Understanding Mid Term Rentals

Full Transcript Below

Intro
Hi. My name is Rod Khleif, and I’m the host of “The Lifetime Cash Flow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars and we talk about how they’ve built incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.

Rod
Welcome back to The Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif, and I am thrilled that you’re here. And I know you’re going to get tremendous value from the lady I’m interviewing today. Her name is Zeona McIntyre, and Zeona is an expert in the– I’m not going to say short-term rental in the mid-term rental space. And I know that’s not something we’ve really have– I don’t think we’ve ever talked about on the show. We’ve had an Airbnb guy on once or twice, but never mid-term rentals. So excited to get into this. Zeona, welcome to the show.

Zeona
Thanks so much for having me.

Rod
Yeah, let’s have some fun today. So why don’t you give us a little background, where you came from, why you’re doing what you do, and maybe bring us current.

Zeona
Yeah, so, you know, it’s not that different from Airbnb because that’s where I got started. Right? So back in 2012, I started with Arbitrage with short-term rentals. So I had a room come available. I had a roommate, and it was fully furnished with my own stuff. And I had heard about this Airbnb thing, and so I thought, well, let me just try it. If it doesn’t work, I’ll just get another roommate. Right? But it worked out so well that I rented out her room, and then I was renting out my room and just doing anything I could to be out of the house until I got more properties and finally could afford to buy. But the mid-term game came in for me around Covid times. And for people that are in the short-term rental space. In Covid, Airbnb allowed everyone to cancel. And so there was this mass exodus on our calendars where everything got canceled within just a few days, and it was months and months of cancellations. So we had to pivot. And for me, I saw that this could be an opportunity to have longer stays, people that needed more space, people that were coming in for relief work and pivoted in that space. And I haven’t really looked back since.

Rod
Wow.

Zeona
It’s a great space.

Rod
You mentioned the term Arbitrage.

Zeona
Yeah.

Rod
Honestly, full disclosure, I hadn’t heard that till a couple of years ago. Now, I know what it is, but could you please describe it for my listeners who haven’t heard it?

Zeona
Yeah, so Arbitrage is essentially subletting, right? It’s renting something and then re-renting it out at a higher rate. And so a lot of people have gotten into that space with Airbnb. It’s not my favorite because I love equity. Right? As real estate investors, we make money in appreciation and equity over time. And you don’t own the property, so you don’t get that.

Rod
Right.

Zeona
Yeah.

Rod
So mid-term is like 30 days or longer or what does mid-term mean specifically?

Zeona
Yes. Hence the book title “30-Day Stay”.

Rod
Oh, that’s right.

Zeona
So anything that’s over 30 days– no, that works fine.

Rod
Sorry, I forgot to mention that. She has a book called “30-Day Stay” that went out through BiggerPockets, which is a big deal because they don’t approve just anybody. So that must be an awesome book.

Zeona
Yeah.

Rod
So 30 days. 30 days or longer. Okay. Yeah. Hello, I knew that.

Zeona
No, you’re totally fine.

Rod
Please continue. Please continue.

Zeona
Sure. Yeah. So a short-term rental is anything under 30 days, and they often are, you know, four nights. And a mid-term rental is anything over 30 days, also furnished, but our average day is about 90 days. And the reason for that is that we get a lot of travel nurses, and they have three-month contracts, and they often extend out to six. So it’s just a lot easier to do a mid-term rental because you have less turnover, less expenses, less tenants to deal with.

Rod
So you’re looking for assets near a hospital or near a medical facility of some sort. Is that an accurate statement? Is that, like, your niche? Is that demographic?

Zeona
That can be. And it depends on our properties because I’m invested in five states, and so some areas end up attracting more digital nomads or business travelers, other areas, more nurses. But yes, for the Midwest, that’s a really good place. It just depends on who do these people want to serve and then where do they buy their properties based on that.

Rod
Are your assets all single-family homes, or do you have any multifamily at all yet?

Zeona
Yeah, so I’ve kind of done a mix of everything. I’ve done a lot of condos, actually, in the mid-term rental space, and a lot of investors don’t like condos, but actually, in this space, they’re really easy to manage because there’s just less to deal with.

Rod
Sure, you don’t have a yard. Right.

Zeona
The HOA, candles, a lot of things. You don’t have to worry about trash, which is a nemesis for short-term rentals, and we don’t have to do that. So condos work well. Multifamily is great and if you have small units, that works really well for nurses, like one to two bedrooms. But there’s another side of mid-term rental space that can be even more profitable, and that is displaced tenants. So people that have insurance loss claims, so maybe they had a fire or burst pipes or something in their property, and the insurance company pays you directly so you can make a lot more money. But those clients want to be in a single-family home, so it’s a little bit different depending on who you want to serve.

Rod
Well, that is a painful example because I just had a fire a week ago Saturday, burned down a building with 20 units in an asset we have in Nashville. Thank God nobody died. Only injury was a woman that jumped out of the third-floor window and fractured her knee, but she’ll be all right. But good Lord. Yeah. So, anyway, I was just in Nashville Monday checking it out and just blown away that nobody died or was seriously injured because it just was crazy how the devastation but anyway, yeah, sorry, I couldn’t let that go by without mentioning–

Zeona
No. So all those tenants can be placed by the insurance company and it probably will be a long time, right?

Rod
Oh, yeah. No, it’ll be a year to rebuild it. And, you know, we were actually in the middle of our CapEx project, so we had a lot of empty units that had been renovated, five or six or five or seven or whatever it was, and that building had been renovated. But out of the 13 that got displaced, we’d already placed nine or ten of them back in other units that we had, thank God. But yeah, I could see how that could be a real boon if you’ve got a home and you’ve got somebody in that situation, yeah, the insurance company will pay. If they’ve got insurance. They’ve got to have insurance, obviously, but if they’ve got insurance, it’ll take care of it.

Zeona
Yeah.

Rod
So let me ask you this. So, describe some of the markets that you’re in and why.

Zeona
Yeah, so I’m kind of all over the place, and I wouldn’t do this again. I think when I was starting in short-term rentals, I was sort of chasing the latest, hottest market, which if anybody subscribes to AirDNA or different sites that have statistics like that, data analysis, they are constantly putting out here’s the quarter’s best places to invest. Right? So over time, you hear about all these places and you go, oh man, maybe if I’m just over there, I’m going to do a little bit better. So I did a lot of that, hopping around, and I think now I just kind of want to go deep in one market. And the value of that is that when someone calls you like an insurance adjuster, you can say, yes, I’ll place them, I’ve got places. Right? So you’re much more valuable with five places than you are with one in that market. But the–

Rod
Sorry. Then you’ve got economies of scale as well, right? I mean, if you’ve got something that needs to be taken care of, you know, you got enough. You could probably hire a full-time maintenance person if necessary. But I mean, there’s– economies of scale that come into play. Yes?

Zeona
Absolutely. Yeah.

Rod
Okay.

Zeona
I think my favorite markets are the ones that I live close by that’s just always super convenient. But I live in Colorado and my market is very expensive, so it is hard to cash flow even with mid-term rental, which gets you more cash flow than normal. But I find that it works the best in the Midwest. So my latest venture was in Atlanta, and the reason for that market is not only are there good hospitals, universities, I was close to the airport with that one. But they also have a film industry that is booming. It’s the second largest outside of Hollywood, and film people often are in town for three months doing a project, so they need these shorter stays. Yeah.

Rod
So you’re in Denver. Is that where you’re at?

Zeona
I’m in Boulder. Yeah.

Rod
Boulder. Oh, boy. We made fun of people in Boulder. I lived in Denver for 30 years. We used to call you guys granola bars up there.

Zeona
Absolutely. I’m a full granola bar.

Rod
Yeah. Okay. I couldn’t resist. Sorry. But, yeah, I went to high school in Denver and, you know, I had 500 houses in Denver at one time, which I wish I freaking had now. But we won’t go down that rabbit hole.

Zeona
Appreciation.

Rod
Yeah. But anyway, you like Atlanta. That makes good sense. Now, is there a type of– I mean, you know, obviously this is a multifamily podcast.

Zeona
Yeah.

Rod
So let’s speak to people that have some multifamily assets or thinking they may want to try this in the multifamily space. What suggestions would you make that they look for in unit size, in location, you know, maybe transportation, whatever. What’s relevant as it relates to this demographic that you’re leasing to?

Zeona
Yeah, so multifamily works really well with small units, so one to two bedrooms are the best, and you’re going to be targeting more of those nurse or digital nomad clients. And so what I find with the multifamily people is that they love to have a few that are still long-term rentals. So you’re getting that monthly, consistent income and you know it’s coming in, but then you can add so much more. I mean, sometimes people do twice their market rate for a mid-term stay, and so that brings in so much more cash flow because sometimes the numbers are tight and people want to make a little bit more. So it can be nice to test it out with a few of your units and then see if you want to transition your whole building.

Rod
What does it cost to get a one-bedroom unit ready with the furniture and everything? Just rough shoot-from-the-hip kind of a thing?

Zeona
Yeah. So a one bedroom, I’d say probably around 7,000.

Rod
Okay.

Zeona
And that’s just if you’re doing it yourself. And then if you’re doing two bedrooms, maybe a little closer to nine, something like that.

Rod
Okay.

Zeona
Yeah.

Rod
So seven to 9k, and then– I mean, it’s Vrbo. It’s Airbnb. You know, you market it everywhere, I assume. You just put it out there everywhere, yes?

Zeona
Yeah. So there’s also a website called Furnished Finder, and they were born out of the traveling medical professionals, and now, they’ve actually– I was at a conference just last week where the CEO was there and he was saying, it’s funny, but 50% of our travelers are no longer medical professionals. There are a lot of people hearing about their site, and so they get a lot of relocations, which can be great. And then, you know, students and different digital nomads, just the whole digital nomad trend has really come up since Covid. So before Covid– yeah.

Rod
I’m sorry. I guess I just want to be clear. I’m thinking when I’m visualizing a digital nomad, it’s somebody that’s online, they’ve started a Shopify thing or they’re some sort of a thought leader or influencer or whatever, or just don’t work in an office any longer and they just want to trap– like my daughter, would love to live in Japan and do what she does, but I don’t understand how that translates to mid-term rental versus you know– so these people just don’t like to be any place more than three or four months. Is that it? Is that the dynamic or– please explain.

Zeona
Yeah. So what I was saying is that before Covid only 7% of the US workforce was able to work from anywhere. After Covid, it was more than 42%. And so even if some of those people are getting called back into the office, it’s not all of them. And so at the beginning of Covid, I was seeing this trend where people were saying, okay, I’m going to be in Denver for a month, and then I’m going to Austin, and after that, I’ve got New Orleans, and then Maui. Right? So they’re just kind of hopping around for a month at a time. Now, I see people doing it a little more slowly. Sometimes they’re three months in a place. But I think this is also a trend that is very of the new generation. Right? Gen Z, they’re really wanting to experience the world, and they don’t feel like they have to be in one place. They don’t necessarily need to own a home, so they’re ready to just kind of travel the world and work from anywhere. So it’s just a little bit of a new way.

Rod
So if you were to put them into an age category, you said Gen X or Gen Z, whatever. What is the age range for those digital nomads?

Zeona
Yeah. Well, man, I see it all over the place. But I would say that Gen Z is probably under 30 right now. Yeah. So probably somewhere in there between like 15 and 30. But that is just their trend. But I’m seeing people that you know, come up from Texas to Colorado because their summers are really hot. Right? There’s just a lot of different preferences. So, yeah.

Rod
Interesting. So maybe just pop up for three months and stay in a furnished house. Now, in the mid-term rental space, are they taking care of their own laundry and stuff? Or do you have a different– you know, I’m getting a little micro with you, but who keeps the place clean? Are they responsible to return it in the same condition? Are you cleaning it during their stay? Or is it just before they come in and after they leave?

Zeona
Yeah, I just do those end marks because I don’t really want to deal with paying for someone to be in there. But what I do is I have an auto message that goes out on day seven when the place is probably starting to look a little messy, that says, you know, here’s my cleaner’s information just in case you want to hire her. And she’s at this rate. And I’ve known that a lot of people have hired her.

Rod
Interesting.

Zeona
So I think that’s a win-win for her, but then I don’t actually have to pay it out of the rental income.

Rod
Okay. So I know you travel about half the year. Your bio says you’ve been to 47 countries. Holy cow. How are you able to manage your mid-term rental business remotely? I mean, what does that look like? Just describe what’s involved. I mean, obviously, you’ve got to probably be there to set it all up and position everything and have it set to go and have the locks that are digital and all that business. But once you’re up and running, what does that look like?

Zeona
Yeah, so many of our tenants come from out of town, so they’re not necessarily needing a tour of the property. So everything happens virtually. We communicate virtually. We sign our leases just with an e-signature. We kind of deal with everything either over the phone or email, and it’s just pretty easy. So there’s the coordination of the cleaner, but they’re on the ground. And if I have a handyman that I need to do something fix it type, we’ll call them. But otherwise, I don’t need to be there. Actually, right now, I’m in Sayulita, Mexico, on a surf trip for a month.

Rod
Wow.

Zeona
Yeah, we’re just kind of on the move. So we’re doing the thing that I’m making money off of. Right? We’re in somebody else’s furnished home right now, for a month.

Rod
No kidding. Wow. Very cool. Very cool. I know you’ve got your book “30-Day Stay”, which I guess goes into some detail as to what this business entails, and I assume it’s kind of like a step-by-step kind of a thing? Is that accurate?

Zeona
Yeah, we wanted to do an A to Z, so I wrote it with someone else, Sarah Weaver. And we’re both female investors, so we have a lot of case studies from our own experience, but also a lot of other female investors in it, and so we try to make it story heavy, so it’s a little more interesting than dry. But we really wanted someone to be able to pick up the book, never knowing in real estate investment, and be able to buy something by the end of it. So it is really thorough.

Rod
Okay. And is there a particular type of person that you’ve seen in your experience working in this particular niche of real estate that does better than another? Is there a personality that does better? And forgive me, maybe it’s a naive question, but I’m just curious, because, like, in the multifamily space, there are different personalities. There are lots of different hats a person can wear. I’m just curious if there’s a type that does better in this space.

Zeona
Yeah, I mean, it’s still hospitality, but less so than short-term rentals. I think short-term rentals have really turned into boutique hotels the amount that is required of you. And so these tenants are a lot more self-sufficient. So that’s nice. But you are still providing a home that needs to be beautifully decorated and professionally photographed. And so someone who has an eye for design, I actually find that a lot of stay-at-home moms love this type of work.

Rod
Wow.

Zeona
I don’t necessarily think that you need to do it. If you’ve got a bunch of long-term rentals and you’re living off that income, don’t go and furnish a property and make a bunch of work for yourself. But if you’re new and scrappy and you’re wanting to make way more money on your return on investment, then yeah, get into it because there is more there for you.

Rod
Here’s a question. I’ve heard, like here in Sarasota, Florida, you can’t do short-term. I mean, the regs don’t allow it. The hotel lobby here is very strong. Does that impact mid-term rentals? Because I think the timeline here is it’s got to be 30 days or longer. So I mean, I think mid-term would work here. I’m not sure on this. I’m just as secondhand in my head. But can you speak to the regulatory environment a little bit?

Zeona
Well, so that’s the beauty of it is that anything over 30 days is generally lumped into a long-term rental space. And so as more and more places are regulating short-term rentals, we’re in this gray area that people don’t realize. Right? So that is where it’s been really born from. But Florida is a little bit different. So Florida sees anything under six months as a short-term rental and they tax you accordingly for that. Now, Sarasota might let you do it after 30 days, but they’re still going to give you a little bit of a tax and most other states don’t do that. So, thank you, Florida.

Rod
I see. Interesting. Oh, that’s unusual. Typically, it’s the blue states that are taxing the hell out of you, but we won’t go down that rabbit hole. Anyway. So what are some of the hurdles that you encounter in this business and maybe some of the lessons that you’ve had? I call them seminars you know, and some are more expensive than other seminars, but we don’t call them failures. So only a failure if you don’t get back up or don’t get the lessons. So talk about some of the times you got your nose bloodied or some things you’ve encountered in this very unique business.

Zeona
Yeah, well, my most recent one was we had a burglary at one of my places and of course, this doesn’t happen with a long-term rental unless maybe you’re renovating. Maybe it does happen, but they have furniture in it. So people wanted to steal our furniture, which sounds unlikely, but it happened. So I have now learned to put cameras up on my property. So that was a fun lesson.

Rod
Oh, wow.

Zeona
Yeah.

Rod
Yeah. I’ve heard, that’s very common in the short-term rental space. You know, they’ll throw a Nest camera out the front and, you know, if somebody’s having a blowout party, they’re able to see and deal with it you know, or if something happens. So I think that’s probably a good move anyway, regardless. We put cameras in all our assets. Does anything else come to mind?

Zeona
Yeah. You know, I think the thing most people struggle with is furnishing, right? That’s the hurdle that if you’re in a long-term rental space, you just don’t know how to do that. I think people fail in the fact that they say, well, let me just get everything from a garage sale and I’ll just put it together, or some random of furniture I have sitting in my, you know, garage or storage unit. That’s not really going to work today. It might have worked five years ago, but now it’s just so competitive in the Airbnb space, in general, that you need to have really beautiful, cohesive, professionally designed spaces. So you definitely want to make that investment upfront, but it doesn’t have to be terribly expensive.

Rod
You know, I’ve seen themes, of course, you see some really cool, like treehouse stuff and stuff like that, but do you do any theme-type stuff in any of your assets?

Zeona
We do a little bit. I’d say it’s more cohesive with the theme. Like we’re not doing crazy game rooms or huge murals or things like that. But we have a place in Colorado Springs and so we kind of leaned into more of a cowboy modern theme and it’s really tasteful and beautiful rather than hokey. But yeah, you do kind of see it runs the gamut online. You can see all kinds of weird stuff for sure. Yeah.

Rod
Yeah. Well, you know, I normally have a whole repertoire of questions to ask and they’re typically very often mindset related. I mean, lifestyle related. And I think you’re the epitome of a lifestyle component. I mean, you’re traveling all over the freaking world. You’re in Mexico right now and living life, living large, rather. I mean, did you know this was going to provide that, or just kind of happened?

Zeona
Gosh, when I started in 2012, I definitely didn’t know that. I think I always had this idea that, oh, I wish I was like a programmer or something. I wish I was really tech-savvy and I could work from anywhere because that’s what it required back then. But then Airbnb came into my life while I was holding this vision of, man, I would love to be able to travel and do my work from anywhere. And so at the same time, it just kind of happened. And one day, I was standing in my kitchen and I realized, wow, I am already doing that thing that will let me accept reservations from the beach and be anywhere in the world. So yeah, even though I’m not that tech-savvy, I am here and I’m doing it. So it’s allowed for us–

Rod
Wow.

Zeona
Yeah.

Rod
Did you have any mentors on this, or did you just kind of just learn it all yourself?

Zeona
Yeah, back then it was really early days. There weren’t books on it. There weren’t, like Instagram and TikTok back then.

Rod
Right.

Zeona
So I had to fumble around and learn a lot the hard way. But now in the space, there are so many other people doing it, and so it’s really fun when I go to conferences or other people I’ve met online. We now use each other as resources, and it’s a really supportive community. I think it’s great.

Rod
Yeah. You know, I remember I was on Clubhouse, I think it was, and there are some guys there that were talking about this, and it seemed like everybody knew each other. Well, listen, guys, get her book if you’re interested in this. It’s “30-Day Stay”. Is that on Amazon or do they have to do that through BiggerPockets?

Zeona
Sure is.

Rod
On Amazon. Okay.

Zeona
I mean, BiggerPockets is the best. Do whatever you like.

Rod
Yeah. Of course. You know, it’s funny when I started my podcast, they were always ahead of me on the rankings in real estate, I was always second behind BiggerPockets. But anyway, I can still say, which is the truth. I had the largest commercial real estate, and they were primarily single-family, but I know all those guys really well. Well, listen, I appreciate you coming on, Zeona. This is different than what we usually have, but I think it’s definitely valuable. So I appreciate you coming on and sharing your knowledge.

Zeona
Thank you so much for having me.

Rod
All right, take care.

Outro
So one other quick thing. We encounter so many people that are frankly frustrated. They’re looking in the mirror and they’re frustrated that they haven’t been able to escape the rat race. They haven’t been able to build cash flow to the point where they’re able to have financial and time freedom with their families. And maybe they see other people buying real estate and creating incredible cash flow, and they think, well, it’s just scary. You know, buying apartments is intimidating. And I get it. See, that’s why we created our Warrior Mentorship Program. They’re our coaching students, and they’ve had extraordinary results. My students, I’ve been teaching about five years and own upwards of 140,000 units now that we know of. Right? And we feel like it’s just getting going. Now, we’re looking to grow this group and really take it to the next level and honestly believe that the greatest transfer of wealth could be upon us right now with this current economic environment. Everything’s going on sale. So we’re looking for people who want to follow a proven framework really like a blueprint or a map, literally, step by step. And then they’re able to leverage our systems and our incredible network to raise money and equity, to find deals and close those deals and build partnerships really nationwide. So if you’re interested in finding out more about how you can become more in our incredible network and take advantage of the unbelievable opportunities that are upon us, you can apply to my Warrior Mentorship Program by texting the word “CRUSH” to “72345” or you can go to “MentorWithRod.com” and what we’ll do is we’ll set up a call so you can check us out and we can check you out and see if it’s a fit. Now, again, you can go to “MentorWithRod.com” or text the word “CRUSH” to “72345” to apply and we will speak soon.