More and more cities are changing the rules around short-term rentals. For example, Kansas City banned any new Airbnb units in R Zones. Housing providers are looking for an alternative to earn similar profits. Enter Al Williamson our guest speaker in February at MAREI, who made the switch to Corporate and Extended Stays. He shared with us his thoughts on why you might switch.
The Case for Extended Stay and Corporate Rentals
Landlords have always had the ability to woo business travelers to their rentals. But now that online travel agencies such as Airbnb, HomeAway, and TripAdvisor have gone mainstream, it’s easier than ever!
First, though, what is a Corporate Rental? A dwelling that’s leased directly to a company who has visiting staff regularly that need a place to stay for a few weeks or months. Or leased to a business traveler who has a housing allowance. If a company is paying for the rental, and not the tenant, then it’s a corporate rental.
When a company pays their employees or contractors to work remotely, then that tenant:
- Will behave and not embarrass their employer
- Will have a binary attitude towards your rates. Either they are within their allowance or they aren’t.
These two characteristics make business travelers the most lucrative and ideal people for your rentals.
The Opportunity for Extended Stay
Business travelers find that with short-term corporate rentals, they can afford more home-like conveniences for less. They can cook healthier, have more privacy, and have a richer travel experience when they don’t stay at a hotel.
That’s why the trend in corporate housing is spiking. Especially when a traveler is on an assignment for 30 days or longer.
Extended-stay business travelers actively search for houses and apartments to live in. Many want to live in neighborhoods and not off freeway offramps.
Now, is it possible that you could furnish a rental to accommodate corporate travelers? Could you earn hotel-size money instead of market rents?
Most certainly!
How Much Can You Make With Corporate Rentals?
The Government Services Administration (gsa.gov) maintains a list of daily hotel rates for various cities throughout the United States. Their website presents per diem housing rates for each calendar month.
If you’re trying to decide if a corporate rental would be profitable, then look up the GSA per diem rate for your city and work with that number.
For example, the GSA per diem hotel/lodging rate for Sacramento, CA is $91.00 per night (assuming a 30-day stay). That’s $2,730 per month.
Assuming a 70% occupancy, if you have a one-bedroom corporate rental in Sacramento, you could reasonably expect to earn a maximum of $1,911 per month, renting it out nightly.
NOTE: My Sacramento corporate rentals rent for $1,860 per month. When I accept pets and charge a $50/month pet fee, I’m still a more affordable choice.
The next step is to calculate the difference between your expected corporate rental earnings and your local market rent.
For example, the going rent for a one-bedroom apartment in Sacramento is $950 per month. This means that you could make $910 extra each month ($1,860 – $950) if you converted a traditional rental into a corporate rental. That’s a LOT of money!
Of course, you’ll need to pay for the electricity and other monthly expenses associated with a corporate rental, but even after paying those expenses, the additional net income is fantastic!
Help Making a Decision
Extended stay hotels have been around for decades. They are a part of a mature industry. By focusing on extended stay, and not nightly stay, you can take month-to-month landlording to new heights.
Corporations behind Extended Stay America and Residence Inn by Marriott use a lot of sophisticated financial models and institutional knowledge to decide where to place their +$10M hotels. So, if there’s an extended stay hotel near you, then you should accept that as proof that your extended stay corporate rental will be wildly successful.
Want to learn more about corporate and extended stays and how I have made them the breadwinners in my real estate investing business? Then join me at MAREI in February. I will be speaking at the monthly meeting on the 13th digging more into how to create a profitable extended stay using none of your own money and they tell me that MAREI members and 1st time guests attend for FREE. Everyone else is welcome, just pre-register. Then I am coming back to Overland Park on the 24th for a full-day workshop where I will be sharing a ton of info, so be sure to bring something to take notes because you are going to want to write things down. The workshop has a registration fee, but it’s super cheap, and there is early bird pricing so register early and save.
