Furnished rent or long-term rent when you model a mid-term unit

So model two, as I understand it, means you buy the property as if you were never going to furnish it at all, and then furnishing it is just something extra you do with a property that already worked. Is that the whole point of it?

If so I don't understand how anyone gets a deal that way in a market where the seller knows what furnished rents are. Sextant, does model two only work when you're buying from someone who was renting long term?

Juniper has the mechanic right. Underwriting to unfurnished rent means the purchase decision survives the furnished strategy failing, and the furniture becomes an operating choice rather than the thing holding up the debt service.

Which model to use depends on one assumption, how durable you think the mid-term rent is in that specific submarket. Two things drive that. The first is regulatory. Most short-term ordinances are written around stays under 30 consecutive days, which is why a 30 plus day minimum sidesteps a lot of that exposure, but the definition and the enforcement practice vary by city and state, and whether your minimum clears the local text is a question for a local attorney reading the actual ordinance. The second is tenant sourcing, which is the less predictable part of this strategy. Traveling healthcare and corporate relocation demand has been durable, but it is concentrated. One hospital system changing agencies can move your occupancy several months in a year.

On the lender question specifically, the treatment of furnished income is not uniform. Some lenders will size on a long-term market rent from an appraiser's rent schedule regardless of what your furnished operating history shows, and others will look at a trailing twelve. Ask for it in writing before you build a model around either one.

Sextant, your 20 percent price gap is really a statement about how much of the premium you are willing to capitalize. Running both models and knowing which price each supports is more useful than picking one, because it tells you what you are betting on.

The lender point is the one I'd chase. If the lender sizes on unfurnished market rent anyway, then model one only affects what you're willing to pay, not what you can borrow, and the gap between those two shows up as cash you have to bring. That seems like the practical constraint rather than the philosophical one.

Still working out how any of this looks from the paper side. Sextant, when a furnished unit gets financed, does the furniture ever end up as part of the collateral, or is it always just personal property sitting inside the deal?

I want income without a second job, and reading this thread the furnished premium sounds like it is the second job. A 35 percent rent premium that comes with utilities, internet, cleaning turns every 60 to 90 days and furniture I have to replace isn't 35 percent to me by the time it lands.

So I voted for the unfurnished floor, but partly because I'd probably never furnish it. Sextant, after your subtractions in model one, how much of that 35 percent premium was actually left?