state; thus, they sign a lease before seeing the unit."
• "In the meantime, if you had an issue with a tenant’s sky-high or out-of-line utility bill, your lease should protect you from this, and you can charge the tenant for the extra costs."

Arthors’ preferred vendors

• https://docs.google.com/spreadsheets/d/1KSm19eUGqCwsv6vFiiuS_oNNGfY7YKp65P5MBIHh–g/edit#gid=0