Intro — why underwriting matters
Underwriting turns hope into a repeatable investment process. One well-run unit is luck. A portfolio grown without rules is messy and risky. Use a repeatable mid-term rental underwriting approach so every acquisition either raises portfolio value or gets declined cleanly. This report plugs directly into the Mid-Term Rentals Growth Toolkit — Ops, Finance & Portfolio.
What underwriting for mid-term rentals must answer
Keep this checklist front and center for every deal:
- Will net operating income cover financing and reserves?
- Are local demand drivers stable for 30–180 day stays?
- Can operations run without owner firefighting?
- What are expected turnover costs and vacancy risk?
- How fast can we rebook after checkout?
If you can’t answer these clearly, walk away.
Core metrics and definitions
Use consistent math across markets.
- Published monthly rate (PMR): the advertised 30+ rate.
- Effective occupancy (%): percent of month actually rented.
- Gross monthly revenue (GMR): PMR × effective occupancy.
- Turnover cost per event (TC): cleaning, restock, admin.
- Monthly operating expense (OpEx): utilities, platform fees, management.
- NOI per month: GMR − (OpEx + expected monthlyized TC).
- Break-even occupancy: occupancy that yields NOI = 0 after debt service and reserves.
Use conservative inputs. Assume lower occupancy and higher turn costs than you expect.
Quick acquisition criteria (pass/fail gates)
Before deep modeling, filter deals fast.
- Market score ≥ threshold (demand drivers, comps, velocity).
- PMR supports target NOI at conservative occupancy (e.g., 70%).
- Turnover logistics feasible within building rules.
- No obvious HOA or zoning bans.
- Local cleaner & co-host available at expected rates.
- Financing terms acceptable (or no financing risk).
If a deal fails two gates, stop.
One-page underwriting model (simple template)
Build a single-sheet P&L per unit.
Inputs (one-time):
- Purchase price / market rent (if leasing)
- Rehab capex (furniture + fixes)
- Closing costs / setup
Monthly inputs:
- PMR (30/60/90 as needed)
- Expected occupancy %
- Platform fees %
- Utilities & internet
- Turnover cost per stay
- Management / VA cost
- Mortgage payment (if financed)
- Reserve % for capex/repairs
Outputs:
- Gross revenue
- Total expenses
- NOI per month
- Annualized NOI
- Cash-on-cash return
- Payback months (capex / annual cashflow)
Keep the model binary: green = meets target return; red = fails.
Market & property screens for mid-term rentals
What to check in five minutes:
- Is there a hospital, university, corporate hub, or steady construction nearby?
- How many 30+ listings exist and what are their rates?
- Are comparable listings rebooking quickly?
- Building rules: is subletting, leasing, or 30+ stays allowed?
- Access and parking: are move-ins easy for longer stays?
Properties with two or more strong demand drivers move up the list.
Due diligence checklist (deeper dive)
Before signing:
- Title and legal: no rental restrictions in deed.
- Insurance: commercial endorsement available for furnished paid stays.
- Vendor verification: cleaners, locksmith, handyman with references.
- Utility costs: confirm average monthly usage per comparable unit.
- Inspection: HVAC, electrical, plumbing, and mold/moisture risk.
- Lease template: add mid-term clauses and extension language.
- Local tax obligations: confirm TOT or lodging tax rules.
Document everything in the Market Folder.
Risk adjustments and stress tests
Stress-test each deal with conservative scenarios.
- Occupancy shock: drop occupancy by 15% and re-run NOI.
- Turnover surge: increase turnovers by 30% for a year.
- Price compression: reduce PMR by 10% and test payback.
- Repair shock: one major capex event in year 1 ($X).
If the deal fails under two stress tests, require a higher margin or pass.
Financing & portfolio effects
Underwrite both unit-level and portfolio-level impacts.
- Include debt service test: NOI must cover debt service + reserves.
- Use pooled reserves: set aside 8–12% of gross for capex and taxes.
- Correlation risk: avoid markets that all fall together (same employer).
- Exit scenarios: model refinance or sale at year 3–5 with conservative cap rates.
Funding structure affects returns and risk appetite.
Ops integration: can you run it?
Underwriting assumes ops can deliver reliably.
- Ensure SOPs exist for check-in, turnover, and maintenance.
- Confirm local vendor capacity for rapid turnovers.
- Auto flows: booking → cleaner → photo checklist must work.
- Co-host pilot: run one paid test turnover before committing.
If ops fail in pilots, don’t scale that market.
Sample one-line P&L — mid-term rental underwriting example
(Use real numbers for your market.)
- PMR: $2,400. Occupancy: 75% → GMR $1,800/mo.
- Platform & payment fees: 12% → $216. Utilities & internet: $150.
- Management & VA: $150. Turnover costs (avg monthlyized): $75.
- Monthly expenses total: $591 → NOI before debt: $1,209.
- Mortgage payment: $800 → Cashflow: $409/mo.
- Annualized cashflow: $4,908. Capex payback depends on initial setup.
Adjust inputs to match your market.
KPIs to track post-acquisition for mid-term rental underwriting
Monitor these weekly/monthly:
- Occupancy rolling (30/60/90 day).
- Extension conversion rate.
- Turnover cost per event.
- Photo-complete turnover rate.
- NOI by unit.
- Days-to-rebook after checkout.
Use one dashboard for all units to spot trends.
Implementation checklist — run mid-term rental underwriting in 7 steps
- Market quick-scan and score.
- Run one-sheet underwriting with conservative inputs.
- Confirm local ops and vendor capacity.
- Run pilot listing (30/60/90 tiers) for 6–8 weeks.
- Re-run model using pilot results.
- Sign acquisition if targets met.
- Add SOPs and automate booking→ops flows.
Embed each market sheet in your Mid-Term Rentals Growth Toolkit — Ops, Finance & Portfolio folder.
Quick negotiation levers for mid-term rental underwriting deals
Ask sellers/landlords for concessions that matter.
- Price drop to meet target NOI.
- Include some furniture or appliances.
- Longer closing or rent-free period for setup.
- Seller-funded capex credit at closing.
Use small concessions to convert a pass into a buy.
Common mistakes to avoid in mid-term rental underwriting
- Using nightly short-term comps for monthly pricing.
- Ignoring HOA and condo rules.
- Underestimating turnover logistics.
- Skipping vendor pilots.
- Relying on a single channel for demand.
Each mistake adds friction and erodes returns.
Tieback — mid-term rental underwriting in the Growth Toolkit
Underwriting is the finance spine of the Mid-Term Rentals Growth Toolkit — Ops, Finance & Portfolio. Save every model, pilot result, and vendor scorecard to your toolkit. That lets you replicate wins across cities without redoing the whole process.
Final note & CTA — validate mid-term rental underwriting with MiniStays
If you want a channel that feeds month-plus guests while you test deals, list your micro-tests on MiniStays. It focuses on 30+ demand and helps validate assumptions faster.
Start testing and listing on MiniStays → https://ministays.com
