10 Questions every realtor should be prepared to answer about corporate housing and the real estate investor
Part I of III
If you’re a Realtor with an established real estate practice, chances are you have or will have a client who wants to buy an investment property. Helping these clients identify the right investment property is now in your hands. You don’t want to mess it up. What are you going to do?
Many investors will buy investment properties for the purpose of high cash flow vs. fixing and flipping. If cash flow is the preference, a corporate rental may just be the investment your client has been searching for; after all, corporate housing is for investors looking to make more money and who are interested in alternative investment opportunities beyond traditional rentals or labor intensive vacation rentals.
Here is your Q&A guide to helping your clients understand the ins and outs of corporate housing as a stellar investment opportunity for their portfolios:
1 – What is corporate housing?
Corporate housing is a property that is furnished and available for a month-to-month lease. Most corporate rentals appeal to high-end business travelers who want a hotel-alternative accommodation during their next three-month business trip, for example.
Within corporate housing, there are three different housing types.
- First, there is apartment corporate housing. This is where companies like Oakwood lease several rental properties within an apartment complex. They then furnish the properties and sublet them as corporate rentals.
- Second, there is managed corporate housing. These are furnished, short-term properties that are owned by individual homeowners and managed by a third-party corporate housing management company, like AvenueWest Corporate Housing.
- Third, there is by owner corporate housing. This housing type is similar to managed corporate housing, as the properties are individually owned; however, the property is managed directly by the owner vs. a full service property management company.
An investor looking to buy a corporate housing rental property would either be interested in managed or by owner corporate housing, depending on how involved they want to and can be in the management of their rental property.
2 – How does someone manage a corporate rental?
Landlords manage their corporate rentals in one of two ways:
One, they may hire a property management firm, like AvenueWest Corporate Housing, to manage the property for them. A typical property management firm will take a commission of 25% – 35% from the earned rental income; however, these companies earn their keep as they are the ones tenants call at all hours of the day and night with maintenance issues. Plus, these management firms handle all management issues from marketing to contracts, inspections and key exchanges. Most importantly these companies have established corporate contracts with business clients who rent properties from them on a consistent and exclusive basis.
Two, an investor may choose to manage the property him or herself in order to increase his or her income. When this is the case, the owner will need to do their own marketing to find tenants (they can use a site like CorporateHousingbyOwner.com to advertise their properties), as well as their own day-to-day management of the property. “By owner” management is only recommended for investors who take a hands-on approach and don’t mind being bugged with phone calls about the toilet getting stopped up and can accommodate the demand of a quality business tenant.
3 – How much income can someone expect to make and how does that compare to traditional, 12-month non-furnished rentals?
The income a corporate rental takes in depends on a number of factors such as location, bed count and amenities. On average, a corporate rental, because it is furnished and provides full-service utilities, can earn twice as much annually than a traditional rental. In other words, an unfurnished, traditional rental may be priced at $1,000/month, but a furnished rental with a flexible lease term may be $2,000 or more per month!
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