Should you invest in corporate rentals? Short answer: only if you like cash flow!
Corporate rentals are apartments, units, or houses that are most commonly used by business travelers. These units typically come fully furnished and have all the basic necessities a traveler would need for a short-term stay. Corporate rentals’ lease lengths fall somewhere between long-term leases and short-term rentals.
Corporate rentals are a great investment for a variety of reasons. They provide benefits that a long-term or short-term rental do not. Let’s take a look at some of these benefits.
The Benefits of Corporate Rentals
1. Corporate rentals require only essential furnishing
Corporate rentals typically come minimally furnished, with place settings, basic kitchen utensils, and bedding. Unlike short-term rentals, they usually don’t need to have a theme or the nicest decor. They can be simply furnished, with a focus on function rather than style or design.
Furthermore, landlords don’t have to worry about keeping the toilet paper and dish soap stocked throughout the duration of the stay. This type of service, along with a cleaning or laundry service, is a nice amenity but is usually paid for by the tenant in addition to the monthly rental rate.
Living space from one of my corporate rentals outside of Fort Campbell, Ky.
2. Corporate tenants are typically required to have their credit card on file.
Most management companies will require your tenant to leave their credit card on file, like you would at a hotel. If they break your TV or tear the door off your cabinet, your property manager will simply charge their card. This extra level of protection should help you sleep at night.
3. Units undergo more frequent inspections.
Every time there is a turnover, the unit can be thoroughly inspected and repairs can be made. Since this will be every few weeks or months, versus 12 months and sometimes much longer, deferred maintenance will not be as big of a problem—if your management company is doing their job.
4. You can charge higher rent.
Because the property is furnished and there is an option for shorter leases, rental rates can be higher—sometimes significantly higher. The shorter the lease, the higher the rent.
5. Tenants are generally working professionals.
Think traveling nurses, project managers, high-level executives, and corporate leaders. Most of these tenants work—a lot—and have little time for much else! This means they likely won’t be spending a lot of time in your unit, which will allow for less wear and tear.
6. Rent is paid by the corporation.
Rent is, a lot of times, paid by the corporation the tenant works for. This guaranteed money makes this type of rental appealing on its own. You won’t really have to worry about whether or not your tenant is going to pay rent!
A Look at One of My Corporate Rentals
We decided to turn one of our 10-unit properties into a corporate rental. It is in an ideal location: very close to Fort Campbell Army base and in a town that has a lot of development going on. Because of the location, it is appealing to military families visiting their soldiers, short-term project managers, and even traveling nurses.
Furthermore, these tenants are (almost) always very low maintenance. They typically work hard and aren’t in the unit very often. Plus, their company almost always pays their rent.
Simple office space for use by my corporate tenants.
Corporate Rental Example by the Numbers
We spent $2,500 on minimal furnishings and found our first tenant before we even finished. He signed a nine-month lease and is paying $1,250 per month. We provide utilities, which is about $65 per month.
One of these units rents unfurnished for $800 per month without utilities, so we are making $385 more per month.
Modest yet cozy second bedroom for guests and family of my corporate tenants.
This additional income added up to $3,465 over the term of this nine-month lease. This means that we paid off the investment in furniture and then made an additional $965 over the course of nine months.
Since the furniture is paid for, any additional income above the $800 per month rate is just a bonus! Furthermore, shorter leases mean higher rent. If someone signs a three-month lease for this particular property, they pay $1,400 per month. This is $600 more than the same unfurnished unit!
The only drawback I have seen so far is that there can be longer vacancy periods. But a good property manager should be able to keep a handle on that with proper planning.
Now that you’ve read this article and are convinced to invest in a short-term rental, don’t dive in just yet! You still have some work to do. This model might not work in every market. In other markets, it might not even be legal. Be sure to speak with experts, so you know what your limits are.
Talk to a property manager who has experience in corporate rentals. They need to understand the ins and outs of the leases. It also helps if they have working relationships with organizations that can provide tenants who are looking for this rental situation. This not only takes some of the guesswork out of this type of rental, but it should also alleviate long vacancies.