The COVID-19 pandemic has brought about a paradigm shift across all major sectors and industries. The real estate market is no exception! With eviction moratoriums, rent freezes, an urban exodus fuelled by remote work, and a decimated travel and tourism sector, landlords and realtors have had their moment of reckoning.
For the discerning eye, the past 18 months have unveiled a wealth of insights signaling the long-term prospects for the real estate market. As it emerges from the pandemic, along with various opportunities that remain hidden in plain sight within the new economic reality.
The COVID-19 Pandemic Is An Unprecedented Shock To The Real Estate Market
The lockdowns and stay-at-home orders over the past year have impacted the real estate market across segments. With retail and office properties almost down to their knees and residential property owners struggling with moratoriums and the inability to find occupants, none have been hit as hard as the vacation rental industry.
With international borders closed, and no flow of workers or students from other countries, this sector has virtually come to a standstill. While the individual dynamics differ based on regions, attractions, property types, and prices, most vacation rental businesses are yet to fully recover.
This unprecedented shock and the unraveling of rental markets followed. However, further emphasized the sustainability and resilience of mid-term rentals over short-term rental properties. As economies around the world reopen, the vacation rental market is likely to wake up to a new normal.
For property owners, medium-term rentals always had more to offer compared to short-term stays. Starting with lesser competition from hotels and inns, fewer regulatory hurdles from local bodies increasingly attacking the AirBnB model, and tenants who are more likely to take good care of the property.
Jump to Mid-Term Business & New Rental Vision
Even in the midst of a raging pandemic, when lockdowns were in full force around the world, a few enterprising property owners pivoted to a mid-term rental model. Targeting remote employees and digital nomads who were no longer restricted to urban areas where their offices were located. With a new vision in mind, these operators are unlikely to move back to the short-term model any time soon.
The industry has seen a surge in bookings for luxury rentals at remote locations where families want to enjoy a hideaway in nature’s proximity. Industry experts believe that getaway destinations close to nature and luxury properties will see growth as the world recovers from the pandemic.
Apart from families, landlords can expect to host tenants whose leases expired; owners who sold their homes and have not yet found a new one; and expats who don’t want to commit to a long-term lease in a city they want to base. Still, not to forget digital nomads looking for calm and convenient places to work and live.
The Pre-COVID Rental Paradigm – Short-Term Vs Mid-Term Rental Models
Short-term rentals skyrocketed in popularity in the past ten years due to various reasons including Airbnb and the gig economy. For landlords and property owners, short-term rental platforms like Airbnb provide an opportunity to earn significantly more than traditional rental income.
In 2017, up to 100 million people used Airbnb to find a place to stay. People love staying with families and individuals offering personalized experiences over hotels. On the same platforms, however, rental bookings for over 30 days are getting more popular. This presents a demand for property owners to become flexible and diversify their offerings to minimize risks and survive the ever-rising uncertainty.
The tech giants are already upping their games to support this trend. Medium to long-term rental platforms today prove to be safer, more profitable, and less demanding as compared to renting properties on short-term.
In the past few months, the mid-term rental market has noted a considerable increase in the number of listings. Not only from private property owners but also hostel and hotel businesses in an attempt to hedge against the losses from slowdowns and uncertainties.
Concerns Associated With Short-Term Rentals
Crazy Amount of Work & Expenses
There is a lot that goes into maintaining a short-term listing on platforms. Constant turnover means you deal with extra costs and efforts associated with renting the property.
For example, taking care of cleaning the place which can eat up profits considerably. You also need to look at the smallest maintenance jobs like changing bed linens every day. When you rent for medium to long term, the tenant has an interest in maintaining and taking care of the property.
Managing a short-term rental property can be highly time-consuming. Hosts should manage check-ins and check-outs, even at night and during weekends. This can turn into a full-time job when the turnover is high. You are also responsible for answering the guest’s questions and addressing repairs.
High Competition With Other Options
Keeping your property always occupied with renters is not an easy job. You face tough competition from hotels and other residences available; your unit may sit unoccupied for long periods.
Long-term rentals, on the other hand, guarantee better profitability and a consistent stream of income.
Possibility of Damage
Short-term renters hardly care about your property and belongings. There is no way to screen the renters in such a model, so you stand a risk of damaging the property, losing items from inside, and other issues. These tenants treat the unit as a disposable item as they often rent it for a night or two.
Benefits of Medium/Long Term Rental With Student Housing
Crisis-Proof Rental Model
As the current trends suggest, the mid-term rental model is a more sustainable mode of renting with reliable, consistent profits, specifically in times of crisis like COVID-19. You generally collect monthly income, regardless of the season.
Less Effort & Expenses
With fully functional platforms like Student Room Flat, landlords don’t need to worry about taking care of tenants and visiting the property.
You don’t have to market the property, clean it or prepare to be rented. Moreover, renters book it online through the platform, so there is little effort and expense on your part.
Better Security of Property
Tenants generally have a sense of ownership for mid/long-term rentals and treat the place well. There is a minimal risk of damage and loss with this kind of renting.
Consistent income is one of the biggest benefits of the mid-term rental model. Tenants generally rent for months together, so you need not worry about finding new people. Your property stays occupied throughout the year.
Newer concepts and innovations rising in response to the pandemic seek to add more value to both renters and property owners. The flat-sharing concept is one such opportunity for real estate market. Furthermore, allows property owners with consistent income even during times of uncertainty.
Platforms such as Student-Room-Flat continue innovating to add value to users from around the world. Overall, this space is starting to heat up with plenty of changes on its way.