The Rental Strategy That Survived Every City Crackdown, with Jeff Hurst

24:08I talk to a lot of people who are looking for a rental property and often they are looking for a long-term rental that they would like to own. But I often speak to people who want to own a long-term rental, but they want the option of occasionally renting it out for less than 12 months. They want the option of either short-term or midterm usage, particularly if the purpose is that it's a flex property. I speak to a lot of people who say, you know, 10 years from now, I might want my aging parents to live close by, but prices in my neighborhood are going up quickly. So I just want to lock in that home right now so that I've got a home nearby so that that option is available.

24:53Yeah. Given what you said about HOA regulations, what should a person be looking for if they are reviewing HOA documents during the home buying process and they want to look for any red flags or any hints, indicators that there might be future HOA restrictions that would inhibit them from being able to do this? I think the I mean, the first thing is like, it's a great step to just be sure you read and understand how the HOA functions. You know, a lot of them don't. A lot of them have been formed, but don't exist or haven't had regular meetings. And so they eventually go defunct. If there is something against it, it's usually very black and white.

25:33And the HOA rules as to what you can do, I think, in terms of like, is there a fear of what could happen in the future? I don't think that's a good reason not to be investing in it today, especially if you're in a place that already has short term legislation on the books at a city or state level. because that starts to give you the protection, actually. You know, if they've written a law that says nothing under this, then you can very reasonably expect that everything over that is going to be in bounds. And then my biggest advice is to stay active and get involved with the HOA. Try and understand it.

26:02My experience with it so far, unlike the short-term side, where people often viewed it as a community nuisance, is that people really view it as a community asset. And so if you think about the use cases, someone's plumbing burst or the roof caught on fire, or they've got an insurance claim, they're your friends. Like it's a neighbor who needs a place to stay in your neighborhood remodeling their house. They're building a new house. And so it feels like a community asset in that sense, you know, and what you're describing of aging parents or maybe it's parents that want to be close to their new grandkids.

26:29It's an asset to be able to have a home that might be more affordable and nearby. And it probably doesn't need pickleball and all the glamour and all the parking spots and those sorts of things. So I actually expect this will start to have momentum as to how come more of the long-term rentals aren't furnished and available on a more flexible term because they address a lot of real needs for a community, including being able to have liquidity when you're buying or selling a home because a lot of people don't sell their home because they don't know where they're going to go. And if they could know they could get into a short-term furnished, mid-term furnished rental, they'd have more flexibility in how they actually entered and exited assets.

27:05Okay, so review existing HOA documents and get involved in HOA. And I saw this in my own condo in Vegas. In some cases, there is activism among residents to increase restrictions. But that's not reflected in the existing documents yet. How would a home buyer know whether or not there is activism amongst residents to increase restrictions and therefore an imminent risk of greater restrictions? Yeah, I think the best advice on topic is don't wait to get involved with the HOA until you are part of the HOA. Reach out in advance. And I mean, HOAs, they're very frequently, almost always volunteer-led.

27:49Like they're not looking for a fly in the ointment. Like they're not looking for the headache of if they know there's a movement afoot to restrict something, they don't want a property to turn over and immediately become that thing. And so part of the get involved piece is like you can reach out before you buy it. Hey, this is what I'm planning to do with this home. You know, I'm planning to rent it out on a 30 day plus basis. I think most of my stays are going to be three or more months and traveling professors because I'm close to this university and just kind of put the feeler out there. And it's a good way to start the conversation and potentially understand, hey, you should know your neighbor is the most active person on why we should have restrictions like you might want to knock on their door.

28:28And so I think there's some of this which is just like getting back to some of the neighborly civility of do a little bit more of the primary research around make a phone call, knock on a door and ask before you actually buy the asset. Because once you buy it, there's not a lot of going back if you find out you're in the eighth inning of a movement to add restrictions on the exact use case you're trying to do. That makes a lot of sense, actually. And that would have behooved a lot of my neighbors in my Vegas condo because the salespeople, it was sold by the developer, the salespeople said, hey, look, there are no short-term restrictions and use that as a selling point.

29:06So lots of people bought it for the express purpose of turning it into short-term rentals. And then, of course, there was this burgeoning movement among existing homeowners that said, we hate this. Soon the HOA changed their policy. And then all of these people who had just purchased a home. It's really hard because, you know, again, when you look at the economics of long-term and short term. If you underwrite something as a short term rental, it's very hard to make the same returns as a midterm or a long term. Like you just have such a higher ADR. And so if you're assuming you can rent a condo in Vegas, you know, maybe 200 nights a year or 150 nights a year at a high rate, the business case really stops working if you're just completely unable to do it.

29:48My advice to people is always underwrite it as a long term unfurnished rental. If you can eke out a gain on that, then you've got the potential to furnish it and have it be a monthly rental and maybe make 20 to 30 percent more cash on cash return. You know, you often make almost 50 percent more monthly rent. And so you can pay the furniture back pretty quickly and have a much better investment than long term. But if you get trapped into thinking you have a short term and then it's not possible, it's very hard to get back to that summit. Yeah, that's exactly what I tell my students as well. For the purposes of making those estimations, how would you estimate vacancy slash occupancy on a midterm?

30:25Yeah, it is trickier just because there's not as much data out there as there is in the short-term world. I do recommend people still rely on some of the short-term tools to understand whether it's AirDNA or Price Labs. There's a lot of quality information out there that'll help you understand what vacancy looks like. What we typically see is we encourage people to understand, okay, go build the price points for what a midterm can be. That's kind of like, all right, start with the State Bridge Suites or the Extended Stay America. Like how much value are you creating versus their price point? What does it look like for a long-term furnished?

30:56And then what does it look like for a short-term on Vrbo or Airbnb? And if you can calibrate your nightly rate, then you can back into how much vacancy can I afford versus being a long-term rental or versus being a short-term. What we usually see is people's vacancy, you know, the really high-performing ones, it's like 20 days a year. Like there's almost no vacancy. because the lease terms are, give me 30 days notice before you move out. So you've got 30 days to find your next renter. And you can usually manage that pretty close. But there are places that are much more seasonal. You know, if you think about Michigan in particular, you may run it as a short term in the summer and a midterm in the winter.

31:34And then you've kind of got a hybrid model. I would typically say expect if you're getting started one to two months of vacancy to give yourself a little bit of cushion and really do the diligence around like, who do you think is going to stay there though? And how do you prove out that there's enough demand in your area? And that's the tools I already mentioned. Furnished Finder has a tool to help you understand who's staying in your zip code, who's staying in your city, and you can access that. And that'll help you just build the profile for it. And you don't have to buy the furniture until you actually get your first tenant, which is another interesting thing of like, if you've got an unfurnished place, you're thinking about getting out of long-term, then advertise it that I will furnish it for the first tenants.

32:12And a lot of people find that really compelling because they know they're going to have newer furniture and they might prefer bunk beds instead of a full bed in the second room. And it gives them more flexibility to get exactly what they need. Would you show photos of an unfurnished place? I mean, it seems as though from the guest experience, that would be a little disconcerting. Yeah, there's two different approaches. I'd say the most common is people will say, we have a furniture allowance of$8 ,000 and we will work with you to spend it. And then they might use AI to actually generate. Here's what we think it'll look like based on an$8 ,000 budget.

32:47And so you've got kind of two sets of photos in the listing. One is empty and one is basically staged. And there's lots of software solutions that'll help you show what the staged home looks like. Right. Yeah. It's common even in home sales now that many of them are AI staged. Absolutely. Right. When furnishing a home, where are the areas that owners typically overspend? I think that for a midterm rental, the overspend is because they're treating it like a short-term rental. They're going to have the 60-inch TV instead of the 40-inch TV, and they're going to have Sonos everywhere, and they will have invested in all the extra artwork, and they will have invested in all of the extra appliances you might need for entertaining a large group on Thanksgiving, whatever it feels like.

33:30It's just that they're treating it like a leisure destination instead of like a place where someone's going to go stay for three months while they work at the hospital. I don't think there's a very common, it's exactly this. The places they underinvest are almost always core functionality in the kitchen and quality of bedding. The primary use case of a midterm rental is often sleep. So you really do need to have a well put together, like, is there a noise machine? Do you have good blackout shades, quality of mattress, quality of bedding, because people are going to be in there 90 to 100 days, it's not like a short term.

34:03And we're like, oh, the mattress is fine for three nights. You want it to actually be great. Right. That's probably the top reason someone's going to be there. How do things change when there are kids or pets in the equation? There are less frequently kids as there are in short terminals because it's less of a leisure destination. So when you think about those use cases, again, corporate travel would rarely involve kids. You know, it's typically one person, you know, sometimes two. Traveling health care rarely involves kids. So that's more than half the use cases already. Relocating families often involve kids and they very often involve pets.

34:36Traveling with pets and midterm rentals is as or slightly more common than short term. And really a lot of it's because if you're traveling for three months by yourself, you're lonely. Yeah. Like you actually want to come home and have your dog. And so the importance of a fenced yard probably goes up a little bit. The importance of being flexible for pets goes up a little bit, in particular, whether you want to allow some pets like a breed restriction basis. You know, there's a lot more financial yield available if you accept pets. On the kids front, I think the most important thing is to think through what are the handful of things that help a kid feel welcome at the beginning.

35:09You know, in particular, a lot of people are doing this for insurance claims and displaced families. And you just kind of think about like, what if an eight-year-old just lost the house they're used to being in? What can make it feel a little bit more special when they get here? Is it board games? Is it some sort of cheaper game system? Is it something that just helps them, you know, have that, oh, I want to be here. I get it. Because we hear a lot that the kids end up really liking the mid-terminals. Oftentimes they're a little bit cozier and it's just kind of a different experience. But you do want to have some things that really pull them in.

35:40And a lot of it can be something that you do specific for a family that's coming as opposed to always on, you know, change out the comforters on the bed, you know, ask the family that's coming. Is there something the kids are really into that you can accommodate? That's, I'd say, a very cost effective give to help them have a wow welcome. Where do you see the future of midterm rentals going, especially as short term gets crowded out and regulated away? Do you see what was once short-term increasingly turn into a midterm market? I see it from both sides of the real estate spectrum. My optimism is that if people realize there's a different way to live, to invest, and to prosper as a tenant, living flexibly, that it helps solve a housing crisis.

36:27You know, we're 10 million units of housing short in the U.S. And in order to solve it, you basically need more entrepreneurs to believe they can make money solving it. And I think what's happening right now is short term has gotten to a place where people don't believe they can solve it that way. And it was a little bit robbing Peter to pay Paul of like taking long term inventory off. Right. What this creates the opportunity for is I think that some long term inventory will start to come into midterm and you'll see more duplexes and quadplexes get built. I think you'll increasingly see co-living situations.

36:56I'm a big fan of PadSplit and what they're building because there's not really a room shortage in the U.S. There's a housing shortage. If more people are renting out a room, it's incremental economics right off the bat. And so I think you'll start to see less system vacancy on the long-term side and more housing come online. I don't think short-term rentals is going to shrink from where it is today. I think it's kind of plateaued and found its new normal. What I expect to see happen is more and more of the short-term operators will actually have hybrid strategies. They'll be short-term for part of the year and mid-term for a part of the year where they have a harder time basically putting in the effort to chase short-term stays.

37:34You know, the Michigan example, I think, is a good one. And you start to find those occasions to where maybe six months of the year, I'm actually looking for monthly tenants and taking a lower nightly rate. But six months of the year, it makes sense for me to be a short-term rental. And it does start to solve more of the mobility issues there and just drive higher occupancy across U.S. housing, which hopefully drives more investment across U.S. housing. Right. That particularly makes sense for seasonal destinations. You know, Florida in the summer versus Florida in the winter. The demand is, you know, there's huge variation in the demand.

38:04There are also cases. So I'm thinking of a place like Atlanta that we're normally demand year round would be relatively consistent. Right. There's there's not huge seasonal variation. But every now and again, you'll have a special event like the FIFA World Cup that temporarily drives demand. But it's not a recurring seasonal episode. It's just kind of a. It's a shock. Yeah, it's a shock. Yeah, exactly. Do you see that zooming out and going into, you know, the aggregate of those types of shocks that happen sporadically across cities in the US? How do you see that playing into the way the market behaves?

38:42I think that in order to participate in the shock, one thing has to be true. You have to be furnished. Right. And once people furnish, they rarely unfurnish. I think it becomes more of a, you know, what we see happening now is that there is more inventory coming online for the World Cup, because in the host cities, you can make such a high nightly rate for that several month period. It is going to squeeze other types of inventory out for a period. But at the end of it, there's going to be a furnished house that needs a renter. And in many cases, short term won't be an option either for regulatory reasons or there's just not enough demand to fill it the same way you can with a midterm rental.

39:19And Atlanta is a very difficult housing market. And they do need a lot more housing inventory. And so I expect there'll be a crunch around the World Cup, but potentially coming out of it, there may actually be more ways to encourage co-living or encourage monthly living that help them with the housing crunch. What we see in the Furnish Finder data is actually like, because we're 30 days plus, there aren't that many places going to a single host city for 30 or 60 days. The ones who are work for FIFA, or they're helping to put on the event. And so there is much more of a emphasis on professional mobility and helping people actually either pursue their passion or their career by living in a place that actually fits in their stipend budget, which otherwise may not have been available.

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45:01from my students is that they'll try to model out on a spreadsheet projected returns but when you have multiple line items and each one is a piece of guesswork you end up with so many inputs that feel like guesses that you have low confidence in the range of outcomes that you conclude. If a person were to try to model out what a midterm rental might be able to fetch them, how would they go about estimating? Yeah, there's a, some of it is similar to short term. And so I'd give similar advice in both cases. One of the things that I'd always do is like talk to a local management company and have them prepare an estimate for you.

45:49On the short-term side, there are some that are actually national and available like Evolve that will just send you, here's based on our data what we think it will do. In midterm, there's not as many national players, but there are frequently local realtor brokers who are also management companies that are doing midterm. Start with professional and have them actually tell you, hey, based on our comparables, here's what we think is going to happen with this property. And that gives you a baseline. And it also helps you understand what their fee structure is. Because the midterm rental fee structure is quite a bit less than short term rental, because you are turning it over a lot less, like you're trying to find three or four tenants a year, not 40 or 50, right?

46:25It typically feels more like 10 to 15 % instead of 25%. So that helps you with like an initial set of assumptions. And it also helps you understand a way to value your time. Because do I want to pay someone 15 % to manage this? Or do I want to keep that 15 % and self-manage? And then when you're connecting more of the like, what's my vacancy assumption? What's my ADR assumption? I would use the platforms because you can get data out of Furnished Finder, out of Zillow, out of Airbnb. And I would also encourage people to just reach out to similar landlords. And that part of it, you know, you've, you've wrenched into a few times Airbnb in 2012, like it felt a lot more collegial, a lot more like a community.

47:05And midterm still has that dynamic because it's a lot smaller. So when you look on the Furnish Finder platform, 85 % of the landlords are individuals who have a single place for rent. And they're very frequently inclined to help someone learn how they did the thing that helped them get ahead. And so reach out to a property that feels similar to them and just ask what their experience has been. A lot of people are really willing to invest time to help with that. BiggerPockets is a good community for it. The Furnish Finder Facebook group is a good community for it. But there are a lot of communities that can really support people taking that zero to one step and figuring out if it's reasonable.

47:39Right. Reddit often has some great threads. Yeah. I think an overarching point on it is like the category is still a little bit more self-serve and hustle centric. Yeah. There are not as many like, oh, go put in your address here and it's going to tell you, you know, spit out the P &L. Like it's there's still a little bit of an information scarcity dynamic. And so you have to hustle a little more for a tenant. People are often building relationships with insurance brokers or trying to figure out who are all the trucks at the Extended Stay America and should I reach out to a construction company and see if they want to save money staying with me.

48:10So there is a little bit more grassroots hustle than where I think we are in the short-term space, but that also builds a little bit more community and the way that people can help each other and figure out how to go solve the problem. It reminds me of what the short-term space was like in 2012. It's a time capsule. Yeah, yeah, yeah. I get those vibes. Short-term in 2012, it was very hustle. But I remember at the time, the issues that I dealt with are just issues that would not exist today. So for example, back in 2012, finding a cleaning service that understood that there were going to be occasions where it would not be appropriate for the cleaner to say, oh, sorry, my car broke down.

48:54I can't make it today. I'll just be there tomorrow. Because, you know, if a house cleaner is cleaning a personal residence. Turn day. Right? Yeah. You know, if a house cleaner is cleaning a personal residence, that's not a big deal. But if you've got a two hour turnover in between checkout and check in, like they've got to be there in that two hour window. At the time, there was a lack of cleaning companies that understood that. Yeah. Well, I mean, there was less mobile phone coverage and there was fewer availability on where are you and what's happening and messaging was harder. I remember just getting access to the home.

49:24Right. We're going to go hide a key at the coffee shop and you've got to find Jared and tell him that Paul is in here. Yeah. Yeah. All these different dynamics was like, how do you get access? How do you get someone to know what the Wi-Fi code is? I'm like, that's all built in now. Right. So it is amazing to think about how much progress has been made in those 10 to 15 years. It's going to be a much shorter like gestation period from midterm rentals to get there because you get to piggyback on all the technology that exists for short term rentals and helping it be more mature and more people know about it.

49:54Right. And to that end, I mean, we've sort of touched on the why now piece of it when talking about the regulatory, like the crowd out of the short term. But kind of going back to the 1990s, there was that same demand, you know, like relocating families, traveling nurses, visiting professors. The demand existed. What did those users do at the time, the guests do at the time? Like, did they just endure market with suckier supply? I think there were a lot more people that because there wasn't an alternative to staying in the Super 8 or the Extended Stay America or the Howard Johnson, like they did it for 40 nights.

50:33There's always been a corporate housing association that's had like in your big multifamily building, there are six units available that are furnished and usually run by a corporate provider. So I think that's been there, but they're typically quite a bit more expensive. I think that while the use case was there, honestly, fewer people were in these jobs because it was less comfortable and less mobile to be in these jobs. I do think there's been an explosion in mobility, both for skilled trades, for corporate, for traveling nurses, that has necessitated the real estate stock and experience catch up.

51:04Right. If an investor wants to buy a property that would be ideally suited for a midterm rental, they're willing to buy anywhere nationwide. Yeah. Yeah. What are the factors they should think through as they're trying to pick a location, a city or state? Yeah. Well, I think the first factor is actually thinking about their own appetite to do the work. One of the things that I think is really nice about the midterm space is you don't have to be on a lake, on a beach, on a mountain, in a leisure destination. You can very frequently be in the neighborhood you're in and it gives you the chance to invest in something that you may be more passionate about because it does feel like a community asset, but also something you know.

51:39So like you may know what type of workers are coming through your neighborhood and what are the families on your block do? And how does that help you get ahead of? I know I can serve traveling professors because I'm 10 blocks away from University of Texas, whatever that may be. So that gives you a knowledge advantage. But the scale advantage in your time of you may be able to invest in a duplex that's seven minutes from your house, not three hours or seven hours from your house. And so you can do more of the actual odds and ends because, you know, 10 to 15 % management fee, like that is a lot of the yield on a rental property.

52:15My first step is like really understand your enthusiasm to do the work and whether you want it to be close to you. And that helps you price in, self-manage or hire a management company. If you get to a place where you know you're going to hire a management company, then it goes right back to those marketplace tools. Really use the Furnish Finder site to start to build your own. Okay, let me see what Vegas looks like. And we publish the breakdown of all of the tenants that are going to Vegas. We publish what the demand looks like in Vegas, how much housing stock there is. What's the price point for different formats of one bedroom, two bedroom studio, etc.

52:47To help you inform the assumptions like, OK, that's what makes sense. And then the last piece would be there are some durable trends that I think help you build a thesis. Probably the most prevalent right now is actually data center build outs. They require a ton of skilled labor. They are frequently in places that don't have adequate housing, adequate leisure infrastructure. If you pay attention to there is this going on in Monroe, Louisiana, or this going on in Abilene, Texas, you can start to build more of a thesis around, OK, is there a chance for me to go get into a duplex, furnish it? I know I've got a three year window that helps me get off to a good start.

53:25Right. I really like the data center thesis. I think a lot of people are chasing it. The other thing I like is just like pay attention to where people are building a Chipotle or Chick-fil-A or Starbucks like that construction requires skilled labor. Also, it's a great indicator of where families are going to end up moving more, which might help you participate in appreciation. And so some of those signals also just help you look for it. My format encouragement is really I really love the strategy of people getting into duplexes and complexes in particular by duplex live in half of it, have the other path go to work for you.

53:58And then as you earn enough cash flow and money, think about, OK, maybe I can rent this entire duplex out and go rinse and repeat, do it again or get my own single family. You know, it's not a get rich quick type of investment strategy. You know, this is not TikTok and private jets. It's much more like, OK, I can go make an extra five hundred dollars a month and that's going to turn into six thousand dollars a year. If I rinse and repeat, it can meaningfully impact my life. I love the house hacking strategy, but the house hacking strategy works only if you want to acquire in the city in which you live.

54:28Right. Again, we are conducting this interview in New York City right now. New York is personally not a place where I would ever want to own, but I do own in Indianapolis. I own in Atlanta. I own in Las Vegas. When considering markets like that, possible places that have been on my radar that are still on my radar. Raleigh is on my radar. Northwest Arkansas is on my radar. various parts of Texas are on my radar. As I think through outside of Indianapolis, Atlanta, Vegas, where might my next acquisitions be, there are a handful of places that I'm targeting. Again, assuming that you aren't going to buy where you live, so you don't have that local knowledge that one that you just spoke about, and you are not going to be using a house hacking strategy.

55:14What are some of the elements that you should think through as you're forming that thesis. Yeah. The macro things I'd be looking at, certainly just population migration, population growth. And so you mentioned Texas and Florida, they are net importers of Americans. And so you can find a lot of places where there are actually just like that macro signal of, okay, if this city is growing, it's going to need more housing. There's going to need to be more mobility. There's going to need to be more construction. There's going to need to be more healthcare. And a lot of those are the use cases that help you build your thesis for, okay, how do I get this to work?

55:44I like starting with the macro trends. I then like thinking about really get down to the map level. Okay, what's my target tenant? Is there a chance to be close to a hospital, close to a university and close to a good school district? Then you've got a lot of flexibility. Or are you going to be really far from one and not as close to another? But doing some of that primary research of really thinking about, and you can call the local hospital, you can look on their job board and see if they're taking traveling nurses. You can better understand a lot of these dynamics to go a layer deeper. And I think there is a piece of this which just does require curiosity and passion, you know, in that I love looking on Zillow.

56:18Yeah, it's fun for me. Yeah. And if you've got something that's fun for you, and you can kind of just turn it on as part of your leisure, it helps you research and it helps you build a pattern. For me, I think the midsize towns and the suburbs are the best places to be looking because you are reaching a more cost conscious consumer. And you do want them to be in a spot to where you can provide an experience that, you know, wows them for$2 ,000 or less. And a lot of that calibration is important too, because for a bunch of short-term rental investors, you're just looking at a totally different price point.

56:49You know, you're looking at$150 ,000 to$200 ,000 home, not a$500 ,000 to $750 ,000 home. Right. Right. If you are targeting a mid-sized city like an Indianapolis or Cincinnati or Columbus. I guess I can't really bucket them. I'd probably call them larger. I would almost think of it as your Northwest Arkansas example to me is a great one. A town that might have 50 to 150 ,000 people probably doesn't have a five, maybe even a four-star hotel, but does have a lot of extended-stay Americas or State Bridge Suites. And it's not a leisure destination, but it's growing. Those start to be the most interesting.

57:22We publish every quarter an update of what are the fastest growing cities? What's the supply demand imbalance? It's a little bit listicle, like it's, you know, but it helps you just start thinking about why. And that pattern building is just the best way to get started. And you can use, you know, Claude or OpenAI to help you build the pattern also by having them do some of the research for you. Right. And that brings up two different considerations, because on one hand, you do have, you know, we talk Texas and Florida, right? You've got these states that are seeing huge population inflow, huge net migration.

57:55Those states also have some of the lowest regulations around home building. And so we're seeing this boom in new construction, which means supply, even though we're seeing a lot of net migration, supply is keeping up with demand. And in some cases, like Central Florida, I'm thinking like that band of like Melbourne to Orlando, supply is actually in some cases exceeding demand, even with all of the population inflow. It isn't necessarily as simple as population growth equals appreciation. Definitely not. One of my coworkers has five midterm rentals. Three of them are tremendously cash flow positive and worth less than what she paid for them.

58:37Wow. Wow. And that's an interesting dynamic because you don't really think, you know, is that a failure as a real estate investor or not? Like probably not because they're cashflow positive and she's got a long-term point of view and eventually they should be worth more than what she paid for them. That's a super important thing for how to think about this as a real estate investor. You're an original, like, where should I buy in the U S must've recently purchased them, right? She bought them and, um, you know, Austin was a very hot market. She bought outside of Austin, I think in late 22, which was just peak.

59:072022 was peak. She's underwater from a purchase price perspective, but there aren't a lot of furnished rentals in the town where she has these. Is this mass drop? It's actually further down I-35. It's Temple. Temple's halfway between Austin and Waco. There's a lot of new construction. It's very affordable. And she's doing really well because there's not many furnished monthly options there. That dynamic, I think on your original point of like, it would never be New York, you know, where New York makes sense for somebody is if it's mainly about tax write-offs and appreciation, but it's almost impossible to get it to cashflow.

59:40Exactly. And so really knowing what your thesis is like, you know, an investment thesis where you need a tax write-off and want to write out appreciation can totally work, but it's not for most people. Like most people are doing this for cash return and you do need to look more in these niches to find it. Right. You mentioned your coworker whose properties are not worth necessarily what she paid for them. One thing that strikes me right away when I hear you say that is that even knowing what a property is quote unquote worth, there's always a little bit of guesswork with that. I often like to say that there are only really three times that you know what a property is worth.

1:00:15It's when you buy, when you sell, when you refi. Yeah. Anything outside of that, you're kind of just guessing how would a person and I'm thinking particularly about seller finance deals, off market deals, the types of deals that a person might make if they're really value hunting, especially in a smaller market. Oftentimes when you are purchasing an off-market deal, you and the seller off-market are trying to come to an agreement about what a home should be sold for. But you don't because it's not a public deal. Right. You don't have that market signal. You don't have competing offers to serve as a market signal.

1:00:51How would you price a property? The starting place is trying to figure out what the cash is worth to you. And so if you can underwrite either the long-term or the mid-term prospects, then you're in a good position to basically just not price in the appreciation, literally just price in. If I think I can do$1 ,800 a month, then over what horizon can I pay back furniture and get this to work? I would start from that core foundational. If I'm a cash investor, what do I think it can do? And with the off market, what's interesting about it is sometimes you can get into, if the person buys into your thesis, they may help you with the seller financing and help participate in a way that gets creative financing much more available because you can actually be paying them every month.

1:01:30And you can treat them much more like the bank. And you may be willing to do something, invest in furniture that they're otherwise unwilling to do, or also the management. That's the starting place. One thing you keyed on, there's only three times you really know. Yeah. One thing I like about buying midterm is that the buyers are more rational. And so when you think about a short term buyer, and in particular, if you think about them in a beach town, mountain town, lake town, you're competing with a lot of people who are not making a cash based buying investment. They're making a decision on, I want to have my grandkids spend their summer here, or I want to retire here.

1:02:05And they may be willing to dramatically outspend the actual cash flow value out of the home in a way that makes it a much trickier place to invest. In midterm, you're much more likely to be competing with either somebody who's also just bidding for cash flow or someone who's actually in a much more liquid market of, I've got 100 options near here in terms of what my long-term option can be. And so you don't see as much, I'd say, vanity inflation in the prices you pay for midterms. Is it then the case that the properties that are best suited for midterms are, when you think about the location within a city, are they more of suburban locations that are...

1:02:45Core commuter. So near good highway infrastructure, commuter corridors, near hospitals, near universities, and then near good public schools. Those are the four things I'm most looking for. If you're near good schools, you've got a chance to serve relocating families. And if you're near good schools and commuter corridors, maybe it's that plus your corporate use case. And then if you're near that and a university, then you can get grad students and professors like you're trying to think through those four different geographic considerations, the primary schools, the universities, the hospitals and the commuter corridors.

1:03:17And when you get them to overlap, you get the most option value for what you can do. And you're overwhelmingly looking at a two bedroom and smaller type of footprint. I want to stay on the topic of developing a rental thesis, especially as it relates to where do I buy this property? Because that's the number one question that I hear from my students. Where do I buy this property? I'm willing to buy anywhere in the United States, so long as the numbers make sense, particularly for a person who, let's just imagine somebody was born and raised in Manhattan, has no direct experience of anywhere else, and is trying to develop this rental thesis from afar, what tactics should they be using?

1:04:01What factors should they be considering? Can you elaborate on the development of that? Yeah. We talked about some of the macroeconomic factors. I think the biggest thing for someone who's starting with that broad of a thesis, I can do this anywhere. I believe in midterm, but I have no idea where to start. The best place is to just time box yourself and do some practice. Pick a market you know nothing about. Pick Cedar Rapids. Pick Waco, Texas. Pick a place that you're just curious about and go start the online research. Bentonville, Arkansas. Bentonville, great. Start with a map. Start with a map on Expedia or on Google Maps and just be like, okay, where are the hotels?

1:04:39Where are the two-star hotels? Where are the extended stay hotels? Then once you've got a visual of like, okay, I understand how this town works. And I mean, as basic as where are the freeways? Right. What does it look like at commute times? You know, look at the map at 8.15 in the morning and see what's red. Like where are their log jams? And then start to just think of it as like, I'm going to keep putting these layers on top. The first layer is like, I understand where people live. I understand commuter corridors. The second layer, I understand hotels. And in particular, do I think I've got a property that competes more with an extended stay America or more with a Marriott or more with the Four Seasons?

1:05:16Have a little bit of that thesis of like, okay, I understand that competitive set. Next up, my Airbnb competitive set. Let me see what that map looks like. Where's there's density? Where are there higher ADRs and lower ADRs? And as you start to build that out, you know, I very much view it almost like a puzzle of I've got a map and I'm starting to kind of lay on my heat map components to see, OK, I understand it now. And then once you understand the demand aspects like that, you can start to get more into let's just look on Zillow. Right. What does inventory look like in my budget? Do I have one hundred thousand, one hundred and fifty, two hundred?

1:05:49But the most important thing is to like take a use case to the end so you can practice the actual approach of what would I do in Bentonville and then go compare Bentonville to Cedar Rapids or go compare it to Fresno or go compare it to another city where you can actually think through, oh, OK, well, I've got this price point for that price point, but I can actually earn more here. Advantage. Right. And, you know, hopefully there is an opportunity to where that first place you're looking, you've got some connection, you know, friends that lived there, family that lives there, someone that helps you just ask some of the more basic questions.

1:06:27But if not, by all means, get involved with the realtor who knows the midterm space and do the research around how can I get a partner? Because you're going to need a partner if you're doing it, you know, from distance to at least help with management, but to probably help with acquisition and staying on top of it. you can align those incentives and get them to do the work for you. If you're tracking where the extended stays are getting built, you know, where that new construction is happening and those new spots are going up, is there too much of a good thing? Would you want to follow that because you know that they've done the research and they're building there because they know that that's where the demand is?

1:07:02Or would you want to avoid it because they're building there, they're creating more supply? I'd be more inclined to follow it. I mean, you know, in the ideal situation, you have no competition and you know there's a bunch of tenants. Yeah. It doesn't happen that often. Right. It is rare that the big chains make huge underwriting mistakes on building out a 300-room hotel. And it's totally common that if you actually get in touch with your local tourism board, this is public information. You'll know what starts are available and what's getting built. And the question becomes much more, if you know they think they can fill a 300-room extended stay hotel at their occupancy goal, do you think you can provide a better value to a tenant that they can?

1:07:42And so you start to think about, all right, extended stay America, it's going to be 560 square feet. It's going to be$1 ,800 a month. I'm going to have this type of fit out on the inside, no stove, no oven, no dishwasher. What can I do for that price point? Like, can I provide a studio experience? Can I provide a one bedroom experience? Like, what does it look like to just feel you can provide a better value? And if you get to a spot where you know they're building a hotel that's going to charge$1 ,800 a month and you know you can provide twice the space and the amenities for$1 ,200 a month, I feel great.

1:08:17Yeah. Because I know the demand's there and I know I'm competing with a better product at a better price point. And that's why I'm also not scared if there's three extended state hotels nearby because then you really know the demand's there. You just want to be sure you've got a better product. That said, there are locations that have legacy extended stay hotels that may not be doing well. Exactly. And if they're not, you usually feel it in the rates. A hotel that's not doing well charges less rate. Their public pricing will be lower. And so it kind of floats itself. Now, what you don't know is if they're going out of business.

1:08:48And that's a hard thing to gauge. It's pretty infrequent. The person working the front desk in Extended Stay America owns it. So you can also go in and just ask or see how busy the parking lot is. Like if you're by a hotel and it's always completely full of construction trucks and the parking lot's full five days a week, you got nothing to be worried about. You know the demands there. I think that type of stuff is actually really underrated and does add a little more credence to why you might want to have a broker on the ground, a realtor on the ground, or do something close to home. Right. Because you need somebody to like, hey, I need you to spend a day, drive around, and I want you to look at these five things for me.

1:09:24Help me out. I often tell my students this. Just spend a weekend. You know, you don't have to live there. Yeah. But go there on a Friday night. And I get that you've got a nine to five job. Just go there on Friday night. Come back on Sunday afternoon. Yeah. Even in that one day, there's a lot that you'll be able to see. Absolutely. And, you know, talk to someone at the grocery store. Talk to someone at the Starbucks. Just get a feel for it. You know, you mentioned earlier when I asked about within a city where you'd said commuter corridor, hospitals, universities, public schools, particularly elementary schools.

1:09:55How important in the future do you think, commuter corridor in particular, how important will that continue to be as we move into the era of remote work, increasing remote work? Yeah, I think it's going to stay quite important because most of the tenant types in terms of what we see today are actually still relatively physical jobs. Like healthcare is not going remote. You need to be there. And a lot of, more than half of our travel for corporate work is actually a skilled trade. It's an electrician. You know, it's someone who's doing the drywall. It's someone who's doing the foundation, like they're building the skyscraper, they're building the data center.

1:10:28That will not be remote work. And they do have to physically get to the job. And so there's a I don't worry a lot about it. I think, if anything, some of it is actually part of a different thesis, which is that maybe your digital nomads or your relocating families will grow faster for this occasion. And you'll have more people who are looking to take out a 90-day lease and just live there and work remotely. Yeah, the elective lease. Yeah, we do see more of that. And we see that being a growing trend for how people are choosing to live and that, you know, you certainly see it in Airbnb's product.

1:11:05They've built products that help you connect three houses. You know, I'm going here for 80 days and they're like, okay, we don't have anything available for 80 days. but we'll get you in this house and then this house and then that house so that you can stay in the same neighborhood. That was a great signal to me that there's a really big opportunity for midterm because you're not playing that. It's like a really hard game of Tetris and short-term rentals. Like you're trying to fill out this calendar and you've got three days here and two days there and seven days there. And then when somebody wants 90 days, there's no way you can accommodate it.

1:11:35That's why I think you'll see more inventory on the midterm size because you typically take one rental at a time because it might extend. It's a much easier management model and it does help people who have that use case of, I'm a digital nomad and I just want to be there for 60 days. There's more likely to be a 60 day window because there's not seven future bookings of long weekends. Right. Who are the people who are typically midterm rental owners? Is this popular among millennials who maybe have a little bit of home equity and they're trying to pull the equity from their first home and redeploy it into an asset?

1:12:10Is it more popular among baby boomers? Is it Gen Z? Who are the owners? I have been really surprised how much older the landlords are than what I expected. In particular, we routinely hear from surveys that probably 40 % or more of our landlords are over the age of 55. I think that speaks to a lot of them did own, more passive long-term real estate, and they're looking to yield more or they're looking to have more flexibility with it. And so the landlords are a older demographic, I'd say, Gen X and Boomer. A lot of the innovation and the people who are actually scaling faster are still younger because they're treating it more like a business they're trying to grow.

1:12:48Whereas I think a lot of X and Boomers are treating it as, I had an asset that can perform better if I change it from long term to midterm, or I decided to build an ADU as a way to generate inner-shitter income, or I rented out a room as a way to house hack. For the older generations, I think they're more inclined to use the midterm product because you've got more opportunities to actually vet tenants and know who's going to be there. And you're not trading out every weekend or every week. It's just more consistent and a little bit more compatible with how much effort they want to put into it.

1:13:19And in particular, if they're going to have someone stay with them, the consistency they want to have someone who's going to rent a room or maybe the garage apartment. Right. What appeals to me about it is that it does feel like that hybrid between, you know, more yield than a long term, less hassle than a short term. Absolutely. Yeah, it's complete Goldilocks. Yeah. It's just right in the middle. Yeah, exactly. And the major, kind of putting in air quotes, like the major risk is the upfront investment in the furnishings. The thing to keep in mind is it's really not that major of a risk. Right.

1:13:49There's ways to mitigate it. One, it's just cheaper than a short term. And two, you can furnish it to the occasion of actually having a renter. And so if you know you're going to have someone in for 120 days, you're a lot more comfortable buying the furniture because you've got this great signal. The other dynamic that I think is underappreciated is that a lot of times what creates a midterm rental is a life event. It's two people getting married and they've got two furnished places. And it's creating the opportunity that instead of maybe selling one, they're going to turn one into it's already furnished.

1:14:17I can create more passive income by making it a midterm rental. And I think we'll see more and more of those use cases, you know, both at end of life or what may have been a teardown or an estate sale becomes an asset that can actually create cash or in particular for marriages that increasingly people may decide not to sell a house or divest, but to actually turn it into a rental because the furniture is already a sunk cost. And furniture is a pretty bad investment. Like once you own it, it's great to get as much value out of it as you can. And if that means turning it in to help with rental income, then I think that's a great use case.

1:14:50Right. You talked earlier about a hybrid, the hybrid approach between short term and midterm. It strikes me that it would be very difficult to do a hybrid approach between midterm and longterm simply because so many longterm tenants are not looking for a furnished place. Yeah, that's very true. What we see is midterm rentals become longterm because someone keeps extending and extending and extending. We see a lot less of people who have a midterm and then decide to advertise it vacant, unfurnished. I do hear use cases of, in particular for relocating families. We want the house, but we don't want the furniture.

1:15:27We'll pay to put your furniture in storage. And we're bringing ours in because we do need the four-month lease. And this is the location and the house we want. And I think that's great. You know, if that helps them feel more comfortable and they're going to help offset, you know, either putting everything in the garage or putting in a storage unit, wonderful. It's just another way to help reach more tenants. Seems like quite a bit of hassle for four months. Well, I think if you think about it from the relocating families perspective, I'm moving to Austin from Seattle. I know I'm going to end up with my furniture in Austin, but I don't want to rush into a house.

1:16:00And I know I don't want to be in this place for 12 months or longer. It's just worth asking, can I use half the garage to store furniture and get my kids' bunk beds in the room so they feel more at home? Can I do whatever this looks like? And I think that starts to be a lot more plausible for people who are basically looking for a way station. Insurance claims, another big one. Can we move a few things from our house because they're sentimental to us, they mean something to us, and we're going to be in this house for four months while we remodel or while we fix the roof or whatever it is. That just gives you a different type of opportunity to reach more tenants if you're willing to be flexible on what you do with your furniture.

1:16:38It strikes me that there is a degree of, particularly when it comes to a furnished place, there is a certain degree of oversight. When I think about hiring movers, taking furniture in and out of a storage unit, nine times out of ten, stuff gets misplaced. Something goes wrong. Yeah, exactly. What recommendations do you have for providing oversight, good oversight and good management from afar? Yeah, I mean, you've got getting the team in place is the most important thing for an out-of-state investor. You know, whether it's friends and family or a professional manager, just being super aligned with expectations on this is what the work is.

1:17:14You know, this is what photo documentation is going to mean on move out day or if we've got to do a furniture turnover and really knowing that you've got a reliable team there. One of our internal experts lives in Colorado, does all of our investing in Iowa. She's got 14 places in Iowa. She has some friends and family there, but she also uses professionals. You have to build that system over time so that you don't feel like not being there isn't a disadvantage. You know what you're going to get just like you had done it yourself. People will talk a lot in the midterm rental space about, okay, what are my standing operating procedures?

1:17:48How do I document this? And there is a pretty robust coaching network for people who really want some extra handholding to where they can get involved and learning from other and kind of inheriting. Okay, what's the playbook? How do I do this? What are the questions I need to ask? if I need to move someone out because the place I own that they're renting has a plumbing issue. What are the expectations? And getting ahead of that so there's fewer surprises, you need to piggyback on the other people's experiences. Right. When you do that, you end up building a bit of an inventory of furnishings. It's almost comparable to being a professional home stager in which home stagers have their staging inventory as it moves in and out.

1:18:27And if you have a sufficient number of units, particularly if you're accommodating furniture turnover requests, I can see a scenario in which you end up having a storage facility. A surplus. Yeah, yeah, exactly. Because you've got, you know, you have this furniture inventory that you're managing. Yeah, I think it would be if you end up with that problem, you've created a good problem. Yeah. You know, it means you've got density and a lot of different units and a lot of tenants and that you're solving for a lot of use cases. It is not a complaint I hear much about. And in particular, because for the most part, what it takes to be successful with furnishings is a relatively vanilla experience.

1:19:09And so you don't need to be having a lot of backups. There's a lot less wear and tear because it's typically someone who's there to sleep and work and they're not churning through your coffee makers and your dishes and all that sort of stuff. In general, what I hear is people actually do a very good job of knowing what's in the house so that when they replace it, they can replace it quickly from Amazon or whatever the preferred store is. But not that they are actually keeping a bulk of inventory. For the handful of use cases where somebody might move furniture in and out, it's usually pre-agreed with the tenant that when the tenant leaves with their stuff, the other stuff is going to come back in.

1:19:44And so I think it's much more of a temporal environment than it is that you're starting like a warehousing side hustle. Right. Right. I was going to ask if there are any best practices, because again, if I'm thinking about the people I know who are home stagers, the complexity of maintaining and managing home staging supplies, if you know of if there are any comparable best practices when it comes to the maintenance and management of. I don't. In terms of how to stage and design, there is a great book out called 30 Day Stay that was written by some bigger pockets authors that I think does a good job talking through what expectations are and where to go.

1:20:22And there are actually a lot of virtual designers that you can hire to help with. Okay, I've got$8 ,000. I've got a 1200 square foot place. This is who I think my target tenant is. Help me. And so you can use that as the services that help connect that similar to what you would with a stager. The, you know, unlike a stager where you're going to move the same furniture into a different for sale houses over two months. Right. This stuff's going to stay there. It doesn't have as much in common with staging furniture as it does with furnishing your short term. It's just that you have to invest less in the midterm furniture dynamic.

1:20:57Earlier, we mentioned Texas, Florida. We've talked about Northwest Arkansas, one of my favorite pockets of the country. Been interested in that place for a long time. What big trends are you seeing nationwide in terms of rapidly growing markets? Yeah, a few months ago, Furnished Finder and AirDNA, who's kind of the gospel source of data for a lot of the short-term industry, co-authored a report on midterm rentals because there's so many questions. If it's a free report, you can get it on the Furnished Finder website or at AirDNAs and encourage people to just look at it. Some things that jumped out at me, the fastest growing state for inventory was Alabama.

1:21:31And a lot of the fastest growing states were actually in the Midwest. The cities were a combination of suburban cities. They were some larger cities like Bay Area. And then they were a handful of what I call lifestyle destinations, like Durango, Colorado. It gives you a better feel for kind of the like, can you picture it? Because it's very visual, map-centric, chart-centric, helping compare short-term, mid-term, and what's working and where the trends are going. So I think that's a great place to like kind of have your 101 course is to just, you know, get through that report and have a sharper thesis on, OK, what do I think this means?

1:22:08After that, I really encourage people to check out the Market Insights tab on Furnished Finder where you can put in any city and coming soon any zip code. And it'll tell you this is the breakup of tenants that have been visiting this destination. It's mainly relocating families or it's mainly traveling health care, whatever it is. and it'll tell you price points and inventory availability to help, again, sharpen, okay, I get it. There's more demand than supply there, or this market looks better than that market. And you can just start to build your own Rosetta Stone of what works for you. What is the methodology behind that?

1:22:39How is that data pulled and aggregated? Yeah. So for the AirDNA report, AirDNA used their dataset, which they've been tracking for, I think, over 10 years now. We did a side-by-side comparison of our classified data. So what our booking request occupations? What are the price points of what people are shopping for? Where's the inventory growth? And so it reads a little bit as a AirDNA found this, Furnished Finder found this, AirDNA found this, corroborated by Furnished Finder finding that. That's the report. When you get into the Market Insights experience on Furnished Finder, what we're actually looking at is the live traffic on our site, how many people are searching in a given area, and comparing that to the activity happening at the listing level on our site.

1:23:22What are the price points of two bedrooms three bedrooms, four bedrooms? What's the distribution of price points for a two bedroom and helping give you a better feel for, okay, I can visualize what's happening on the demand side and the supply side based on activity on Furnished Finder. Now we're not a booking platform. You know, it's actually a subscription service. So we don't know exactly what happened. It's very much a throwback site. You know, you mentioned VRBO in the old days of it feels as much like Facebook marketplace as it does Airbnb because we give all the control to the landlord to get paid how you want to get paid and to not have a service fee and to communicate, screen however you want to do your work because it's a very different tenant occasion.

1:24:04And a lot of times the tenants will actually want to come look and have the conversation in person, which is super different than short term. As you aggregate that data and you look at the, for example, the distribution of price points for two bedrooms, three bedrooms, four bedrooms, for example, or studios. Do you see any common threads in either types of housing or geographic locations? By types of housing, I mean studios as opposed to three bedrooms. Do you see any common threads in either types of housing or geographic locations that tend to overall be growing the fastest? There's not a common thread on geography beyond where's their construction.

1:24:43Right. There are very, very discreet pieces of advice on the footprint, and I think in particular on price points. And so really important to remember that the average monthly price point on Furnished Finder is a little over$2 ,000, whereas for a short-term rental might be$2 ,000 a week. You're talking about a much more price-conscious occasion. And frequently, I think where we need the most inventory is actually like$1 ,500 and under. And so you get more into room rentals and studios and very affordable housing. And I think that is one of the things you need to demystify if you're coming from a short-term mindset of like, I need something that's a little bit wow.

1:25:19You're actually looking for, I need something that serves a very practical use case at a very practical price point. And that's almost always two-bedroom or smaller. And the opportunity to house hack your way into it, renting out a garage apartment or 20 % over 60 ,000 listings are just rooms in a house. Can you create a private room experience? And those average price point is about$1 ,000 for the month. There's a lot of ways if you stay laser focused on being a really high value affordable option with a small footprint, it minimizes the opportunity that you can have a risk because you're also just putting less capital to work.

1:25:56You can buy a more affordable investment place if you know you're trying to get a studio or a one bedroom with a spare room to work. Do you see a lot of people in the places that support this? Do you see a lot of people creating ADUs? I guess we even began this conversation by talking about... I think it's going to be a huge trend. We're starting to see some now, in particular because of legislation in California. It's very ADU supportive. My crystal ball would be that I think you have a lot of people in the late Gen X boomer who actually build the ADU for themselves. I've got a 4-3 house on enough land where I can build a garage ADU or a detached ADU in the backyard.

1:26:36and I'm going to go live in the ADU because I can actually outfit it to be more appropriate for someone who wants to age in place. And I'm going to rent out the four bedroom house, which will pay for the ADU construction and give me more cashflow in retirement. Right. And that's been a very, it's almost a little bit opposite of what some of the ADU thesis was like, Oh, put an ADU back there. So a, someone can go live there for$1 ,400 a month. You might start to see more of all of these vacant rooms that are held by Gen X and boomers actually be, okay, rent out the entire house and I'll go live in the ADU.

1:27:05And then I'll supplement living in the ADU by traveling and spending more time in different parts of the country on 30 or 60 day leases. Right. Which does make sense because particularly if you're an empty nester, the kids have left the house, you're downsizing. The golden handcuff scenario that we've encountered right now is that many Gen Xers and baby boomers thought that they would downsize, but now are locked into a 3 % node. A 2.5 % node, a 3 % node. Exactly. It creates a really creative opportunity for entrepreneurs because you can approach someone who's got the space. I will build the ADU for you.

1:27:40I'll use my capital to build an ADU that you'll move into if you'll let me furnish your 4.3 or your 3.2 house that's already here and manage and rent it for you. And like, what are those creative solutions start to look like to where you're bringing inventory on that actually fits the aging population and frees up housing stock for all the families that are looking for their first starter home or even just looking to be in a neighborhood that has a different profile than where they are today. Right. You mentioned pad split earlier. There's also a spare room. We are seeing a lot of solutions around room by room availability.

1:28:14Yeah, I think there's both of them. What Evolve did for short-term rentals, I think you're seeing that dynamic happen in the room space and starting to be a – because there's so much value to be had there. And it's such a trust type of dynamic that technology helps solve. I think you're going to see a lot of inventory go there and create a lot of great investment theses, too, for people who want to, you know, are looking at a four or three, but they're looking at it as a co-living space, not as a short term rental or a long term rental. Do you have any ideas on the most common types of ADUs that you think we're going to see?

1:28:45Are they going to be detached? Will they be basement conversions, detached garages? Yeah, super geographic. There are places like Texas where it's very frequent that you can do an above the garage or even you have enough yard to do something detached. There's not any basements in Texas. So like it's much less common to be that type of dynamic. Right. You know, if you follow kind of like the aging in place thesis, it'll be better to be ground floor. So I think detached will become more common or even garage conversions. And you do a garage conversion, but then you might add opportunity to do some sort of carport or do some sort of structure that like bridges the gap.

1:29:18I think you'll see more of that. And I think like all the other investing, what it really comes down to is knowing who's the tenant that you're looking for here. You know, what is the use case and how much can you afford to spend on it? And it's a very different profile for, you know, what might be a retired boomer versus a first year grad student. Right. Well, thank you for spending this time with us. Where can people find you if they would like to learn more? The best way to get in touch with me is on LinkedIn. So Jeff Hurst, ATX. the best way to get in touch to learn more about midterm rentals is either the Landlord Diaries podcast, which Furnished Finder hosts.

1:29:52We always get back to people in the show notes and are welcoming new guests. And there's a ton of information published on Furnished Finder Facebook community, on Reddit midterm rentals, and in bigger pockets has a dedicated midterm rentals thread also. So just get out there and learn. It doesn't cost anything to be curious. And if you find something that feels like a good thesis, I think there's going to be a really nice moment for the next decade plus for people to really create some life-changing discretionary income and wealth through midterm rentals. It does feel like 2012. And if you got into short-term rentals in 2012, it probably worked out.

1:30:26Yeah. And as somebody who was in short-term rentals in 2012, I can tell you this moment in midterm does feel like... It feels similar. Right? Yeah. It's got the vibe. It's kind of that thing where like, you know, when people ask why and he's like, I don't know, I guess because I lived it once before. People are trying to be helpful and they're trying to solve something that needs solving. There's a piece of it which just also feels I think it's actually quite fulfilling for people who get into the space and have provided, you know, housing to a nursing hero or relocating family. Right. And you're right.

1:30:58It is very fulfilling because lack of housing availability is one of the biggest challenges facing our country to be able to make more efficient use of housing. The spaces we have. Right, exactly. And then as we learn more about that, build more of the spaces we need. Right. And it's just a very, you know, core American entrepreneurial idea. Yeah. To connect home ownership as the path to the American dream with like, well, let's go make more homes possible. Exactly. It may not have to be ownership in the future because there's so many different ways to invest. There's so many different ways to live.

1:31:29I think it's uncommon people will be as rooted in a city and home ownership as my generation or my parents. Yeah. But I think it's way more likely that people will create substantive wealth by being more creative with how they live. Exactly. Excellent. Well, thank you so much for taking this time. It was a pleasure talking and thank you for hosting me. Thank you, Jeff. What are three key takeaways we got from this conversation? Key takeaway number one, midterm rentals hit that sweet spot that a lot of investors overlook. Look, a lot of landlords, myself included up until really this point, think in two modes.

1:32:05So there's long-term leases, 12 months or more, and there's short-term Airbnb, VRBO. But the middle lane, midterm rentals, has more cash flow, better returns than a traditional long-term lease. It also has a lot less work than running an Airbnb. As you've heard me say before, real estate is a commodity when you're doing long-term leases, but it is the hospitality industry when you are Airbnb-ing. And so long-term 12-month leases versus Airbnb, they're not comparable because one is more akin to running a hotel and the other is more akin to simply having a commodity that you lease out in long duration.

1:32:50What's cool about midterm is that it hits that sweet spot where you have a lot of the cash flow, the return upside that you get from the Airbnb model, but it's a lot less work because the turnovers are so less frequent, three months, six months. So it's a lot less work. If you're outsourcing it, the management fees are a lot lower than they would be on a short-term rental. You're turning over three or four tenants a year rather than 40 or 50 like you would with the short term. Plus, cities aren't going to legislate against it. The anti-short-term rental laws are already baked into the books. And they all define, in most cities, they define short-term rentals as 30 days or less.

1:33:34I mean, I shouldn't say cities will never do it, but there's no push towards doing it. There's no likelihood. There's no known likelihood of them doing it. So there's regulatory protection. An extended stay America in Austin for 30 days is probably about$1 ,800. And for$1 ,800, you can really get a lot more space than an extended stay America if you're actually shopping for a studio apartment or even a sublet room. Key takeaway number two, underwrite as a long-term rental first. So before you even buy the property, before you furnish a single room, run the numbers as if it's a plain, unfurnished, long-term rental.

1:34:12So if you're buying a property, run the analysis as though you are renting it out on a 12-month lease, a traditional 12-month lease. In our course on rental property investing, we have a very detailed spreadsheet that lets you run the numbers and conduct a very thorough analysis from the perspective of somebody who is running a traditional long-term lease. And the reason that you're running the analysis this way is because you want multiple exit strategies, which is another way of saying you always want a fallback plan. You don't want to paint yourself into a corner by relying on only one strategy to make you money.

1:34:50If you can make it work as a long-term rental but make more money as a mid-term rental, then great. Now you've got your best case scenario and you've got your acceptable case scenario. So, you know, you de-risk by knowing that there's a solid plan B. You know, you often make almost 50 % more monthly rent. And so you can pay the furniture back pretty quickly and have a much better investment than long term. But if you get trapped into thinking you have a short term and then it's not possible, it's very hard to get back to that summit. Finally, key takeaway number three. Don't furnish the place for Instagram.

1:35:26Furnish it for how it actually lives. furnish it for sleep because a lot of midterm hosts treat their rental like a short-term vacation property. And that's not what tenants are looking for. Tenants want great mattresses, blackout curtains, a functional kitchen. Most midterm rentals can be fully furnished for around $7 a square foot, according to Jeff. And that is a fraction of the$30 to$40 per square foot average that short-term hosts routinely spend. The primary use case of a midterm rental is often sleep. So you really do need to have a well put together, like, is there a noise machine? Do you have good blackout shades?

1:36:05Quality of mattress, quality of bedding? Because people are going to be in there 90 to 100 days. Those are three key takeaways from this conversation with Jeff Hurst. I have to say, I had not really considered midterm rentals prior to talking to him. In preparing for the interview, I really began to understand why this is a segment of the market that has taken off so much. You know, as work becomes more remote and more mobile, as the need that business travelers have, traveling nurses, visiting professors, people in town for special events or projects, as that segment of the workforce, the segment that needs temporary on-site housing, as that continues to grow, the demand is there.

1:36:54and with cities regulating against short-term rentals, the mid-term market does offer that upside. So I'm very warm to this notion, particularly after meeting Jeff and after speaking with him. If you'd like to learn more about rental properties, we've got two things coming up. One is we have a course on rental property investing, a super comprehensive course called Your First Rental Property. it will be available starting May 11th. So we have two cohorts per year. We do a spring semester and a fall semester. We're opening the doors for our spring semester. We're opening those doors on May 11th.

1:37:34So mark your calendars, Monday, May 11th. We open our doors. If you want to join the spring cohort, that's the day that you can sign up. Go to affordanything.com slash enroll, where we've got a lot more information about it. The second thing is I'm hosting a free webinar about how to make money in rental properties in 2026. That's going to be on Tuesday, May 12th. I would love to see you there. Bring your questions. I'll be doing a presentation on the current 2026 market. We're going to go deep into how to make real estate viable given current market conditions. Again, that's Tuesday, May 12th.

1:38:13It's totally free. You can sign up for it by going to affordanything.com slash rentals2026. That's affordanything.com slash rentals2026. Thank you so much for being part of this community. If you enjoyed today's episode, please share it with friends, family, neighbors, colleagues, with traveling nurses, with visiting professors, with landlords, with tenants. Share it with Airbnb hosts. Share it with people who are thinking about buying a rental property. Share it with accidental landlords who moved out of their previous home, but they don't want to give up the 3 % mortgage. so now they're holding on to it as a rental, but they didn't really intend for it to be one, and they're trying to figure out how it can make money.

1:38:54Share this with them. Share this with all of the people in your life. That's the single most important way that you can spread these ideas. Please open up your favorite podcast playing app and leave us up to a five-star review. Please write a few sentences. Tell us what you enjoy about the show. I read every single one of these, and these are incredibly valuable in allowing us to book amazing guests. So thank you so much in advance. If you haven't done it yet, thank you in advance for doing it. And if you have done it, thank you for having done it. Again, remember, free webinar, Tuesday, May 12th.

1:39:25You can sign up at affordanything.com slash rentals2026. And if you want to learn more about the course, you can read more on our website, affordanything.com slash enroll. Thank you so much. This is the Afford Anything Podcast. My name is Paula Pant, and I'll meet you in the next episode. Thank you.