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Buying real estate for passive income with rent is a classic, safe and profitable investment option. Contracts can be long-term (over 12 months) or short-term (with no period restriction). In recent years, the short-term segment has grown a lot, including the arrival of online platforms such as Airbnb. Long-term contracts have not lost their space in the market. However, another segment is emerging: properties aimed at med-term contracts. This segment grew during the pandemic period, driven by the intensification of remote work. More and more people want 2, 3 or 4 month contracts. However, platforms and solutions are lacking to make this rental format popular.
“Second-Home” + “Income”
More and more investors are attracted to the combination of “second home ownership” and “rental income”.
In Florida, the trend has grown over the past ten years. Most investors want a property they can use, but can also rent when they’re not using it. In this way, they are able to meet the monthly expenses related to the property and, in many cases, make a profit.
This desire was resolved with the intensification of short-term rentals. The city of Orlando is one of the most sought after global destinations to invest in this real estate niche. The well-known Vacation Homes near Disney are the most desired. The city of Miami has also received in recent years several projects aimed at short-term rental, mainly in the Downtown area. The most recent of these is THE CROSBY.
There is also no shortage of real estate options for long-term rentals. Lennar has projected the city of Homestead (South Miami) on the radar of global investors with the long-term rental Pine Vista development. Homes in Pine Vista are earning 5-6% a year.
Florida, therefore, becomes the most sought after destination by investors for this type of investment, as it is a safe, transparent and extremely promising environment. The city of Orlando was considered by FORBES the best destination in the world for real estate investment.
But what about the mid-term rentals?
Mid-Term segment is an opportunity for investors
With the consolidation of remote work, driven in part by the pandemic, more people are working out of the office and becoming digital nomads. This audience is not looking for long-term contracts. On the contrary! They want flexible rental contracts so they can be free to travel and spend time in different places. Nor are they looking for short/very short term contracts, which do not allow a minimum of time to establish their remote bases of work, even if temporary.
A study shows that in the US, the number of digital nomads grew from 7.3 million in 2019 to 10.9 million in 2020 – an increase of 49%.
Of course, it’s not just digital nomads who can benefit from improvements to the mid-term rental process. Other large groups include exchange students and professionals who take long business trips, together creating a large enough market that desperately needs innovation.
It is called “Flexible Living”, that is, a flexible lifestyle where people want to work from anywhere in the world.
However, this niche market, despite the growing demand, lacks digital solutions that face the trend.
There are no Airbnb, Booking or Vrbo-style platforms on the market aimed at this audience. At least, these platforms are not positioned this way.
Recently the company Rentberry took the lead and its executives are excited. Others will emerge. In the case of Rentberry, the idea is to turn its activities to the public that wants to rent for periods of 3 months to 1 year.
Some luxury developments in Florida have noticed this trend and launched in this format. The new Waldorf Astoria Tower, a residential project of the hotel brand, allows owners to rent for a minimum of 3 months.
What to expect from the Mid-Term segment?
The truth is that this medium-term rental falls into a distinct group. The terms are too long to be considered short-term or vacation rentals. They are also too short to be considered a long-term contract. The audience and their needs are also different.
Owners, on the other hand, want to sign a contract to protect themselves, which is not the case in most short-term situations.
While solutions for long-term and short-term contracts have evolved and consolidated, the medium-term rental niche remains unexplored. It is therefore a great opportunity for investors.
It is still too early to conclude what will become of medium-term lease contracts. It doesn’t seem to be just something for the moment and restricted to the pandemic and “new normal” periods. In fact, there is a trend.
Although the segment is in its infancy and there is a lack of solutions and support to make it efficient, safe and dynamic, it is worth paying attention to the practice, as it can be extremely profitable for those looking to earn income from rentals in Florida.
Judging by the expected return on Orlando homes, the future is bright. Orlando vacation homes offer returns between 6% and 10% per year. In some cases they can considerably exceed this percentage. The great advantage is that with the rent income it is possible to pay off the financing installments. This investment leverage strategy, using resources from Florida banks, is what most attracts international investors.
About AMG International Realty
AMG International Realty is a global real estate company specialized in Florida. If you want to know more about rental properties in Florida, contact me right now and chat with me by WhatsApp: +1 (305) 318 6968 (Heloisa Arazi).