Chapter 10: Short-term and mid-term rentals: revenue with a job attached
Somewhere on your feed this week, a screenshot is collecting likes: a three-bedroom house earning $40,000 a year on a booking platform while the landlord next door collects $23,400 in rent. Both numbers can be true at once. The screenshot shows revenue. The lease next door shows something much closer to income. This chapter prices the gap between the two, then introduces the quieter strategy sitting in the middle of it.
The revenue math that sells the courses
A short-term rental (STR) rents by the night, furnished, to travelers. Its revenue formula is simple: nightly rate multiplied by nights booked. Take a house in the same class as Marcus and Tina's $240,000 rental. On a long-term lease it brings $1,950 a month, or $23,400 a year. Run as an STR averaging $185 a night at 60% occupancy, it books about 219 nights: $185 × 219 = $40,515 a year, roughly $3,376 a month.
That is 73% more revenue from the same walls, and it is exactly where the course-sellers stop reading. Revenue is the wrong line to compare. A long-term tenant pays the utilities, brings a couch, and lives with the paint color. A guest pays for one weekend and expects a stocked, spotless, professionally photographed small hotel.
The 60% occupancy figure deserves its own warning, because it is an average that hides a rollercoaster. In most leisure markets, summer carries the year while January barely covers the light bill. The mortgage payment, unhelpfully, is the same every month.
The cost stack the screenshot skipped
Every line between revenue and income
- Furnishing: $15,000–$30,000 to outfit a whole house before the first booking, and it wears out.
- Platform fees: roughly 3% on a split-fee listing, up to 15% or so if the host absorbs the guest fee.
- Cleaning: a paid turn after every stay; guest cleaning fees cover most of it, rarely all of it, never the supplies.
- Utilities: electric, water, internet, streaming. The guest pays none of them.
- Dynamic pricing software, STR-specific insurance, permits, lodging-tax filings.
- Your hours: messages, reviews, restocking, the 11 p.m. lockbox call. This is the biggest line and the one priced at zero in every screenshot.
Put real numbers on that list for the $40,515 house and the year looks like this:
| Annual STR operating math | Amount |
|---|---|
| Gross revenue ($185 × 219 nights) | $40,515 |
| Platform host fee (3%) | −$1,215 |
| Cleaning and supplies not covered by guest fees | −$2,600 |
| Utilities, internet, streaming | −$3,600 |
| Dynamic pricing software | −$360 |
| STR insurance upgrade over a landlord policy | −$1,200 |
| Furnishing reserve ($18,000 set over 5 years) | −$3,600 |
| Permits and lodging-tax administration | −$400 |
| Extra wear and repairs | −$2,400 |
| Net before mortgage, property tax, and base insurance | $25,140 |
So the STR nets about $2,095 a month before the mortgage. The same house on a long-term lease, after 7% vacancy, 8% management, and 6% maintenance, nets about $1,551 on the same basis. The honest premium is roughly $544 a month, not the $1,426 the revenue comparison implied.
Now price the job. A self-managed STR takes something like 15–25 hours a month: guest messages, pricing adjustments, scheduling cleaners, restocking coffee and toilet paper, and managing the review score that decides your search ranking. Against a professionally managed long-term rental at about one hour a month, the STR premium works out to roughly $29 an hour. That is real money, and it is hourly money. You have bought yourself a hospitality business with a mortgage attached.
The proof is what happens when you try to make it passive. STR co-hosts and managers typically charge 20–25% of gross revenue. At 20%, that is $675 a month off the top, which drops the net to about $1,420, below the boring long-term lease. The STR premium is, to a close approximation, wages.
None of this makes short-term rentals a bad business. It makes them a business, and the owners who do well treat them like one. They buy where demand has more than one engine (a hospital and a university beat a single festival weekend), they hold deeper reserves because January's $40 nights still come with a full mortgage payment, and they track their hours the way chapter 2 taught, since profit per hour is the score that separates an investment from a job you bought.
Run your own market through the comparison before you believe anyone's screenshot:
Regulation is the existential risk
Every other risk in this guide erodes returns. This one deletes them. STR rules are written by city councils, and a single vote can convert your hospitality business back into a regular house: permit caps, primary-residence-only rules, minimum-night requirements, or outright bans. Cities have passed all of these, sometimes with grace periods, sometimes without. Your mortgage survives the vote either way.
You cannot diversify away a city council, so underwrite around it instead. Before any other math, run the property as a plain long-term rental with the chapter 4 and 5 numbers. If it works as an LTR, the STR upside is a bonus and the downside is a pay cut. If it only works as an STR, you own a leveraged bet on municipal politics.
Never underwrite an STR that does not work as a long-term rental. If the LTR math fails, the deal fails, whatever the nightly rate says.
Two practical checks belong in week one, before the spreadsheet gets exciting: read the actual city ordinance (not a Facebook group's summary of it), and read the HOA covenants if there is an HOA. Plenty of buildings ban rentals under 30 days even where the city allows them.
The quiet middle: mid-term rentals
Between the nightly grind and the annual lease sits the mid-term rental (MTR): a furnished unit rented for 30 days or longer, usually to traveling nurses, relocating families, insurance-displaced households, and remote workers. Stays of a month or more typically fall outside STR ordinances and hotel taxes, which removes most of the regulatory risk in one move. The guests are vetted professionals on stipends or corporate budgets, the turnovers happen a handful of times a year instead of twice a week, and the rent carries most of the furnished premium. In 2026, with STR rules tightening in many cities, the MTR has become the strategy that quietly works without a course attached to it.
The premium is smaller and so is the job. The furnished house from our example might rent for $2,750 a month to a relocation tenant, with the owner covering utilities and keeping a furnishing reserve. After realistic gaps between stays, that nets about $1,630 a month against the LTR's $1,551, for perhaps 3–5 hours of monthly effort. Finding the tenants is its own small craft: furnished-housing platforms, hospital staffing coordinators, and insurance housing companies fill these units, and a landlord who answers email the same day stays at the top of their lists.
Sofia ran this experiment on real walls instead of a spreadsheet.
When a tenant gave notice in her $650,000 fourplex, Sofia furnished the empty unit for $8,000 and listed it for 30-day-plus stays near the hospital district instead of re-leasing it at the usual $1,450. A travel nurse signed for $1,995 a month, utilities included. Sofia handles the bookings herself; her property manager keeps the other three units. Her side-by-side after a full year, per month:
| Monthly, one unit | Long-term | Mid-term |
|---|---|---|
| Rent | $1,450 | $1,995 |
| Vacancy and gaps between stays | −$102 (7%) | −$239 (12%) |
| Utilities and internet | $0 (tenant pays) | −$240 |
| Furnishing reserve ($8,000 over 5 years) | $0 | −$133 |
| Cleans between stays | $0 | −$50 |
| Management | −$108 (8%) | $0 (Sofia runs it) |
| Net | $1,240 | $1,333 |
| Her hours per month | about 0 | 3–4 |
An extra $93 a month, about $31 an hour for the booking and turnover work, plus an option she values more: if the hospital pipeline dries up, the unit goes back on a regular lease at $1,450 in one afternoon. The experiment passed her own rule because it never needed the premium to survive.
The table leaves out the lines that are identical either way for her building: maintenance, capex, and the unit's share of taxes and insurance. Those costs do not care who sleeps there.
The tax footnote everyone has heard about
You will run into the STR loophole: when average guest stays are 7 days or less and you materially participate, rental losses can offset regular income without real estate professional status. It is legitimate, it is popular, and it is audited, which is exactly why it gets a full honest treatment in chapter 13 rather than a cheer here. Do not buy a hospitality job for the deduction.
Where people go wrong
- Comparing STR revenue to LTR rent. The honest comparison is net to net with an hours row attached, and it usually shrinks the premium by two-thirds.
- Underwriting July as if it were the whole year. Occupancy is a curve, and the mortgage is a flat line through it.
- Skipping the ordinance and the HOA documents. A 30-minute read beats discovering the ban after closing.
- Valuing their own hours at zero. Hire the work out at 20–25% of revenue on paper first; if the deal dies, it was wages all along.
- Buying a deal that only works furnished. The LTR fallback is the floor under everything; without it you are trading on city politics.
Key takeaways
- STR revenue can run 50–100% above long-term rent, but furnishing ($15,000–$30,000), fees, cleans, utilities, software, and insurance shrink the example house's premium to about $544 a month before the mortgage.
- The remaining premium is mostly wages for 15–25 hours a month of hospitality work; hiring a 20% co-host pushed the example STR below the long-term lease.
- Regulation is the existential risk: one council vote can end the business model. Never underwrite an STR that does not also work as a long-term rental.
- Mid-term rentals (30+ days, furnished) keep most of the premium with a fraction of the churn and far less regulatory heat; Sofia's fourplex unit nets $93 a month more as an MTR for 3–4 hours of work.
- The STR tax loophole is real and audited; chapter 13 covers it honestly.
Sources: IRS Topic 415: Renting Residential and Vacation Property · IRS Publication 527: Residential Rental Property · Finvest Tax Playbook