Background

As MTR (Medium Term Rental) becomes more popular, many hosts are somewhat lost in pricing their rentals. For other investment strategies such as STR (Short Term Rental) and LTR (Long Term Rental), there are plenty of tools to price the rentals. AirDNA is a pretty well-known tool for pricing short-term rentals. Similarly for LTR, local governments regularly collect and publish data and you can find them easily. But life is not so easy for an investor dabbling in MTR.

Why Is Pricing MTR Difficult?

While there are a number of reasons make pricing an mid-term rental difficult, we will discuss the top three reasons that we think it is difficult to price an MTR.

1. Few Reference Points: While MTR is becoming more mainstream, it still has a very small market share compared to LTR or STR. So there is just not enough data for a tool to be able to meaningfully price. It is the biggest challenge for anyone attempting to write down a simple formula.
2. Emerging Market: The price of a good or service is generated by the demand in the market. MTR is an emerging market, so both guests and hosts do not have a well-defined expectation for how much a mid-term rental should cost per month.
3. Hospitality Level: A traditional 12-month rental (LTR) rarely comes furnished. On the other hand, short-term rentals provides hospitality that’s equivalent to a hotel. For MTR, things vary significantly - some hosts provide a mattress, bed, and desk, while others will provide even towels. Due to this, a mid-term rental could cost a tenant significantly different amount depending on the amenities provided.

MTR Pricing Factors

• Location, Location, Location: If your property happen to be close to a hub for MTR guests, such as hospitals, or universities, your numbers are going to be higher. Because the demands almost always exceeds supplies in these locations, you can even get away with not having a picture-perfect place while making a competitive return on investment.
• Configuration: Tailoring the property configuration to suit the target demographic can enhance rental amount and occupancy rates. As the bulk of mid-term tenants tend to be an individual or a couple, usually 1 bedroom or studio with private bathroom will have the highest occupancy rate. If you have a larger property, you should definitely consider renting out room-by-room, unless you are targeting temporarily displaced families.
• Crime and Safety: A lower crime and higher safety rating of the neighborhood, the better you can get your MTR. There are a number of resources online, which you should utilize before purchasing a property.
• Amenities: Amenities will drive up the pricing to a certain threshold. It is very useful to understand your guests need from their perspective - they dont want to bother with having their name on the electric, utilities bill etc. On the other hand, cleaning everyday is something usually not expected of you as a host either. Having luxury amenities will generally keep the prices higher. Budget the amount that you want to spend on furnishing on your MTR to balance expectation and effort required on your part.

How To Estimate MTR Rent

From our research as of Q1 of 2024, a host can expect to make anywhere between 1.1x-1.5x as a 12-month traditional rental. If you happen to live in a large city where medium-term rental is somewhat common, you don’t have as much a problem. You could simply find a similarly situated property as yours and price it within that range.

Sometimes you are not that lucky so you may not have access to reference data points. In that case, find LTR prices with a similar configuration and start with around 1.15x the average rent as a baseline. As you iterate through guests, you can continue increasing the prices slightly until you hit a ceiling. Take seasonality into consideration as well. For example, if you have a property in Wilmington, North Carolina, a town with access to the Wrightsville beach during the summer, you can expect to fetch more during the summer.

RentMonthly Rent Estimator Tool

As of this writing, we do not know of a reliable tool that could give you solid numbers so, the team at RentMonthly is busy building a pricing tool. We are using a machine-learning algorithm, which takes a number of features into account and try to predict prices for an MTR. Stay tuned for more!