Corporate housing finds its way to the spotlight in this article about the changes in the industry and the opportunities available to homeowners and investors.
The new normal is an often bantered phrase. True, everything is new but, nothing today is ordinary, especially in the rental industry.
Previously there were clear lines of delineation between different rental and real estate market segments. Short-term and long-term rentals, vacation lodging, and corporate housing were distinct and separate lanes.
Today, however, due to the new paradigm created by the pandemic, those segments blend and intersect in new and exciting ways providing opportunities for investors, landlords, and property managers to tap into markets they may not have considered previously.
The Intersection of Corporate Housing, Long-Term Housing, and Vacation Rentals
In the not-so-distant past, corporate housing sprang up as a means to provide a stable temporary housing environment. Those traveling professionals engaged in contract work, projects, and training sought fully furnished apartments. These accommodations were either in extended stay lodging or corporate housing.
While that stills rings true, professionals on the move are nuanced in type, needs, and interests.
Extended stay lodging was a staple for traveling health professionals and government contractors, but now there is competition for those renters by apartment and condo communities. Even vacation homes are expanding their marketing to reach both leisure and business clients.
Whether corporate housing, vacation rental, or another lodging type, these short-term housing solutions offer flexible lease terms and provide all the amenities of home with the added benefits needed for a traveling professional and go by many names:
- Corporate Housing
- Corporate Apartments
- Executive Apartments
- Furnished Apartments
- Serviced Apartments
- Executive Suites
- Executive Rentals
Changing Market per COVID and remote work
The corporate housing market segment continues to grow year over year, even far outpacing the hotel market. And now it seems a significant new opportunity is making its way to the scene as businesses are encouraging remote work.
A Harris Poll survey for Zillow found 56% of Americans were offered the opportunity to work remotely and 75% of those wish to continue indefinitely. Two-thirds of those would consider moving if they were offered continued flexibility.
In addition to the traditional corporate housing client, and now the new push to migrate to work-from-home options, there are many other reasons why someone would seek out furnished apartments for short-term accommodations, such as:
- Temporary housing due to disasters and insurance claims,
- Traveling nurses and other medical professionals,
- Political, government, or military assignments,
- Job relocations,
- Temporary housing between a home sale and home purchase,
- Home renovations,
- Moving to a new area before securing long-term housing,
- Seasonal, disaster relief, and construction workforce accommodations,
- Need to be close to specialized medical facilities,
- Divorce and other life changes that require temporary accommodations.
Three Options to Offering Corporate Housing
There are three available avenues to joining the opportunity to cash-in on the new trends of remote work and relocation.
- Invest in a dedicated corporate housing complex.
The most obvious (which coincidentally is the most expensive and time consuming) is to invest in an entire complex devoted to corporate housing needs and cater to those clients solely in that location.
- Convert a vacation rental into a corporate housing solution.
This second option could involve either entirely catering to the traveling professional and remote work or offering the vacation rental as a mixed-use property as the season and market demand. Often whatever is the off-season in that location (often Autumn and Winter) would be a great time to market and attract a short-stay vs. leisure stay booking.
- Convert a single-family home or individual units (or a portion of units) within an apartment complex or condo community into a corporate housing solution.
As remote work continues as the new norm, one in three Americans are considering relocation for opportunities, lower cost of living, and to escape high urban areas. It’s also projected that traditional rental housing will see vacancies rates increase. As tenants move, landlords and property managers may have the opportunity to jump into the corporate housing market.
Benefits of Accepting Corporate Housing Renters
Corporate housing, on average, charges about 40% of the nightly cost of lodging of similar accommodations, which usually outpaces long term monthly rental rates.
In comparison to vacation rentals that have seen an uptick in regulations, especially concerning charging and collecting occupancy taxes, short-term rentals are not usually under those same obligations.
The turnover rate would allow more opportunity for inspection and routine maintenance, meaning your investment can stay-up-to-date and in good repair.
Often, payment is sent by the company or booking agent directly and not from the occupant, lessening the chance of rent being delinquent.
Lastly, typically the corporate occupant often comports themselves in a respectful manner towards the residence, neighborhood, and community.
Disadvantages and Challenges
Of course, with any investment, there are inherent risks and disadvantages. Some items of consideration are:
Routine marketing and networking are more ongoing, whereas long-term rental turnovers are more seasonal or annual.
Turn-over activity is increased such as tenant screening, lease signings, move-out inspections, cleaning the unit, and all other turnover activities.
What to Consider Before Offering Corporate Housing
For those thinking of investing in a corporate housing complex or converting current long-term housing over, here are some areas to consider for your success.
- Decide the type of short-term housing guests you wish to attract. Knowing who you want to serve will help inform location, interior design, marketing, amenities, and other decisions. Catering will differentiate you from extended stay accommodations that market to the generic traveler.
- From there, decide the service level of your accommodations: luxury, mid-level, or basic lodging.
- Purchase furniture, decor, and houseware to match the service level of the client you wish to attract. Unless you are offering a luxury executive apartment, there is no need to purchase one-of-a-kind art or high-end furniture. Simply make sure the furniture is of good quality and suits the purpose of the occupant for the service level you wish to achieve.
- When investing in a new property, consider the exterior for curb-appeal, safety, walkability and transportation, and ease of yard maintenance.
- Additional considerations would include the noise level someone might experience in a mixed-use community or complex, how you will handle pets, marketing, and billing.
For those that have vacation rentals in your rental portfolio, you’ve already furnished, decorated, and stocked basic household necessities, which leaves you ahead of the pack to convert some or all occupancy over to corporate housing.
How to Fill Short-Term Rental Vacancies
You may market a corporate housing offer on the traditional listing sites, just be specific in the description that you are open to corporate clients on a month-to-month or short-term lease basis. But you can also try these strategies as well:
- Network with large companies by contacting their HR or Accounting departments. Call large companies and agencies in your area and ask who to speak to about getting on their approved list of corporate and short-term housing options.
- Check with your insurance carrier to not only make sure you have the appropriate coverage for this new endeavor but also to be added to their approved list of housing available for those displaced by natural disaster or home repairs.
- Use vacation rental listing sites such as Airbnb, but be sure to change the minimum night stay to 30 days.
- List your availability on Facebook and Craigslist.
- Check out travel sites such as Expedia.com.
Temporary Housing Market Rent
Pricing should fall somewhere between a long-term lease monthly rate and 50% of a similarly appointed 30-day hotel stay.
For instance, let’s say the going rental rate in that area for a mid-range one-bedroom apartment is $1200 but the same mid-level hotel suite is $120/night, you could charge $1800/month for that same dwelling ($120 / .50 = $60 x 30 days).
You’ll also have the flexibility to charge more for one month and decrease the monthly rate, the longer the lease options.
For the $1800 a month example above, a two-month lease could be discounted to $1700/month, and a three-month contract $1650 a month. Lease renewals also have that same pricing flexibility.
Additional revenue is available by charging for premium services such as laundry and dry cleaning services, storage, premium entertainment packages, and housekeeping services. Those are typically paid for by the renter, although some companies may choose to purchase these add-ons.
Billing and Incidentals for Short-Term Rentals
Many accounting departments handle the rent payments and although a consolidated bill is a good idea, they may want to have it itemized.
In and all cases, whoever is paying the monthly bill, it is best practice to not only have the responsible party sign a letter of responsibility but also inform the renter that they are responsible for damages.
It’s recommended to keep a copy of the renter or corporate credit card on file for add-on services and incidental damages or cleaning. In addition to a traditional security deposit, you may wish to charge a separate cleaning deposit. Check with your local and state regulations before making these decisions.
Check with your insurance provider to discuss short-term renters insurance such as Accidental Rental Damage Insurance (ARDI) you might be able to offer your renters. Some property management software companies partner with insurance companies that provide insurance to renters for as low as $15/month.
It’s More than Furniture, It’s Flexibility to Move with the Changing Market
The experts predict high vacancy levels come 2021 as people continue migrating to new locations due to remote work opportunities, search for more economical housing prices, and the desire to relocate to less urban areas.
Those on the move will need accommodations, whether temporary or long-term. Creative investors and landlords can take advantage of this new normal to mitigate loss and add a unique option to their portfolio by offering short-term temporary housing options until the new normal, normalizes.