There are so many rental investment strategies
out there. There's long -term rentals, medium
-term rentals, short -term rentals, rent by the
room, co -living. It's a wonder that anybody
is able to pick one and focus on one because,
hey, let's get this straight. It's just there's
a lot of ways to invest. and a lot of ways to
do it. And today I'm going to talk about the
pros and cons of each of these strategies and
give you a little bit of an overview so you can
make the best decision that's going to work for
your investment. So if we haven't met, my name
is Doug Varenas. I'm a licensed real estate agent
in Oregon and Washington and an accredited investor.
If you're interested in investing in the Portland
metro area or you're interested in investing
out of state, I'm currently offering free consultation
for out of state investors looking in affordable
markets that have favorable regulatory environments.
And I can help you go through that entire process
from locating a property. to getting a team that's
going to help you from a real estate agent, property
manager, vendors, etc. So if you're interested
in that, click the link in the description to
schedule a brief chat with me, or you can post
something in the comments and I'll get back to
you. Investing in real estate. It can be very
complicated. It can be very overwhelming. There's
a lot of different strategies. So today I'm going
to go over these strategies and give you the
pros and cons and hopefully give you some clarity
on what's going to work best for you. So first
strategy we're going to go over is long -term
rental. And this is what most people think about
when they think about investment properties and
renting. So this is going to be your 12 -month
or more lease where you have a tenant move in,
they're moving into an empty house, they move
all their stuff in, they sign the lease, they
give you a deposit, and they are your tenant.
And so this is what we think about when we think
about renting a place, right? been renters at
some point. And so the pros of this are consistent
rental income. So ideally, if you're screening
your tenants well, you're going to get that consistent
rental income for that entire year. You're going
to have a deposit to cover any damages, and you're
really looking for ease and consistent payment.
So if you're using a property management company,
You're not going to have to deal with any of
that. You do have to have some oversight with
the property management company. And if they're
not a great property management company, you're
going to have to have a lot of oversight. But
ideally, you're going to have some simplicity
and consistency with a long -term rental strategy.
It's straightforward. You can get rental comps
easily. And there's minimal involvement for the
investor if they want. So some of the cons of
this strategy are going to be your rental income
is limited. It's on the lower end of rents. Long
-term rent is not necessarily maximizing the
income potential of that property. And so you
might be leaving some money on the table. Also,
because you're entering into a tenant -landlord
relationship, these tenants, depending on...
Where your properties are located could be well
protected. You can have to go through the eviction
process. It could take a long time. There could
be a lot of damages to your property that you're
going to have to pay for. And so these properties
tend to get more wear and tear, surprisingly,
than short -term or medium -term because you
do have that turnover. People generally are on
their best behavior. you tend to have more damage
and higher chance of having an eviction. Again,
this can be mitigated with great tenant screening,
but even with adequate tenant screening, expect
to go through an eviction during your time owning
the property. So that's long -term rentals. Next
strategy that we're going to go over is going
to be short -term rentals. So these are typically
Airbnb or VRBO. They're vacation homes. And the
rent, you're typically renting them out for less
than 30 days. They are vacation. One day, two
day, a week. They are vacation homes. So they're
typically going to be located in markets that
have... amenities and sites that people are going
to want to go to so they're in mountain ski towns
they're in theme park towns they are in any sort
of place where tourists are going to want to
come a big city that attracts a lot of tourism
you know a los angeles or you know maybe a miami
so a destination so these properties are typically
going to look like vacation homes so high -end
amenities, very specialized. So they might have
like special decorations depending on who they're
marketing to. There's like, you know, a subset
of like bachelorette party places. And there's
also like college football game theme places.
And so really you're looking at these are vacation
rentals. You're in the hospitality business if
you're doing a short -term rental. So the pros
of doing this are that it is, can be very lucrative
in that. If you have a place that is in high
demand, in a high demand area, you can command
the premium and you can do very well with a short
-term rental. Some of the cons are going to be
that this space has become more competitive.
So to stand out, you need to have more expensive
high -end amenities or a theme that resonates
with people. So the Airbnb and Vrbo space has
just become more competitive in general, especially
in the last five years. You really have to be
an expert operator to succeed. And another con
is going to be regulations. A lot of places are
clamping down on Airbnbs. They're trying to regulate
them more. And so this can be an issue that could
impact your bottom line and something you're
going to want to pay attention to wherever you
decide to purchase your short term rental. Another
thing is going to be operating expense. So if
you're not the one who wants to do the amount
of communication it takes, coordinating with
guests, checking them in, answering all their
questions, changing out the toilet paper, washing
the towels, washing the sheets, it is very labor
intensive. And so you could either do that yourself,
but if you're going to handle it yourself, it's
going to be a lot of work. If you want to have
a property management company that focuses on
short -term rentals, take over. all your management,
well, that's going to cost you a pretty penny.
So I mean, upwards of 25 % and even 35 % is going
to go to these short -term property management
companies that are going to handle that all for
you, but at a cost which is going to significantly
eat into your bottom line. And so those are some
of the cons. Next up on our list of investment
strategies is going to be medium -term rental.
So this is something that I'm personally looking
into converting some of my long -term rentals
into is medium -term rentals. So medium term
rentals, like short term rentals, are going to
be fully furnished. The utilities are generally
going to be included and they're going to be
for stays that are 30 days or longer. A lot of
times these are going to target like traveling
nurses or people who have insurance claims and
need to live in another house for a few months
while their home is being repaired. It could
be like college professors who are temporary,
could be people moving to the area who just need
a few months to get acclimated. I think the demographic
for this strategy is going to expand because
less and less people are wanting to like drag
around all their stuff. So it's not about stuff
as much anymore. It's about like the amenities.
So it's a little bit less intense than. a short
-term rental because you're not necessarily dealing
with a vacation type environment. These people
are definitely going to be interested in being
closer to amenities or closer to work. So if
they're a traveling nurse, they're going to want
to be pretty close to the hospital or they're
going to want to be in a desirable area that
they can sort of maximize because although they're
medium -term renters, they're not vacationing.
They might have an element of that in their stay,
especially if they're like kind of digital nomads.
So people that kind of move around just looking
to explore different areas and they work from
home, they're going to want to be in like sort
of the hippest area or someplace that's near,
you know, what's going on. They're going to want
to be near the action. And so some of the pros
of this are that it's less intense than a short
term rental. So because it's 30 days plus, you're
going to have to handle less communication. there's
going to be just less must less fuss because
they're just saying longer you're also going
to be able to maximize your income a little more
than a long -term rental because you're going
to be able to charge a premium because it's furnished
you're providing all utilities and wi -fi and
then you know those little extras um you know
they might have a big screen tv you're gonna
have you know nice beds so it's gonna be a furnished
place that's gonna come out a bit of a premium
And so it's kind of the sweet spot between a
short -term rental and a long -term rental. And
the advantages are that sometimes, or a lot of
times, depending on the area, of course, these
aren't going to fall under landlord -tenant laws.
And they're not going to be Airbnbs or verbos.
I think that's going to be... I think they can
fall under landlord -tenant laws if they stay
long enough. but they're not regulated like airbnbs
so you got to check your local jurisdiction but
i think a lot of times if it's like 28 days or
more they don't count as short -term rentals
and so they don't fall under that potential excessive
regulation or regulation that you're seeing in
the airbnb and burbo space so it's kind of a
way to skirt around that but still maximize the
income of your home And those are medium term
rentals. Some of the cons similar to short term
rentals are it's going to be a little more intensive.
There's a little bit more expense up front in
furnishing each room. And so you're going to
see a little bit more of an upfront cost. Again,
this should all be baked into the cake. So where
you're going to be making money, but it's going
to take a little bit longer because of that expense.
Next up on our list of investment strategies
is one that I am coming around to, but I'm still
skeptical about, but I'm willing to give it a
shot or at least a consideration. And that is
the co -living space or what's commonly known
as like rent by the room. And so this is really
an interesting area if you can kind of wrap your
mind around it. And the idea is that you are
maximizing the space in your home and you're
renting to people who are basically renting by
the week. So each room in the home has its own
locked door. And then there's common areas and
common bathrooms. Some of the bedrooms with en
suites you could charge more for. But each room
is going to be its own separate entity. And so
this is done through sites like PadSplit is a
big one. They're not in every market, but they
screen tenants. They have a membership portal
and then they onboard those members. They do
background checks. They make sure that these
tenants can pay and then they rent your room
by the week. And so really it's about maximizing
bedrooms in a home. And I've seen people like
frame in their dining room to make that into
another bedroom. I mean, you can get kind of
nuts with it. but the homes i'm i'm kind of considering
for this strategy are more like these five six
bedroom places where you don't need to do a lot
of renovation um but you can still maximize the
amount of bedrooms so each of these goes from
you know in my market here in vancouver they're
like two to 375 a week um depending on you know
obviously the amenities But this is a little
bit different than like a room share because
typically these are like they're not owner occupied.
Every room here is rented by somebody. So it's
a little different than these sort of room share
sites like Roomster. This is a really interesting
population because what I think this is doing
is really you're trying to turn your place into
a multifamily. Basically, you're trying to turn
your single family home into an apartment. The
tenants that you're renting to, they can't afford
a one or two bedroom place because it's too much.
They're looking for something that's clean, that's
furnished, that's in a decent area, that's safe,
but they don't want to pay a lot of money for
it. So they're willing to do this room share
thing. And so, you know, if you're doing 250
a room, sorry, 250 a week. you know that's a
thousand dollars for one room so you got like
five rooms you're looking at five thousand dollars
and then if you have an ensuite with a bathroom
that you could charge more for that's even more
so you're really juicing up your single family
home and really making it into a multi -family
so that's kind of the pros of it is that you
can maximize your income pretty quickly you know
depending on how I wouldn't want to do a lot
of modification to a home because then if you
wanted to go and sell it, it's kind of a weird
layout. And so I would just purchase these five,
six, seven bedroom homes and then just do those
by a rent by the room strategy. Because a lot
of times those homes don't rent very well. Like
people aren't usually looking to rent a seven
bedroom home unless it's in an area where you
could do short term rental, like it's in a high
demand vacation area or city. then that would
be great. But for this strategy, I'm interested
in it because you can maximize that income, but
you don't have the constant communication you
do with a short -term rental. So the cons of
it are it's kind of new and you're kind of relying
on the platform to do a lot of your due diligence.
I think pad split takes like 8%. uh fee which
seems well worth it that's kind of your standard
property management fee but i don't know how
much you have to change out toilet paper and
this and that like um and i do worry about disputes
and i do worry about tenant quality because this
does have like kind of a house i've heard it
referred to as like a halfway house model but
honestly i think these uh tenants for these are
just people who are like trying to build credit
They're trying to save money. They don't want
to, they don't have money for like a giant deposit.
So they want to get in some place for less money.
And that's kind of the advantage of it. And I
see this being very popular in the future because
we're just headed to renter nation. People are
just going to be renting. Prices are unaffordable.
There's going to, there's a need for affordable
housing. And so this really kind of the ideal
candidate for this is like people who are responsible
and are kind of building, they just don't have
a lot of money. You know, maybe they will in
the future. They're just kind of starting out.
They need a safe place. They don't want a lot
of hassle. It's very, very gen alpha. Like they
want to furnish room. They don't need all the
extras. And this is serving a growing community.
So I'm pretty excited about it. I haven't done
it yet. I'm thinking about it. I'm looking at
it. Pad split is not in my areas where I invest.
So they're not in Minneapolis, Minnesota. They're
not in Vancouver. So I'm hoping to kind of get
it kicked off here. Maybe like get. get a property
and try it out. And so we'll see what happens.
But those are, you know, those are the pros and
cons of these investment strategies. If you have
an investment strategy that you use that you
like, I'd love to hear about in the comments.
Or if you're interested in one of these strategies
or have questions about them, let me know in
the comments as well. I'm happy to answer those
based on what I know and hope you've enjoyed
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