Why Midterm Rentals Beat Long-Term Rentals for Cash Flow | Megan Ahern

Megan Ahern (00:00)
Yeah, so I had heard about midterm rentals, but I just thought it would be like more work. I tried the Airbnb thing and hated it. Just hated that constant churn. But I bought a property that was a sevenplex and I called it my sevenplex from hell because throughout the remodel, it took like two years. Everything that could have gone wrong went wrong. We were just so felt like upside down on it and.

had to put way more into the rehab. And so I realized like, I’m not gonna make any money on this thing unless I do something creative. So I decided to try out midterm rentals in that property. And I actually kind of fell in love with it. So now we have, I think 12 units that are midterm rentals.

Micah Johnson (02:14)
Hello everyone, welcome to the Real Estate Pros Podcast. I’m your host, Micah Johnson. And today I’m joined by Megan, who’s been making some serious moves in real estate investing now since 2018. Megan, welcome in, glad to have you.

Megan Ahern (02:26)
Hi, thanks for having me.

Micah Johnson (02:28)
Absolutely,

absolutely. I’m excited for our talk today. You’ve all been getting some really good experience lately with marketing shifts, finding ways to capitalize on it, like doing what the best have to do to survive when things happen. So I’m pumped to dig in and learn more about it. for our folks that aren’t familiar with you yet, tell us a little more about yourself and what your main focus is right now.

Megan Ahern (02:50)
Yeah, so right now ⁓ we are mostly flipping houses. We flipped 40 houses last year or bought 40 to flip. Last year we usually flip around 30 houses a year and we own some single family and small multifamily rental properties that we do midterm rental, long term rental.

We also own some Oxford houses, which are like sober living houses. And I own a staging company and both my husband and I are both realtors. So kind of all things real estate.

Micah Johnson (03:20)
Yeah, nice vertical integration. That’s excellent. So take us back. What led you to where you are today? How did all this come to be?

Megan Ahern (03:31)
So my husband was getting medically separated from the military and we just kind of had a look and say, all right, what do you wanna do when you grow up? He didn’t wanna go to college, that’s why he joined the military in the first place. All the jobs that really transitioned him from military to like civilian, he wasn’t able to do anymore because of that.

⁓ injury. And so we decided to just go for broke on real estate. And we actually sold everything we owned in California, I sold our house there and moved into a travel trailer and moved to Nebraska because we had picked that as like our target market ⁓ and parked the travel trailer behind our projects for the first year until we could prove to ourselves that it actually worked.

Micah Johnson (04:15)
Now why Nebraska? What about that market?

Megan Ahern (04:20)
We wanted to buy rental properties and so we just really felt like we couldn’t make the numbers work in California and it was so much competition there. So we were trying to pick like a very landlord friendly state, most likely Midwest, somewhere where like the cost to rent ratio was better. And we decided on Lincoln because it has very low crime for the low income areas. So I wanted to be, as a woman, feeling safe that I could be in these kind of lower income

neighborhoods ⁓ and also it had multiple colleges it had businesses moving into the area so it had like a good renter base there.

Micah Johnson (05:46)
So I want to dive into the what you learned in that year, right? So you’re obviously still doing it. You proved to yourselves you could do it, but take us through that. What’s that like?

Megan Ahern (05:56)
Yeah, it was crazy. So we had a little bit of proceeds from the sale of our California house, a little bit of separation bonus from the military and VA disability. And we just realized, like, if we live in a trailer, we could live off of the VA disability per month. ⁓ And so we just parked it behind the houses and we ended up buying a few rentals with that seed money that we had and kind of ran out of seed money pretty quick.

And we also ran into issues of like, nobody wanted to lend to us because we didn’t have a real job. And so we hit that ceiling of conventional loans pretty quick. And that’s when we turned to flipping houses to also make those big juicy chunks of cash that would allow us to buy more rental properties.

Micah Johnson (06:44)
How long did it take till you got into flipping? it that in that first year or?

Megan Ahern (06:49)
Yeah, the end of that first year we sold our first flip.

Micah Johnson (06:53)
Nice. what about that process? I mean, besides the big chunks, it? What do you enjoy about it?

Megan Ahern (07:01)
I like the transformation part of it. I think especially in the beginning, I was like very into the design aspect of it and really putting out a good product. I honestly, because we flip just hyper locally, we’ve built a really good brand for ourselves as being kind of high quality flippers and doing it right, even if it’s maybe not the most profitable way of doing it. But we have that brand in town. So I love.

driving through town and being like, I flipped that, I flipped that, I flipped that. And knowing that I’ve kind of changed the landscape of this little city, yeah, gives me the warm and fuzzies.

Micah Johnson (07:37)
I love the way that real estate pays your emotional paycheck. Like it pays a great financial paycheck, but it gives, there’s all these little things that happen during it. And that’s one of the ones I respect the most about flippers is to take something that’s not great and to make it great and do it the right way. Cause I got into real estate as a realtor and I saw how it looked like when people get into a home, I’ve seen the flip that is not good at all and turns into a nightmare. And it’s

It is, it’s awesome to get in there because people are going to live there, eat there, love there, sleep there, cry there. All the things are going to happen there. And it’s only there because you put it there and you went through what it takes. And it’s not as, is it a simple process? Yes. Is it easy? No, no, it’s just not. That’s why everybody doesn’t do it. So kudos, much respect for, for doing that, especially getting to 40 a year. That’s not an accident or 30 years, not an accident. Y’all built a machine to do that. That, that takes quite a bit of effort.

And then you mentioned sober living houses. Take us there for a second. Oxford homes, is that what you called it?

Megan Ahern (08:40)
Yeah, Oxford House is ⁓ almost like a pseudo government program, but it’s nationwide. So they have to the guys have to be already sober, but it’s really kind of a community house feel that helps them to stay sober. But for us on the landlord side, it’s very hands off, which is why we wanted to get into it. It’s very passive. Once an Oxford House becomes an Oxford House, they want to keep it that way.

So it’s just a matter of every two or three years, they do two or three year leases. And so every two or three years we maybe are raising rent or renegotiating that lease a little bit. But for the most part, we’re not having to fill vacancy, we’re not having to do turnovers. They handle all of that and they handle the yard and the snow maintenance ⁓ and all of those things. So it’s very passive investment for us.

Micah Johnson (09:31)
cows like in triple net, single family home. That’s awesome. How did you get that connection? What led to that?

Megan Ahern (09:39)
we actually flipped a house and an investor bought it and I thought that’s strange that an investor could make those numbers work. And the agent on the other side of the transaction said, well, this is going to be a sober living house. And I just kind of put that in back of my mind like that’s odd. Then fast forward a few months and I have this guy working for me he’s doing just general labor. We’re dropping him off at a hotel room he was staying at a hotel because he just got out of rehab. And then

The next day he’s like, I got this sweet place to live. Will you drop me off over here? And he says the address. I’m like, I know that house. I flipped that house. It’s a it’s a Oxford house or sober live sober living house. Tell me about it. And so he told me all about it from this excited like he was so thankful for it. He finally got to get out of this motel that he was staying in and like just kind of over the next few months, like told me about how it works. They have chores.

They keep each other accountable. They go to AA meetings together, all of these things. I’m like, this is really cool. So a few months later that winter, we had a big house that was a college rental come vacant in the winter, which is so hard to fill college rentals in the winter. And so I had reached out to him and said, can you connect me with somebody at this Oxford House program and see if this house would work for them?

And so it did, it ended up working for them. That was our first Oxford house. And then from there, they just hit us up when they need more houses. So if they want to open an Oxford house in one of the small towns around us, they’ll call us and tell us what they need. If they want another one in Lincoln, they call us and tell us and we get to go find it for them.

Micah Johnson (11:57)
God, that’s awesome. And it’s, I love hearing about these little programs that exist out there that again, do kind of that both sides of it for you because it in that in the rehab world home is very important. And there was a there was a study I remember I read back about 2017 that talks about if just home is provided if someone has a home stable, safe, secure, their chances of relapse is so low. But if it’s not, it’s exactly the opposite. So

It’s another way where, know, folks always think about real estate investing and landlord and teneting, but that’s, love for them to see these little microcosms of ways to practice this business. It’s not, there’s all kinds of outside the box ways to especially lock in guaranteed rent for two to three years. Like that is, I mean, come on now. I don’t know what other folks are hunting, but that’s stuff I look for, for sure. And it’s powerful. How many do they have?

Megan Ahern (12:49)
Yeah.

Micah Johnson (12:58)
Is there like, can you expect one a year? you, or do they have like a, like a kind of, it’s random for you.

Megan Ahern (13:05)
It’s a little bit random. ⁓ I would say probably one a year is doable. If you wanted to go like expand out geographically, I could get more than that, but I’m just hyper local. So I don’t want to be have properties more than like 30 minutes away from Lincoln, Nebraska, which is where I am. ⁓ Because it feels like you have to recreate like a whole new system and whole new contractors and all of those things. I would rather just stay close, but it is nice because when they reach out and they ask like,

Okay, we want another house in Lincoln. A lot of times we’re finding those houses on the MLS and then just lowballing them because they’re awkwardly like too large of houses. They will fit like eight to 10 guys, sometimes even 10 to 12 guys in like a eight bedroom, three bath type of a house.

⁓ So if you just look on the MLS of over 3,000 square feet, we know that we can usually add those bedrooms, even if it’s not enough bedrooms to begin with. But they usually sit on the market because families don’t really need that big of a house, ⁓ like an awkwardly large layout, or like they don’t need houses that have eight bedrooms. So we can usually find them at a pretty good deal.

Micah Johnson (14:15)
Okay.

makes sense too, because it’s like you were saying, the numbers aren’t going to work. That numbers aren’t going to work on that house on a normal flip for what you’re going to get it. But for what you’re talking about, that’s a whole different math problem. And that’s super handy because yeah, that’s a house that needs work. That’s ginormous. That doesn’t fit. That’s exactly what’s going to sit on the market for a long time. Heck yeah. And you’re making their dreams come true because the person that’s trying to sell that thing is just like, my God, will this ever end?

Megan Ahern (14:50)
Yeah, yeah. And it’s nice for like the guys getting out of rehab. Like I’ve gone into one of the houses before for a maintenance request or just something and this kid came up to me. He’s like.

Are you the owner of this house? I said, yeah. And he’s like, I’m thank you so much because I just got out of rehab yesterday. Like, I never thought I would ever live in a house this nice, because we are going in there and we’re completely remodeling them. Tiles, showers, like beautiful LVP all the way through updated kitchens, granite. Like we, I think about it as I want to tenant proof it. Like there’s a lot of, ⁓ you know, walking around, there’s 10 guys in there. I want it to be like,

hearty durable materials, but also make it beautiful. And he just starts crying because he’s like, I never thought I would live in a house this nice. And so you do get that, you know, warm and fuzzy. makes money, but it also you get to help out.

Micah Johnson (16:27)
Who knows what effect that has down the road? That simple of a thing can open someone’s mind to, if I never thought this was for me, okay, now it is, what else is out there? It’s one of the, know, why a lot of people even get into real estate for so long, they tell themselves they can’t, and then they see somebody else that does it, and they’re like, wait a second, I can do this too. And that scale of it, it’s…

In the end, real estate is a human business. It all comes back to a human being doing something with that property. And when you can use it in a way like that, I don’t know. I love it. It makes me super excited. So thanks for doing it. Thanks for serving humanity that way. It’s powerful. ⁓ I want to dig in real quick. So one of the early things we were talking about pre-recording was flipping’s kind of flipping took a little beating for you. Long-term rents kind of changed. And then you shifted towards a midterm rental model that you even said, I feel like it’s easier.

can take us into that. What led to that switch and how has that been rolling out for you?

Megan Ahern (17:25)
Yeah, so I had heard about midterm rentals, but I just thought it would be like more work. I tried the Airbnb thing and hated it. Just hated that constant churn. But I bought a property that was a sevenplex and I called it my sevenplex from hell because throughout the remodel, it took like two years. Everything that could have gone wrong went wrong. We were just so felt like upside down on it and.

had to put way more into the rehab. And so I realized like, I’m not gonna make any money on this thing unless I do something creative. So I decided to try out midterm rentals in that property. And I actually kind of fell in love with it. So now we have, I think 12 units that are midterm rentals.

And they’re just actually much easier than longterm rentals. And they have more cashflow. ⁓ Obviously you’re touching them more often because you’re turning those like every

maybe three to four months instead of every year or two. ⁓ But the turns are a lot easier. So when we’re going in, I’m just sending my cleaner. She does a deep clean, she does the laundry, she resets the beds, and that’s it. Otherwise, if we’re turning a long-term rental, we have to go in usually, and the tenants hang things on the walls, they hang a TV with lag bolts. So you’re going in, you’re doing drywall repair, you’re doing… ⁓

⁓ touch up paint a lot of times, all these different steps to the process and it just becomes like more of a stressful situation than when you’re doing midterm rentals, just send the cleaners and that’s it.

Micah Johnson (18:59)
It’s like the benefits of Airbnb where the stuff’s there and it’s simpler, but not the headache of how often it happens. And it’s, I’ve been surprised, one, you’re not the first person I’ve heard really switch to that midterm model to find that cashflow. And one, how big the market of it actually is. It’s, people, most folks just think doctors and nurses and stuff, but that’s not the case that need midterm rentals. was talking with someone recently where

Megan Ahern (19:06)
Yeah.

Micah Johnson (19:27)
They were talking with insurance companies. So a house burns down and someone needs a place to stay, they midterm rent them their houses. And I was like, oh my God, I never thought of that. He’s like, it’s great. It’s guaranteed rents paid and it’s like good rate that they’re paying and the family gets somewhere to stay. So, you know, you get your warm and fuzzy thing again. But I was, I was really impressed by that. Did you find that same thing when you went into it that, wow, there’s a little bit more market here than I thought.

Megan Ahern (19:54)
Yeah, everybody talks about like the traveling nurses and in the hospitals that we do have don’t really take a whole lot of traveling nurses. So I thought like, I don’t know what the demand for this is going to be, but we have multiple colleges. And so we get a lot of ⁓ midterm guests that are for the colleges for one reason or the other. Like they might be a coach that gets a coaching job, but they don’t know if they’re going to be kept for another season. So they don’t want to buy something. They don’t want to rent. They’re going to be there for a few months.

⁓ or even like internships for the college. And then you find out there’s all these other weird things that you have no idea. Like apparently 10 miles out of town, there’s a wind farm, some kind of a power plant, and we get a bunch of people to work on that power plant from Europe. So they don’t have stuff. They need a furnished place for six months or whatever their working is. And then a lot of times they’ll just like…

hook us up with the next guy that’s gonna be replacing them. So there’s been this really steady ⁓ flow of guests and we have about a 5 % vacancy rate across our midterm rental portfolio, which is the same as we have across our longterm rental portfolio.

Micah Johnson (21:07)
I would guess probably cashflow and better. I mean, you get to the whole process of it. I find it fascinating. I’m interested in myself doing some research down here in Florida for that, because it is. I like the fact that you would think touching it more would make it harder, but it doesn’t. It actually makes it simpler. the stuff’s already there. There’s a benefit to having the stuff there, like you’re saying, because no one’s

Megan Ahern (21:12)
Yeah, for sure.

Micah Johnson (21:36)
no one’s gonna mount stuff. And you really attract the thing that you just nailed there too. It’s a professional class of people. They’re not there to beat stuff up. They appreciate the fact that it’s so nice and they get to stay there, because they have to literally move around like that for their life. Like that’s their life. And they appreciate those kinds of places, which I don’t know. I’m more more sold on it every day, Megan.

Megan Ahern (22:00)
Yeah.

A lot of times too, it’s like ⁓ single people or maybe like a spouse that has a traveling job and the other spouse works from home or something. So they don’t have kids, which not like I would be, you know, whatever, not accepting kids, tenants with kids, but.

Kids are a little bit hard on stuff. And so you get these people that are usually just the single person. All they’re doing is working during the day, come in, wanna have a clean place to sleep, making a hot pocket for dinner. Like a lot of times the ovens aren’t ever even used. it’s not a big lift. Like Airbnb, you have these people throwing parties and doing crazy stuff in your units. It’s not like that. It’s just people that wanna work and sleep and that’s it.

Micah Johnson (22:50)
It’s like a hotel and a long-term rental. And it gives them that feeling of it too. ⁓ It’s miserable staying there that long. But these are the kind of conversations that I can have a long time for, because I like digging in and understanding stuff. So for folks that are listening that have got value out of today and want to learn more about you, what you have going on, what’s the best way for them to find you?

Megan Ahern (23:14)
⁓ Instagram. I am The Tatty Investor on Instagram. So you definitely follow me there.

Micah Johnson (23:20)
Excellent, excellent. Thank you for sharing. We’ll make sure everybody, if you’re listening in, check our show notes. We’ll have Megan’s link there so that you can go follow her. Like I say on this show a lot, we don’t just bring random people. It’s folks that are professionals, they’re doing the business, living it each day. So go follow along with someone who’s doing that. If you’ve heard something interesting today, whether that’s Oxford houses, midterm rentals, whatever it is, even how to build that hyper local brand, because that’s so powerful in real estate around towns.

Follow along, check out with someone that is actually doing it. That’s how we learn best in this business. So Megan, thanks for being with us today again. Thanks everybody out there for following along with us. If you got value out of today’s episode, please like this episode, share it with someone else you think you get value out of it. And if you’re not a subscriber yet, you know what to do. Click that button, follow along with us. We got more conversations coming up with operators just like Megan. Folks out there building a real business in the industry. Thanks for being with us today.

Megan Ahern (23:57)
Thank you.

Micah Johnson (24:17)
We’ll see you on the next episode.