How to underwrite a mid-term rental: a step-by-step guide

1. Why an MTR underwrite is different

A long-term underwrite can treat revenue as rent times twelve. A short-term underwrite lives and dies on nightly rate and seasonality. A mid-term underwrite sits between and borrows the hard parts of both: revenue depends on a furnished monthly rate that varies widely by ZIP, occupancy depends on how quickly you re-place the unit between 1–6 month tenants, and the expense stack includes items neither sibling strategy carries in the same way, furnishing amortization and included utilities above all. Every step below exists to handle one of those differences.

2. Revenue: AMR from real comps

The revenue input is the average monthly rate (AMR) your specific unit can ask, and there is exactly one defensible source for it: active 30+ night listings in the same market that match your bedroom count and quality. Not a nightly ADR times 30. Not the citywide average, a 1-bedroom AMR and a 4-bedroom AMR can differ by thousands. Build a comp set of listings that genuinely look like your unit, discard outliers, and take the band, not a single point.

This is the step MTR Analytics automates: Comparables pulls the real listings with monthly rent, occupancy, and revenue, and computes per-bedroom AMR bands from the comps you keep.

3. Occupancy: model the placement gaps

Mid-term vacancy doesn't arrive as scattered empty nights; it arrives as gaps between placements. A unit that hosts four 13-week contracts back-to-back is at 100%; the same unit with three weeks of gap after each contract runs near 80%. Underwrite with a placement-gap assumption you can defend from market occupancy data, and check how demand seasonality in your market (hospital contract cycles, academic calendars, project timelines) concentrates those gaps. Market occupancy for real 30+ night listings is shown per market in Market Intelligence.

4. The MTR expense stack

On top of the standard ownership costs (mortgage, taxes, insurance, HOA, maintenance), a mid-term underwrite must carry:

• Utilities, included. Mid-term tenants expect all-in pricing: electric, gas, water, internet. Budget them at realistic local levels, not hopes.
• Furnishing amortization. The furniture, kitchen, linen, and setup budget is real capital; amortize it over its useful life (commonly a 3–5 year horizon) rather than pretending it was free.
• Turnover costs. Deep clean and refresh between tenants, cheaper than weekly STR turnovers, but not zero, and tied to your placement count.
• Channel costs. Listing fees or booking commissions, depending on your channel mix.

5. The decision metrics

With revenue and expenses honest, the standard metrics do their usual jobs, briefly:

• Monthly cash flow: what's left after every cost above, the number you live on.
• Cap rate: NOI over price, for comparing properties independent of financing.
• Cash-on-cash return: annual cash flow over total cash invested, and for MTR the denominator must include the furnishing budget, a commonly missed line that flatters returns when omitted.
• DSCR: NOI over debt service; lenders underwriting the property's income usually want comfortable headroom above 1.0, and it's your margin of safety when occupancy disappoints.

The formulas:

6. The MTR vs LTR premium: the go/no-go number

The final and most important check is one most calculators skip: run the same property as an unfurnished long-term lease and compare net results. The furnished monthly strategy carries furnishing capital, utilities, turnover, and more of your time; it has to pay for all of that with room to spare. If the MTR net beats the LTR net by a healthy margin, the extra operational load is being paid for. If the premium is thin, take the boring lease, the option to switch later is free.

For context, the median U.S. ZIP's furnished monthly rate runs 77% above its Census median rent (national numbers). That is a gross rate gap. After furnishing, utilities, turnover, and vacancy, the net premium on a given property is far smaller, which is why it has to be computed per address.

The Property Analyzer computes this premium for any U.S. address alongside cash flow, cap rate, cash-on-cash, DSCR, and NOI, with every assumption exposed for stress-testing.

7. Worked example (illustrative numbers)

Round numbers to make the mechanics concrete, not market data. A 2-bedroom near a hospital cluster:

The lesson in the shape of it: the deal works because effective AMR clears the full stack including furnishing amortization, and because the MTR net comfortably beats the LTR alternative. Drop occupancy to 70% and the premium over the long-term lease evaporates, which is precisely what the stress tests below are for.

8. Stress tests before you commit

• Occupancy −15 points: does the deal still cash flow with two extra months of gap per year?
• AMR at the bottom of the comp band: your unit is unproven; underwrite entry pricing, not the best comp's rate.
• Fallback to LTR: if mid-term demand disappoints, does the unfurnished lease cover the mortgage? A safe deal has a floor, not just a ceiling.
• Demand concentration: if one hospital or employer generates most of the demand, underwrite the possibility that its hiring slows, check the driver mix in Demand Drivers.

Frequently asked questions

How do you calculate mid-term rental income?

Multiply the AMR your unit can ask, from 30+ night comps with the same bedroom count, by expected occupancy. A $3,400 AMR at 80% occupancy is $2,720 a month of effective rent before expenses.

What occupancy rate should I use for a mid-term rental?

Model the gaps between placements instead of a flat rate. With 13-week contracts, one week of gap per contract is about 93% occupancy and three weeks is about 81%. Then stress-test 15 points lower.

What DSCR do lenders want for a rental property?

Minimums vary by lender, commonly between 1.0 and 1.25. Ask how the lender counts furnished monthly income before you rely on it in the loan.

Should cash-on-cash return include furnishing costs?

Yes. Furniture, kitchenware, linens, and setup are cash you put into the deal, and leaving them out flatters the return.

Is a mid-term rental more profitable than a long-term rental?

Sometimes. Furnished monthly rates usually run well above long-term rent, but the net premium after furnishing, utilities, turnover, and vacancy is much smaller and varies by property. Underwrite both strategies on the same unit and compare net cash flow.