The rental property market is at a turning point, and 2025 presents investors with unique opportunities to rethink their approach. With changing tenant needs, economic pressures, and new technology shaping the industry, choosing the right strategy is critical. Short-term, mid-term, and coliving rentals each offer unique opportunities for real estate investors, depending on market trends, location, and individual investment goals.
From the high revenue potential of short-term rentals to the stability of mid-term leases and the growing popularity of coliving, each strategy has its own set of advantages and challenges. This blog explores the strengths and limitations of these models to help investors determine the best approach for 2025.
Short-term rentals: high returns, high effort
Short-term rentals remain a popular choice in tourist-heavy areas, with the global market valued at $124.6 billion in 2024. Online booking platforms dominate the market, capturing a significant portion of bookings. Recent data highlights both opportunities and challenges: while listing supply increased by 12.8% in 2023, occupancy rates have steadily declined, dropping from 75% in 2021 to an estimated 56% in 2024. Revenue per available room (RevPAR) has stabilized at $129 per active property, reflecting a trend where declining occupancy outpaces rate increases.
Despite these challenges, short-term rentals offer significant revenue potential, with average daily rates in August 2024 reaching $329. Regional performance varies, with markets in the Southwest and Western U.S. experiencing smaller occupancy declines compared to more substantial decreases in the Mid-Atlantic states.
However, the operational and regulatory demands of short-term rentals can be intense. Compliance with local tax laws remains a major challenge, with only about 10% of short-term rental hosts achieving compliance without proactive enforcement. This creates management burdens, alongside guest turnover, cleaning schedules, and marketing updates. While short-term rentals can generate strong seasonal income, the volatility and labor-intensive nature of the model make it a high-effort investment strategy.
Mid-term rentals: steady returns, location-dependent
Mid-term rentals have experienced remarkable growth, with a significant growth in demand for 30+ day bookings in recent years. Mid-term rentals, with stays averaging 30-120 days, provide more stable income compared to short-term rentals, which average only 3-4 nights per stay. While nightly rates for mid-term rentals are typically 27% lower than short-term rental rates, the extended stays offer reliability and reduced turnover costs.
This market thrives on specific demographic needs. Key drivers of demand include:
- Remote workers and digital nomads seeking flexible housing options
- Transitional groups like students and relocating employees
- Seasonal workers and corporate travelers
- Cost-conscious renters avoiding high short-term rental rates
Mid-term rentals perform particularly well in areas with strong business activity, such as urban centers, corporate hubs, and regions requiring temporary housing for traveling professionals, like the entertainment industry. These rentals also cater to intern housing demand during summer months, creating niche but lucrative opportunities.
The average occupancy rate for mid-term rentals hovers around 51%, offering greater stability than short-term rentals while requiring less intensive management. With the real estate rental market projected to grow from $2,601.92 billion in 2023 to $2,806.83 billion in 2024, mid-term rentals are positioned as a stable option for investors in the right markets.
Coliving rentals: reshaping the rental landscape
Coliving is transforming the rental market by addressing two critical challenges: affordability for tenants and profitability for investors. The global coliving market is projected to reach $15.9 billion by 2025, growing at a compound annual growth rate (CAGR) of 11.4%.
For investors, coliving offers unmatched financial advantages. PadSplit hosts earn 33% more than Airbnb hosts and 2.5 times more than traditional long-term rental owners. High occupancy rates of 80–90% and tenant stays averaging nine months help reduce turnover costs, providing consistent, scalable revenue streams.
Peter Pasternack, a former star of A&E’s Flip This House, transitioned from managing short-term rental properties to coliving with PadSplit. By converting his properties, Peter streamlined operations and significantly boosted profitability, proving how coliving can turn underperforming assets into high-yield investments.
Coliving is particularly well-suited to cities like Austin, Denver, and St. Petersburg, where supportive zoning laws and housing affordability challenges drive demand. These markets allow investors to align with favorable regulatory trends while addressing growing tenant needs. Additionally, coliving’s ability to adapt to urban housing challenges makes it a compelling strategy for real estate portfolios.
Social and environmental impact
Coliving also delivers significant benefits to tenants. PadSplit members save an average of $332 per month compared to traditional rentals, and in cities where rents exceed $2,000, coliving can reduce housing costs by up to 50%. Beyond affordability, coliving fosters a sense of connection that enhances tenant well-being. Many coliving residents report improved well-being due to factors like economic security, reduced social isolation, and a sense of community.
In addition, coliving aligns with sustainability goals. Shared spaces typically have a general sustainability benefits through shared resources compared to standalone units, appealing to eco-conscious tenants and investors alike. Advanced technology, such as seamless rent payments, smart home devices, and energy-efficient designs, streamlines property management and increases tenant satisfaction.
Why coliving stands out for 2025
Coliving represents a transformative solution for investors and tenants alike. By combining scalability, high returns, and social impact, it addresses the critical challenges of the modern rental market. This innovative rental property model isn’t just a trend—it’s a strategic investment choice. Its ability to deliver consistent income, foster tenant satisfaction, and promote sustainability makes it the standout rental strategy for forward-thinking investors in 2025.
Are you ready to maximize your rental income while making a positive impact in your community? Explore how coliving can transform your property and boost your returns. Visit our Host Page to learn more about becoming a PadSplit host. With our proven model, expert support, and turnkey solutions, you can unlock the full potential of your property. Start your coliving journey with PadSplit today!
