Investing in Corporate Housing: The 30 Day Stay
It is a fact that the middle class in the United States is shrinking according to the Pew Research Center and in today’s fast paced business world job security and longevity are also on the down turn. In order to take control of our financial future it is now even more imperative that each of us take the time to learn more about the financial opportunities available to us through the diverse world of real estate investing. In 2016 the Corporate Housing Providers Association (CHPA) reported revenues of $3.2 billion in the US 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 untapped rental income stream that the individual investor needs to do understand. Corporate Housing investing can substantially increase the ROI on your residential investments while also reducing your PPD (Pain Per Dollar) compared to vacation rentals.
Historical perspective tells us that all real estate values and trends go in cycles. It seams simple to say “buy low” and “sell high” but real estate financial success is so much more than that. To take control of your American Dream you need to understand the income potential of your residential property and be able to tap into the right professional clientele. How you use the investment, how you manage it, how you finance it and when you choose to exit will all determine to what extent your real estate investment is profitable. To be successful it is essential for you to understand the fundamentals of property investing and recognize how to diversify your investment portfolio to maximize income and minimize risk. Corporate Housing as a real estate investment opportunity allows you the investor to significantly increase your rental income compared to unfurnished rentals and minimize your PPD compared to vacation rentals.
Corporate Housing may seem simple on the service but to be financially successful you need to understand that corporate housing is more than just a nicely furnished rental. Corporate housings is lodging choice for consumers that encompasses specific standards, minimum furnishing requirements, consolidated billing (Rent, Utilities and Internet are all included in one simple rental rate) and professional service. CHBO, or Corporate Housing by Owner, is a great place to learn more about how individual owners can get the most out of their investment and offers a marketing platform specifically designed to connect with those in need of monthly accommodations. In addition CHBO has a rental calculator and Property Specialist to help you determine what a good rental rate would be for your specific property. In addition CHPA offers both individual and company accreditation certifications for those wanting to take corporate housing rentals to a professional level.
Trending – Across the country we are seeing 2 trends emerging starting with the 401K roll over investment and investing in retirement properties before you retire. With the stock market again hitting high levels analysts are showing concern about how long can this bull market last which is causing individuals to get smarter with their retirement dollars. By taking your 401K investment out of stocks and rolling it into traditional real estate rentals investors are able to gain more control over their money compared to the volatility of stocks. In addition we are seeing investors deciding to buy their retirement home 10 and ever 20 years before they need it. For example if you are looking to retire in Phoenix, AZ investors are purchasing that property now, locking in low interest rates and giving the investors the peace of mind of knowing exactly what their retirement property will cost. For those out of town investors AvenueWest Phoenix is able to fully manage and lease these properties at rental rates 3 and 4 times higher than traditional unfurnished rental rates.
Corporate Housing – Corporate Housing is a lodging solution that is traditionally transacted between corporate employees that need a monthly lodging solution and is found through businesses that provide fully furnished private residences. According to the CHPA 2017 Report, the industry hit its revenue peak, with revenue for the US corporate housing industry estimated at $3.2 billion, a 10.2% increase over the previous year. For the fourth successive year, the supply of US corporate housing units increased. Average daily rate (ADR) rose 6.3% in 2016, approximately double the growth in overall hotel ADR, according to STR / Smith Travel Research.
What does that mean to you the individual real estate investor and what do you need to know? It means that corporate housing tenants were renting furnished 1 bedroom apartments for a national average of $150 per night or $4,500 per month. In addition these tenants stayed on average 86 days.
PPD TIP: Typical vacation rentals turn over weekly which means the properties need to be cleaned and inspected 52 times a year. With a typical corporate housing rental the property only needs to be cleaned and inspected 4 times per year. As any landlord will tell you, the time and energy needed to turn over a property between tenants is a lot and anything you can do to increase your revenue and decrease your work makes an impact on your rental success.