Investing in rental properties can be a lucrative venture for beginners seeking to generate passive income and build long-term wealth. There are various types of rental properties available, each with its own set of benefits and considerations. Let's delve into the basics of investing in rental properties, including long-term, mid-term, and short-term rentals.
Embarking on the path of rental property investment can be both exciting and rewarding. In this guide, we will navigate through the diverse landscape of long-term, mid-term, and short-term rentals, uncovering the distinct benefits each type offers.
What sets this guide apart is the firsthand expertise provided by the Wehnes Group Real Estate team. With a combined experience of over two decades in the real estate industry, three members of our accomplished team are also seasoned investors who have successfully built and managed their investment property portfolios. Laura Wehnes, Laura Schulte and Nancy Slade graciously share their insights, strategies, and invaluable advice, providing you with a unique opportunity to learn from those who have not only mastered the art of real estate investment but continue to thrive in it. Join us in unraveling the possibilities and intricacies of rental property investment – your adventure starts now.
Long-term rentals involve leasing out properties to tenants for extended periods, usually a year or more. This type of investment offers stability and consistent cash flow, making it an attractive option for beginners. “These types of properties are great to start with because they can be managed on your own and require less time to take care of it, once the initial set up is complete and you have your tenant move in,” says Laura Wehnes, owner of Wehnes Group, who owns multiple properties, including long- and short-term rentals.
Key benefits include:
Steady Income: Long-term rentals provide a reliable monthly income, which can help cover mortgage payments, maintenance costs, and yield profit.
Less Management Intensive: While there are responsibilities associated with property management, long-term rentals typically require less frequent attention compared to short-term rentals.
Tenant Stability: Long-term tenants tend to stay for extended periods, reducing the need for frequent turnovers and vacancy periods.
Convenience of Location: Typically, when you start out, it is best to find a property within 10-15 minutes of your home so it is easy to take care of and you can understand your market pretty quickly.
Mid-Term Rentals (Corporate Rentals or Furnished Apartments):
Mid-term rentals involve renting out properties for a period ranging from a few weeks to several months. These rentals often target business travelers, snowbirds, students, or individuals in need of temporary housing. Nancy Slade, agent and marketing specialist with Wehnes Group, owns a vacation condo in Florida and offers both short- and mid-term stays. “Alot of people who live in colder climates love spending their winters in Florida. ‘Snowbirds’ like to come and stay anywhere from 1-6 months. They make fantastic guests and usually return year after year.”
Higher Rental Income: Mid-term rentals generally yield higher rental income compared to traditional long-term rentals.
Flexibility: Landlords can adjust rental rates more frequently to match market demand, potentially maximizing profitability.
Partially Passive Income: While there might be more turnover than long-term rentals, mid-term rentals still offer a level of stability and less frequent management compared to short-term rentals.
Short-Term Rentals (Vacation Rentals):
Short-term rentals involve renting out properties for brief periods, often a few days to a couple of weeks. This type of investment has gained popularity with platforms like Airbnb and Vrbo. “When choosing a property for a short term rental, you will want to do a lot of research to determine a location, your demographic that you will be attracting, and the amount of competition in the area. Many cities across the US are regulating short term rentals and taxing them differently so before you start you will want to check in with the local municipality to see if it is an option and what other costs you might incur,” said Laura Wehnes.
High Income Potential: Short-term rentals can yield significantly higher rental income on a per-night basis compared to other rental types.
Flexibility for Owners: Property owners can use their units when not rented out, offering personal use opportunities.
Location Variety: Short-term rentals can be located in popular tourist areas, urban centers, or other attractive locations.
Agent Laura Schulte and her husband, Dan, have owned Murphy’s B and B in Hermann, Missouri for three years. “If the property is in a town or area you love, an investment is a great way to open up your future as you can always use that property as a possible place to retire - which is what we planned.” When it comes to short-term rentals, Schulte adds “Don’t buy just to buy. Buy so your love of the property or area is infectious for your guests!”
Key Considerations for Beginner Investors
● Market Research: Understand local real estate market trends, demand for rental properties, and potential rent rates.
● Financial Analysis: Calculate all costs, including property purchase, maintenance, property management, and potential vacancy periods to ensure positive cash flow.
● Property Management: Decide whether to manage the property yourself or hire a property management company, especially for short-term rentals that often require more frequent attention.
● Regulations: Be aware of local regulations and legal requirements related to rental properties, including zoning laws and short-term rental regulations.
Investing in rental properties offers a range of options for beginners, including long-term, mid-term, and short-term rentals. Each type has its own advantages and considerations. Long-term rentals provide stable income, mid-term rentals offer a balance between stability and higher income, while short-term rentals present the potential for high profits and flexibility. As you embark on your rental property investment journey, it's advisable to conduct thorough research, financial planning, and consider your goals and resources.
For tailored guidance and expertise in investment properties, consider consulting with Wehnes Group Real Estate. Our experienced professionals can provide valuable insights to help you make informed decisions and navigate the complexities of the real estate market.