RETIREMENT & REAL ESTATE
ONE-TO-ONE CORPORATE R NTALS
ing providers, individual real estate investors can leverage the rising demand for corporate housing to their own benefit. With corporate housing tenants paying an average of $4,500 per month for furnished one-bedroom apartments and the need for these housing units still on the rise after four years of trending upward, the possibilities are staggering. More and more real estate investors are opting to purchase their future retirement homes using individual retirement accounts (IRAs) and then using those properties to generate income until retirement. Many find corporate housing appeal- ing because it often represents higher returns and lower main- tenance than a typical vacation rental, which is another option for the property short of simply buying and holding it. To make corporate housing rentals yield the returns you want, you must understand who uses corporate housing and determine whether the model will fit your real estate invest- ing goals [see sidebar]. Corporate housing has emerged as more than just an essential business service for relocated or traveling business executives. Today, corporate housing is a full-fledged lodging solution for everyday individuals who need short-term housing that has the space and convenience of a home on the road. Some examples of today’s corporate housing tenants include: • Executives • Attorneys • Consultants • Visiting professors • Legislators and lobbyists • Displaced families dealing with insurance issues like floods, fires, mold, and natural disasters • Traveling medical professionals • Patients seeking medical treatment MAKING CORPORATE HOUSING RENTALS WORK FOR YOU
IS YOUR INVESTMENT PROPERTY RIGHT FOR CORPORATE HOUSING?
W hile corporate housing can be quite lucrative, it’s not the right strategy for every property. Review the fol- lowing list to determine whether you and your property are better suited for long-term renting or corporate housing: • Is the property in an urban location with good proximity to businesses, hospitals, or universities? Almost any location that is a destination for executives and industry professionals is a good location for corpo- rate housing. Corporate housing pays higher rents (in most cases) than a 12-month lease but may not be as consistent or pay as quickly since many corporations pay on a 45-day billing cycle. • How do you handle property management? Corporate housing rentals are usually lower-mainte- nance than vacation rentals, but higher maintenance than a typical year-long rental because the occupants may require more services than traditional renters and you may have to “turn” the property three to four times in a year. If you purchased your property using your re- tirement account, you may be prohibited from manag- ing the property directly, so make sure you are prepared to handle the unique management issues that come with this type of rental. • Do you own the right type of property? Both single-family homes and condos can work as cor- porate housing rentals, but you will need to evaluate the costs, time commitments, and your own personal goals for the property to determine whether your goals are a good fit with corporate housing. • Can your investment strategy and bud- get accommodate sporadic occupancy?
Investing in Corporate Housing: Monetizing the 30-Day Stay THE AMERICAN DREAM IS EVOLVING AND YOUR RETIREMENT INVESTING CAN BENEFIT.
by Kimberly Smith
T
he days when the American Dream meant simply owning your own home are long past. These days, the American middle class is spending billions of dollars on renting, not buying, each year. To take control of your American Dream, you need to understand the true income potential of your residential rental properties. In some cases, particularly if you are using a retire- ment account to hold your real estate portfolio, you may stand to gain exponentially better returns if you rent to corporate tenants rather than traditional vacation renters or 12-month tenants. In 2016, the Corporate Housing Providers Association (CHPA) reported revenues of $3.2 billion in the United States alone. That is $3.2 billion in rental dollars that corporations are spending to lease furnished residential properties on a month to month basis. This is an enormous and largely untapped potential rental income stream. Corporate housing investing can substan- tially increase the returns on your residential investments while also reducing your pain-per-dollar compared to vacation rentals. Although corporate housing has traditionally been trans- acted between corporations and large-scale corporate hous-
CORPORATE HOUSING: A solution for corporate employees who need monthly lodging, usually provided through businesses offering fully-furnished private residences for stays of 30 or more days. PAIN-PER-DOLLAR (PPD): The amount of work that each dollar you invest “costs” you on a property. For example, a typical vacation rental has a high PPD because it requires a great deal of maintenance. Corporate housing rentals tend to have lower PPD because the tenants take good care of the properties in most cases and the rentals only need to be inspected and cleaned a few times a year.
• Families involved in corporate relocation • Professional athletes and entertainers
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Kimberly Smith is the founder and CEO of AvenueWest Corporate Housing Inc., founder of Corporate Housing by Owner and founder of AvenueWest Global Franchise, LLC., a global franchise providing solutions for property owners, corporate travelers, and business owners in the form of quality corporate lodging solutions and the associatedmanagement. She may be reached at Kimberly@avenuewest.com.
84 | think realty magazine :: november 2017
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