Big Town Real Estate

Big Town Real Estate
Midterm Rental Investment Strategy in Los Angeles
Photo by Freddie Kim, mid term rental owned/set up/managed by BTRE

Midterm Rental Investment Strategy in Los Angeles

Midterm rentals are defined as rentals of fully furnished properties, for more than 30 days and less than 1 year  (30-90 day rentals are most common). These rentals are typically listed on the same platforms as short term rentals (AirBNB, VRBO), but also have special platforms dedicated to them. According to Melanie Kershaw’s article The Local Investors’ Guide to Los Angeles Real Estate investment in Mid-Term furnished rental properties in Los Angeles and other busy Metro areas, has been made much simpler by the online platforms. Consequently, mid term rentals have become a very viable investment option in recent years.

Mid Term rentals are less often rented by vacationers, and most often rented by people in town for a specific purpose. Bigtown has acquired and currently manages mid term rental properties. Typical types of renters we see are people in town for a work project, people displaced from their homes for some reason (sold their home and are looking for another, rehabbing their home), people in town for medical reasons or to support family due to medical issues (this especially happens if you are anywhere near a hospital, as some our properties are). 

A properly run Mid Term Rental should generate at minimum 1.3x the rent of a Long Term Rental, and ideally the rent will be closer to 1.5x to as high as 2x compared to a long term rental.

Advantages of the Mid Term Rental Real Estate Investment:

  • Higher rent than long term rental;
  • Minimal management/turnover issues compared to short term rental: The management of a midterm rental is more similar to a long term rental than a short term rental. Tenants are there for extended times, so they expect to be on their own for house supplies/necessities of living (i.e. they are buying their own toilet paper and not asking you for it);
  • Non-Permanent Tenants mean, house is always:
    • In good shape, and good order; no need to worry about hoarders or a bad long term tenant trashing the place;
    • Able to be vacant in the event you want to sell it or use it yourself, or use it for any other purpose;

Disadvantages of the Mid Term Rental Real Estate Investment:

  • Vacancy can be an issue: you will not always get back-to-back tenants, there may be a gap, and the gap can be significant;
  • Location matters more than in long term rental: Long term rentals can generate strong returns in any neighborhood; mid-term rentals are more like short term rentals in that, they will struggle if they are in less desirable neighborhoods, and/or further from large employment centers. Mid Term Rental investors must be more selective of neighborhoods;
    • Good data is hard to find to analyze Mid Term Rentals. This is something that cannot be stressed enough- because this strategy is so new, there are very few (and some might argue, there aren’t any) established data sets on specifically these kinds of rentals. This makes picking Mid-Term rental markets part art form as well as part data analysis- which of course increases the chances of a sub-par decision (We are pretty good at figuring the markets out so far though.);
    • Management and turnover is less then short term rentals, but is still more hands on than long-term rentals;
    • Market Changes, and Stability: Mid Term rentals can be affected by certain forces such as:
  • Increased competition (more investors doing mid-term rentals);
  • Changes in the job market, or in specific types of job markets (Example, Travelling medical personnel boomed during the height of COVID, and slowed later);
  • 30 day rentals create legal tenancies, and tenants may acquire tenants rights: Like Long term rentals, people staying in mid term rentals may acquire tenants rights, and require eviction if they refuse to leave. Short term rentals do not have this problem.

At Big Town Real Estate, we can navigate you through all the ins and outs, both logistically and legally, of Midterm Rental Investment Strategy in Los Angeles. We not only have our own data from properties we have acquired and managed, but use cutting edge tools such as AirDNA and Mashvisor, which scrub rental data from the short/mid term rental platforms, which we can make available for the benefit of clients.

Sources

California Debt and Investment Advisory Commission. (2024) “LOCAL AGENCY INVESTMENT GUIDELINES” Retrieved from: https://www.treasurer.ca.gov/cdiac/laig/guideline.pdf

Los Angeles City Planning. (2019) “Home-Sharing” Retrieved from: https://planning.lacity.gov/plans-policies/initiatives-policies/home-sharing

Melanie Kershaw, (2022). “The Local Investors’ Guide to Los Angeles Real Estate” Retireved from https://belonghome.com/blog/local-investors-guide-los-angeles

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