What is best for your real estate investment: Corporate Housing versus a Traditional, Long-Term Rental.
Top 4 things to consider when deciding if your rental is best as a corporate housing rental or traditional unfurnished rental.
While corporate housing can be quite lucrative and make your property stand out in a sea of available rentals, it’s not the right strategy for everyone. If you are an investor looking to purchase the right type of rental property, review the following information to determine whether you and your property are the right fit for corporate housing – or whether your property may be a better fit as a traditional, long-term rental property.
The properties that people rent through CHBO often appeal to corporate tenants because they are different than the properties traditionally offered through the full-service corporate housing companies. These CHBO properties are in high demand because they are not found anywhere else.
Corporate housing thrives in urban and business areas where executives travel to often. It also does well near hospitals and universities, which tend to bring on temporary staff or relocate professors or doctors to the area. (Please note these may not be traditional rental areas.) If your property falls into one of these locations, you may want to make it a corporate housing rental and tap into these lucrative opportunities.
While you will typically get a higher annual return with corporate housing, you don’t necessarily get the smooth cash flow that you would from a tenant who is signing a long-term lease. If you need money by the second of each month in order to pay your mortgage, than corporate housing is not for you. With corporate housing, your place will be rented more sporadically and less consistently than a tenant who signs a 12-month lease. In some cases, especially when you work with corporations versus private tenants, you may not get payment for 45 days.
Are you a worrier? Your rental property might sit vacant for part of the year (versus having a long-term, lease-committed tenant). Some people, by nature, worry about these kinds of details and may not have the stomach for investing in a short-term rental property. That said, if you’re more easy-going and enjoy earning higher returns overall, you may be just be the right personality fit for corporate rentals.
Do you have the time? Corporate housing can take more time than traditional rentals because you will have to deal with turnover more often. There may be anywhere from two to 12 transactions on your property per year. If you don’t want to be as active in your property’s management (i.e. you’re not cut out for “by owner” management), then hire a good property manager to handle the nitty-gritty details like prepping the home for the next tenant. AvenueWest Corporate Housing is a full service property management program for CHBO Complete™ properties that is available in some markets. Visit www.AvenueWest.com for more details.
Learn more about your rental as the perfect corporate housing rental in The Corporate Housing Handbook.