Corporate tenants the ideal choice for some condo landlords
Nancy Devanny has owned and lived in a series of South Florida homes and condos, renting them out as she moved on to new ones. She now manages 12 rental properties for herself and family members.
But, these days, being a landlord isn't easy. Skyrocketing insurance premiums, rising property taxes and homeowner's fees put the pinch on profits, and "you can't raise the rents quickly enough or high enough to keep up with that," she said. To make matters worse, the slumping real estate market has made it harder for her to sell her properties.
Then, Devanny heard about a new Web site that could give her potential access the lucrative corporate housing market.
CorporateHousingByOwner.com (CHBO) gives individual owners like Devanny a link to the corporate housing market. The owner controls the terms of the lease, furnishes and manages the properties, and retains 100 percent of the rental income, minus the $395 annual listing fee.
Corporate rentals appear to be an emerging revenue strategy for condo owners stuck with units that they bought with intent to flip. It's also a robust niche of the rental market, now controlled largely by professional operators. In the United States, revenue from corporate housing was projected to hit $2.4 million in 2006, according to the Corporate Housing Providers Association, a trade group.
In a typical corporate housing scenario, a management company manages and leases fully furnished residences to a business, performing arts group or other entity that needs short-term housing for relocating employees, visiting nurses, doctors, professors or performers.
The management company owns the units or collects a fee from the owners, usually a percentage of the rent, for its services.
CHBO now enables individuals to list their units and market them to businesses, hospitals, and other users of corporate housing, said co-founder Eric Smith, who owns the company with his wife, Kimberly.
Condo-laden South Florida promises to be fertile ground for the Web site, according to the Colorado-based Smith. "South Florida is a huge market, with so many individual investors and condos going up, there's a huge demand for furnished corporate housing," he said.
This is one of the first regions in the nation where Smith, a 15-year veteran of the corporate housing industry, is marketing the site. Las Vegas, which, similar to South Florida, built an abundance of condos; San Francisco and Denver are among the others.
He got the idea for the site while running Avenue West, the corporate housing company he owns. Since management companies are area-specific, he could only handle housing in a specific region, such as Denver or San Francisco. "We had so many owners calling us from all different markets across the United States who we could not service," he said.
CHBO is carving a broader niche. "They're the very first company to offer individually owned condos for corporate housing," said Bill Squire, owner of Florida Sun Break, a corporate rental property management company serving South Florida. Florida Sun Break advertises some of its properties on the CHBO site.
More work, more profit
For the individual home or condo owner, the prime motivation for corporate housing is simple: higher rents and shorter leases. Unfurnished South Florida apartments that would rent from $1,500 to $1,800 a month on an annual lease could fetch $2,500 to $3,500 in a corporate housing situation.
Squire estimates that the average per diem rate for a one-bedroom corporate unit is $100 to $110 in South Florida.
While the savings isn't substantial over a hotel room, the comfort level of renting a well-furnished home with a living room and fully equipped kitchen in a desirable neighborhood often cinches the deal.
"It's not necessarily cheaper, but it's a better value," Squire said.
Yet, not every condo is a candidate for corporate housing. In fact, many aren't.
"You need to make sure your condo docs [governing rules] allow for short-term rentals," Squire said. Rentals of three months or less give organizations the flexibility they need, and many condos prohibit rentals or require they be a minimum of a year.
Also, keep in mind that the corporate renter has a high level of expectations, Smith said. Furniture should match and not come from an attic. Kitchens should be well equipped and living rooms should offer many, if not all, the comforts of an executive's home.
On its Web site, CHBO publishes a detailed list of criteria condo owners need to meet in order to be certified as CBHO Complete. The certification requires specifications on everything from what to have on hand in the kitchen for cooking (22 items, including pizza cutters and ladles) to plant care (unit owners should leave laminated instructions). The CBHO Complete designation is optional; it's also done on an honor system.
When she considered the cost of furnishing the apartments for rental, Devanny said: "It's costly to do, but it's not as costly as you would think. If you're a creative shopper, you can beautifully outfit a place for not that much money."
In addition to the price, Devanny found that she likes having greater access to her property afforded through shorter-term corporate rentals.
"If, for any reason, you want to go over, you can call over and stop by," she said. Since corporate rental property owners expect cleaning service, a maintenance crew can help "keep an eye on it."
And, in a market which continues to hope for an upswing, Smith said, owners may be attracted to the ability to sell a property without the hassle of waiting for a long lease to be over.
E-mail freelance writer Ellen Forman at southflorida@bizjournals.com.
