If you think Airbnb is the only type of short-term rental properties besides the traditional long-term rentals that you can invest in, you are wrong. Real estate investment is so diverse that it includes types of rental properties that you might have never even heard of, such as corporate rentals. But what is it? And can this strategy be a good investment for you? Keep reading this blog to figure out.
What Are Corporate Rentals?
Corporate rentals, also known as corporate housing, is a type of rental properties that targets a specific segment of corporate travelers. Corporate rentals are fully furnished real estate properties of high quality to be rented out to business travelers for a minimum of one month. Corporate rentals are sometimes referred to as executive apartments, serviced apartments, corporate apartments, temporary housing, or short-term housing. Corporate rentals refer to the actual apartments including the services provided such as cleaning, security, and other essential amenities, and they are typically designed for those with jobs that require extended stays in different locations, and all they need to do is bring their suitcase and some food for the fridge.
Keep in mind that corporate rentals are different from other furnished units for rent or short-term rentals such as Airbnb in the sense that corporate rentals should be supplied with high-quality furniture, complete, and well-maintained because they serve high-ranking clients and corporate travelers.
As we mentioned before, corporate travelers are the main users of corporate rentals. Corporate travelers refer to employees who get assigned by their employers to be relocated, to train, or to work on projects remotely, and clients of corporate rentals also include government employees on extended assignments.
Advantages of Investing in Corporate Rentals
There is no doubt that in order to invest in any type of rental properties, you have to study the market and the nature of the property in order to decide whether investing in a certain property is the best choice for you or not. Let us take a look at the major pros of investing in corporate rentals that you need to consider.
High Rental Income
Unlike furnished apartments, corporate rentals should be prepared with high-quality furniture and come with amenities like electricity, phone, water, and other essentials since they target corporate travelers, including high-ranked ones in many cases. This, however, dramatically increases its rental costs, which consequently increases the rental income for the investors. Building a good reputation and name for your corporate rentals between clients through professional marketing and the usage of professional property management, if possible, will encourage corporates to deal with you more often and also motivate you to raise renting price. Always remember that corporates that use corporate rentals prefer to deal with professional and organized investors/owners who will guarantee secure and good stay for their employees.
Type of Clients
One of the major challenges that real estate investors in rental properties face is dealing with different types of clients or tenants. In many cases, dealing with individual tenants who have different backgrounds can be time-consuming and exhausting, not to mention the uncertainty of leaving the property undamaged and in a good condition. This challenge is minimized in corporate rentals because investors or owners mostly deal with professional employers who have specific reasons for renting your corporate rental for a specific period of time. These types of tenants are usually organized and have an allocated budget to pay for your rental, so everything will be clear from the very beginning. In addition, corporate travelers tend to be mature tenants, they do not usually bring their families and are mostly busy with work and their professions, which reduces the possibility of damaging the property to a certain extent and facilitates a professional communication between you as a real estate investor and them as tenants.
Require Less Follow-Up
Unlike other short-term properties like Airbnb that require constant follow-up with guests prior and during their short stay, corporate rentals tend to require less follow-up because tenants usually stay for a minimum of one to three months, which reduces the number of annual tenants and also the possibility of leaving any damages in the property. Corporates who need to use corporate rentals usually know everything about them and how to deal with real estate investors, unlike individual tenants and constant travelers who, in many cases, need constantly to check and follow up with Airbnb property owners and hosts. This will spare you time and efforts that you can use in other types of investments or in planning to extend your real estate investments.
Build Professional Relationships
Clients in other short-rental properties tend mostly to use your rental property for the duration of renting, and that is it. However, investing in corporate rentals gives you the chance to build relationships with corporates that usually have remote trainings and projects, which means they absolutely will need to regularly use corporate rentals for their employees. Therefore, always make sure to represent your corporate rentals in the best way possible and provide tenants with everything they need. Regular cleanliness and maintenance of the rental property are essential keys to satisfy your tenants, and also you need flexibility, innovation, and respect when dealing with tenants, such as providing special offers for your clients.
Disadvantages of Investing in Corporate Rentals
Such as every other type of investment, investing in corporate rentals has disadvantages that real estate investors need to examine and consider before deciding whether this type of investment is good for them or not.
Investing in Corporate Rentals Is Expensive
Although corporate rentals produce higher rental income for real estate investors, this comes at the expense of investing a good amount of money in preparing high-quality fully-furnished apartments with essential services. Unlike investing in Airbnb rentals that can be as simple as renting out an extra room or a couch in your house, corporate rentals need good amount of capital to prepare them. Moreover, you have to buy your corporate rentals in locations that tend to be business-oriented, such as Washington DC, New York City, Chicago, and San Francisco, etc. Finding a specific business location to start investing in corporate rentals is a key to success but also limits many aspiring real estate investors to invest inside their states if they did not have business locations, for instance.
Investing in Corporate Rentals Targets Specific Type of Tenants
Short-term rentals such as Airbnb properties are open for the public and welcome any type of tenants, compared to corporate rentals which address a specific type of tenants, who are corporate travelers. This does actually reduce the number of tenants and consequently minimizes the turnover rate. Therefore, it requires lots of professional marketing and time to build up a good reputation for your corporate rentals and build professional relationships with customers.
The answer to the question of whether you should invest in corporate rentals or not can never be a yes or no since it depends on you as a real estate investor, your budget, the location you want to invest in, and also what kind of investor you want to be. In all cases, you need to take your time and study the various types of investments that real estate offers in tandem with your investment plans.
After reading this blog, you now have a general idea of what corporate rentals are and the main pros and cons that you need to consider before investing in such a strategy. As we always say, knowledge and information are shock-resistant, so arm yourself with them by using Mashvisor and get all you need to know and do as a real estate investor.