What are the pros / cons of Corporate Rentals?

Question

I'm continuing to hone my understanding of the various rental focuses (there are lots!) as I expand my portfolio. I'm interested in corporate rentals (CR) and wondering what success/challenges others have faced.

Here's my basic thesis: Acquire a mid/high quality property in a market with several corporate offices (preferably multi-nationals). Executives are travelling, there are lots of conferences, etc. This would be a furnished property with minimum 30-day rental requirements. You can get a decent premium given the short term nature, and the fact that the "renter" is paying with an expense account.

I am aware that STR's require a higher level of service and have frequent turnover. I have systems in place for daily cleaning and property management.

If anyone has corporate rentals, I would love to know what your experience has been. Is the CR market much different from the typical STR market? Is the clientele much different? Are the returns better? Appreciate your insights!

Paul Sandhu · Answer

@James Woodrich

My other rule of thumb is to look at the basic motels in your area and see how much they charge for a weeks rent.  Around here it is $350/week.  That gets you a room with 2 beds, a microwave, television and a bathroom.  For my basic 2 bedroom houses with no luxuries I charge $350/week.  The 2 people can sleep in their own room, do their laundry, cook food, grill something outside, and have cable/wifi.  There is also a sofa bed in the living room that I do not charge for a 3rd person.  I call these places "Hamburger and French Fry".

My other places have central heat and air, a streaming HDTV for Netflix and the like.  They are just better overall.  I charge $400/week for these.  No charge for the extra bed.  Local motels that are equivalent of these are $600-$700/week.  I call these places "Steak and Potato".

I extrapolate these rates for my 3 and 4 bedroom places.

Nancy Bachety · Answer

@Kimberly G. has great success with corporate rentals. It seems like a profitable option. You need to have it available to rent as a corporate rental in order to be listed on corporate rental sites. That’s my understanding.

Sam Josh · Answer

How did you guys market  / reach out to these corporates? I am super interested in that client base for my property in SF.

Myka Artis · Answer

Corporate rentals are great! I personally haven't had any problems with mine. Corporate rentals keep the cost down and the profits up. You don't need to pay for a cleaner, it's no constant turnover, and you're making the STR money. The only thing you need to look out for is the economy of your area. Make sure your area has enough traffic coming in and out. I personally market to traveling nurses. You can't miss on the medical field. They are always on the move.

James W. · Answer

@Paul Sandhu

Thanks for providing your insight.  I haven't thought about it seriously, but it seems like it could possibly be a way to make more on a few properties.  I may do a little research and try it out on one property when I get a change in renter.

Jon D. · Answer

The one I have seen quite a bit in my research is http://corporatehousingbyowner.com so that's the one I would try. As well, Craigslist could be a good option.

James W. · Answer

For those that do corporate rentals, do you just post online, or do you specifically market and make connections with some of the larger companies in the area?

I may have a home or two that could work well for it but I am trying to figure more out before I would consider kicking a tenant out.

@Paul Sandhu said his rule of thumb in charging for a furnished rental for one week is comparable to the monthly rental rate for a month to month rental.  Is that pretty standard for most?

Julie McCoy · Answer

This is a niche I'd like to pursue more - I live in Hollywood, so there's a pretty good market for actors/crew coming into town for jobs, auditions, things like that.  My landlord frequently rents out his unit to top-notch tenants in town for weeks/months at a time.  Just looking for the right property/owner to sign a master lease with.  (the house across the street just got sold and is set up wonderfully for this sort of thing - the new owner has already expressed an interest in short-term rentals in general, fingers crossed he'll be willing to accept my proposal of letting me rent some/all of his space!)

Nancy Bachety · Answer

@Jon D. Do you have, or know of, the corporate listing sites you’d prefer to use?

Jon D. · Answer

You're right @Paul Sandhu that 30 day minimums are restrictive, but it's necessary given the tight rules around STR in Toronto.

Yes, @Nancy Bachety - we would list on corp rental sites.

@Myka Artis - that makes a lot of sense. We have many corporate HQ's (banks, telcos, etc.) which is where we would focus.

Thanks @Ariel Vincent.  You're right on the conference part, we would focus on the traveling worker.

What are the pros / cons of Corporate Rentals?

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