When big business brings big employment opportunities to town, real estate investors have the chance to add corporate housing to their portfolio. Unlike single- and multi-family properties that attract long-term tenants, corporate housing tenants have unique needs and a much higher turnover.
If you are thinking about whether short-term rentals are a good investment strategy, here are three things to consider, especially as you embark on working with a hard money lender like 5arch to fund your deal.
1 – Turnkey Spaces with Amenities and Upgrades
Most rental units are unfurnished with basic appliances and appointments. Corporate tenants, however, are looking for fully furnished living spaces with amenities and upgrades. That means utilities and add-on features like laundry, cable TV, and Wifi that are normally arranged for by the tenant now fall to you to provide—and they all need to be in consistent working order to keep tenants happy.
While you may have to spend more of your multifamily rental loan than you normally do to upgrade your rental units for corporate clients, know that you’ll reap the rewards in the form of higher rents. Keep in mind that when people are in town for work or are relocating for a new job, it’s more often than not the employer who is footing the bill, so you can raise rents accordingly with success.
2 – Refocusing Your Marketing Strategy
As a rental owner, you are likely accustomed to seeking tenants for year-long leases and beyond. Corporate tenants, on the other hand, may only be looking to stay for a week at a time. That’s why it’s important to market to the businesses and corporations themselves rather than the individual tenants when you are marketing your corporate housing vacancies.
Another plus to working directly with business owners? You won’t have to spend much time, if any, vetting tenants. Corporate clients tend to be busy professionals who usually come to town by themselves and focus solely on work. Because their housing situation is arranged—and paid for—by their employer, it’s understood that they will keep the unit in good condition.
When you do your part as a diligent landlord and provide clean, comfortable, home-like spaces for their employees, business owners will be eager to establish an ongoing rental agreement with you.
3 – Putting a Solid Maintenance Plan in Place
With short-term stays and high turnovers, property owners need to be on top of their game when it comes to maintaining corporate rental units and making necessary repairs. While a few days might be considered a prompt response time to a maintenance request for a longer-term tenant, you need to be much quicker for a corporate tenant who is only in the unit for a week.
If you want corporate clients to choose you over a hotel each time they are in town, then you need to inspect your unit and have it cleaned often so that you can offer a seamless move-in experience for each new corporate renter. By having someone on call 24/7, you will offer a hotel concierge-like experience in a unit that feels much more like home.
4 – Short-Term Rentals, Long-Term Gains
It’s easy to think that long-term rentals offer better ROI, but corporate rentals are a different breed of short-term rentals that could be the right move for your investment portfolio.