Does a first nightly rental have to work as a plain long-term rental too, or is that rule just deleting all the good deals?

Before anyone argues about the floor, ask her what her furnishing number is and then add 40% to it. Every single one I've scoped came in over, because the first pass prices a couch and the second pass discovers you need window coverings in every room, a second set of everything soft, and someone to assemble it all. That overage comes out of the same cash she's counting on as her cushion for a bad first winter.

Strict version, and I paid to learn it. I had two nightly units in a beach-adjacent town that voted in a residential-zone restriction with a phase-out. One of them rented long-term at $1,600 and carried itself the day I flipped it. The other was a converted space with an odd layout that no twelve-month tenant wanted at any price I could charge, and I sat on it for five months before I sold at a loss. The rule isn't about the good outcome. It's about how you exit the bad one without a fire sale.

What does mid-term actually mean here? Is a 30-day booking still going through Airbnb, or is that a different kind of tenant with a lease? I've read the word four times in this thread and I don't think I know what it is.

@juniper, mid-term usually means stays of 30 days or more, often furnished, often billed monthly. Travel nurses, people between houses, contractors on a long job. Sometimes booked through the same platforms, sometimes on a short written lease. It matters here because a lot of local ordinances define a short-term rental by the length of stay, commonly under 30 days, so a 30-day-plus stay can fall outside the restricted category in some places. That definition varies by city and state and you'd have to read the actual ordinance for the town you're buying in rather than assume the 30-day line applies.

@lantern, the thing your client should price isn't occupancy. It's how hard it is to change the rules where she's buying. A town with a written registration program and a five-year history of renewing them is a different asset than a town where the whole thing sits on nobody having complained yet.

On the cleaning side, since that's the part of her spreadsheet I'd actually see. In the markets my crew works, a three-bedroom turn runs $130 to $190 depending on how much laundry stays on site and whether there's a hot tub. Beginners plug in one number for the year and then discover that a same-day turn between a 11am checkout and a 3pm check-in either costs a premium or doesn't happen. If her model has 68% occupancy, that's a lot of same-day turns in July.

So is the strict version basically just saying buy a normal house? Genuine question, I'm two weeks into reading any of this.

@rigging, yes, more or less, and I think that's the honest shape of it. I came here wanting income that isn't a second job and this whole thread is people describing a second job. Even the ones defending the high numbers are describing same-day turns and pricing software.

How do you even get the long-term rent number for the test? For nightly I can at least look at listings. For twelve-month rent on a cabin in a small town there might be four rentals in the whole place and none of them look like it.

@ember, in a thin market you call two property managers in the county and ask what they'd sign a lease at today. They'll tell you, because they'd like the listing. If neither of them can name a number, that's your answer about the fallback.

I hold land for decades so my bias is obvious. I've never once bought something where the good outcome required a third party to keep permitting me.

I've been building a buy list for eight months and the strict rule kills every property on it. Every one. The mountain cabins that produce $70k of bookings rent for $1,200 a month to a long-term tenant if you're lucky, and the small-city duplexes that pass the test produce $28k of bookings and aren't worth furnishing. So the rule isn't wrong, it just means the answer to "should I do short-term rentals" is mostly no. Which might be the real answer for most people and nobody wants to say it.

Dumb question that I'd have kept to myself in person. When you run the long-term fallback test, do you get to keep the furniture in the house and charge more for a furnished lease, or is the realistic version that you sell it all at 20 cents on the dollar and rent it empty? Because those are pretty different numbers and I've never seen anyone say which one they mean.

@compass, from what I've seen the furnished twelve-month lease is a small market almost everywhere outside of a few corporate-heavy cities, so assuming a premium for it is optimistic. Selling the contents in a hurry is closer to what actually happens.

I'll take the other side properly because everyone here is agreeing with each other. The long-term floor is a rule for people who don't want to do the work of underwriting. My version: pull twelve months of actual revenue for the eight closest comparable listings, take the number at the 30th percentile, not the average, and cut another 15% for your first year while your reviews are thin. If the deal survives that, buy it. If it needs to be at the 70th percentile to work, walk.

That test kills more bad deals than the long-term rent test does, because plenty of houses cash flow at $1,850 of rent and still lose you money nightly once you count the turns. The long-term test tells you about your exit. It tells you nothing about whether the business works.

Five years of servicing these places and the ones that failed didn't fail on occupancy. They failed because the owner was three states away, the cleaner stopped answering, and the reviews went from 4.9 to 4.4 in one summer. Once you're at 4.4 in a crowded market you're competing on price with people who have better photos. @flint's 30th percentile test doesn't save you from that, because by then you're not in the comparable set anymore.

Trying to convert this into something I can actually apply instead of reading for another six months. Two tests, both have to pass. @flint's 30th-percentile-minus-15% for whether the business works, and the long-term or mid-term rent floor for whether you survive the ordinance. If a property only passes one, you're taking a specific named risk and you should be able to say out loud which one.

@flint, where are you getting twelve months of actual revenue for eight comparable listings? The paid data tools estimate it from scraped calendars and a blocked night looks identical to a booked night. In small markets I've seen those estimates off by 30% in both directions. I'd trust the ones where a local manager will show you real blended numbers across their portfolio, and I'd treat everything else as a range rather than a figure.

The document question nobody has asked. If she's buying a place with an existing registration or permit, whether that permission survives the sale is written in the local ordinance and it goes both ways depending on the jurisdiction. Some transfer with the property, some die at closing, some sit behind a cap with a waitlist. And if there's an HOA, the CC&Rs and any recorded amendments can restrict nightly rentals independently of what the city allows, and amendments can pass after she closes. Read both before she gets attached to a spreadsheet, and have an attorney in that state read them too.

Living through the middle of this right now. Town passed a 90-day annual cap on nights rented for non-owner-occupied properties. My best month alone was 27 nights. The cap didn't ban anything, it just deleted about 55% of my revenue with a nine-month notice period, and my long-term fallback rent is $1,500 against $1,680 of payment plus escrow. I'm covering the gap out of pocket while I decide. So the floor test wouldn't have fully saved me either. It would have made the gap $0 instead of $180 a month, which honestly is the whole difference between annoying and a problem.

@quarry's example is the useful one. The floor test isn't binary protection. It moves you along a scale from "I sell at a loss under pressure" to "I hold and wait." For a first property with one asset and no other income streams to absorb a bad year, being able to hold is worth giving up a lot of upside. Someone with six units can carry a dead one and go buy the cabin.

Two paper items that decide more of this than the occupancy debate.

Insurance. A standard homeowners or landlord policy commonly excludes or limits business use, and nightly hosting reads as business use to a lot of carriers. Platform-provided coverage is a supplement with its own conditions and exclusions and it isn't the same thing as a policy written for the use. Get the actual declarations page and the exclusions in writing from the carrier before closing.

Loan documents. Occupancy and use provisions vary by loan program and by lender, and buying an owner-occupied-priced loan and then listing the place nightly is a conversation you want to have with the lender in advance and in writing, not after. Both of those are worth an hour with the professional who's licensed for them.

Adding to @fathom on the debt side. Lenders that underwrite rental income don't all treat nightly revenue the same way. Some will only credit market long-term rent from an appraiser's rent schedule regardless of what the calendar earned, some will use twelve months of documented platform history, and some won't touch the property type at all. Which one you get changes your down payment materially. Terms and overlays change often, so anything specific has to be confirmed in writing with the actual lender rather than taken from a forum. Practically, if her lender already ran it at long-term rent and it failed, she may find the strict test isn't optional for her, because it's being applied to her by someone else.

Nobody's costed the management. If she's not doing the work herself, a full-service co-host in most places takes 18% to 25% of gross plus keeps some of the cleaning fee. At $63k of bookings that's north of $12k a year. Does her 68% occupancy model have that line in it, or is she the labor?

Wear is the line everybody leaves out. In a house with 200-plus turns a year I see cabinet hinges, faucet cartridges, and drywall corners go at maybe four times the rate of a long-term rental. It's small money each time and constant. @thatch is right that reviews die from that stuff more than from anything dramatic.

The disagreement in this thread is really about whether you're underwriting a point estimate or a distribution, and everyone arguing for the strict floor is arguing for the distribution without saying so.

The way I'd write it for @lantern's client. Model three columns. Column one is @flint's discounted nightly case, which is the deal she thinks she's buying. Column two is the same house at 45% occupancy and a 20% lower ADR, which is what a saturating market looks like two years in. Column three is nightly income at zero and long-term rent as the only revenue. Then answer one question per column: in each, how many months can she fund the shortfall from cash on hand before she has to sell.

If column three gives her fewer than about twelve months of runway, she isn't choosing between two underwriting rules. She's making a bet on a local council she doesn't control, with her whole position, on her first property. That may still be a reasonable bet in a town with a stable, long-running registration program, and it's a terrible one in a town that's currently studying the issue. The regulatory read is doing more work in that decision than any occupancy assumption in the spreadsheet.