What does it take to run your rental property as a successful corporate housing rental as what are the pros and cons of doing so?
Renting your property as corporate housing involves renting out a furnished apartment or home to a business. This is for companies that regularly have traveling employees who are often away for weeks or even months at a time.
Landlords who choose to rent their property as corporate housing often make as much as three or four times as much money as they would if they were to rent the same property as a typical rental, however, there are some downsides.
Corporate housing is a different style of housing and as such requires a different level of attention to detail and management which means it is not the right style of investment for everyone. Additionally, not every property is suitable to be used as corporate housing.
There are several ways that a house can be adapted to the needs of corporate housing dependent on the target market. For example, you might adapt the property for clients who want a luxury environment, those who prefer a homier environment, or even insurance companies that need to house displaced families for extended periods of time.
Corporate housing can be highly profitable depending on how you decide to run your rental business and what competition is in the area. In this article, we take a look at what it takes to run your property as a successful corporate housing rental as well as the pros and cons of doing so.
Corporate housing is similar to short-stay rentals priced to be more cost-efficient than hotels and so more suitable for slightly longer stays. As corporate housing, you can price yourself at around 50-60% of the price of benchmark hotels in the area whilst offering far more.
For example, if a hotel room is $100 a night you would set your nightly price at around $50 a room. If you had a fully equipped 3 bedroom house then you might set the nightly price at $150. This would then work out at approximately $4,500 per month. If you compare this to the monthly rent of a long-term rental you can quickly see a large potential upside.
With corporate housing, you can increase your property’s potential earnings. However, your property will require more time input from you or your property management team and there will need to be greater attention to detail to make your property stand out, to make your property more appealing than a local hotel or Airbnb.
Because of the greater time required to manage successful corporate housing, it is a more challenging rental property strategy and as such is not suitable for everyone. However, if done well you can get a higher return which makes it an appealing strategy for some.
The main benefit of corporate housing is to increase your net income, and there are few things that should be considered to ensure you maximize your income including:
Successful corporate housing needs to be managed and run differently to long-term lets – or even short-term/Airbnb rentals.
For example, to run a successful corporate let you will need to offer a fully furnished rental with a tasteful design. As such, you should invest in high-quality furnishings that will both last and create a sense of luxury. Additionally, you should invest in other aspects of the rental including artwork for the walls, a large TV with entertainment packages, a well-stocked kitchen with quality appliances, and a good cleaning and maintenance crew to ensure the property is maintained at the highest level. This initial investment and the subsequent increase in upkeep can be off-putting.
Finally, in order for your rental to be successful as a corporate housing option, you will need to establish a network of contacts in the HR department of relevant large companies to make sure your property is in the runnings.
To determine if your should rent your property as corporate housing you need to, first of all, do your market research to determine demand and competition. If your rental is near the city center or the headquarters for large firms, for example, this could be an indication of opportunity.
Secondly, you need to develop relationships with corporate HR managers and people connected to traveling executives or organizers of housing for employees.
A final consideration is to rent your furnishings and decor before you purchase them so that you can test the market a determine whether or not the investment will be worth the reward. This will allow you to furnish the property lavishly without initially breaking the bank.
We’ve mentioned a couple of times already that you will need a network of HR managers. To guild these valuable contacts you will want to write an introductory letter to the managers of the largest companies. You can use LinkedIn to identify, connect, and begin building your relationships.
Additionally, you can follow the progress of large construction projects in your area and those that are coming up. This information is kept on your city or county’s website. Contact the winning contractor and pitch your housing option to them.
Construction workers and project managers take long-term assignments away from their homes. Crews working on public works type projects are typically paid per diem based on the US Government Services Administration.
This group may have a different set of needs than high-end corporate clients. Many workers are willing to share a bathroom, so a company may be able to place three or more people in a three-bedroom, two-bath house. Consider offering weekly housekeeping and on-site laundry.
Finally, during your research check out examples of housing for large companies that already exist. This should give you an idea of the quality, target markets, and pricing that the competition is setting.
We’ve talked a lot already about the potential financial upside to renting your property as corporate housing. However, it’s not all plain sailing and it’s well worth considering the additional risks and work that come with renting a property as corporate housing.
Increased marketing expenses
You’ll need to maintain a decent website to operate in corporate housing and to be considered a serious player. Do what you can not to appear as a Mom and Pop type operator.
Higher cleaning costs
You need to put forward a veneer of professionality. As such, you will at the very least need to get the property professionally cleaned after every guest. You might even choose to offer a weekly cleaning service for those guests that are staying longer. This will help create a sense of luxury, and also help ensure the longevity of your furnishings. However, it does also come with a higher cost.
Luxury rental clientele can be demanding. If you are going to target executives and compete with luxury hotels you need to know how to offer the kind of luxury service they expect.
Make sure that all appliances are in good working order and think about what thoughtful touches you can add to make their stay more convenient. This business model is lucrative but it’s not passive.
High entry cost and projected revenue
To achieve the highest projected revenue your property needs to be in the right location. The issue with this is that property prices in the most convenient locations, for example, Silicon Valley are often astronomical.
When it comes to renting a property as corporate housing there are a few good rules of thumb. The first is that the property should be furnished with quality appliances and furniture. The second is that you will be able to charge a corporate unit to rent for two times the unfurnished market rent. Thirdly, when operating luxury corporate housing, because you will be dealing with shorter-term tenancies you should expect a higher vacancy rate than a traditional rental would and this vacancy rate should be factored into your overall costs.
Finally, it’s also important to consider seasonality. Demand for a corporate home will vary seasonally and the amount you can charge depending on demand will also change. Catching the highest demand times may more than exceed a year’s worth of market-rate rents.