The following was written by Al Williamson of LeadingLandlord.com.
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 are mainstream business, it’s become even easier.
A corporate rental may be defined as a dwelling that’s leased directly to a company or a business traveler who is provided a housing allowance. Simply put if a company is paying for the rental, and not the tenant, then it’s a corporate rental.
When a company is paying for their employees or contractors to work remotely, 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 ideal people for your rentals.
The Corporate Rentals Trend
Business travelers find that with short-term corporate rentals, they are able to afford more home-like conveniences for less. They are able to cook their meals 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 near freeway off ramps.
Now, is it possible that you could furnish a rental to accommodate corporate travelers? Could you earn hotel-size money instead of market rents?
How Much Can You Earn from Corporate Rentals
The Government Services Administrations (gsa.gov) maintains a list of daily hotel rates for various cities throughout the United States. Their website provides per diem housing rates for each calendar month.
If you’re trying to decide if a corporate rental would be profitable, look up the GSA per diem rate for your city and work with that number.
For example, the GSA per diem hotel/lodging rates for Sacramento, CA is $91.00 per night (assuming a 30-day stay). That’s $2,730 per month. Assuming 70-percent occupancy, if you have a one-bedroom corporate rental in Sacramento, you could reasonably expect to earn a maximum of $1,911 per month.
The next step is to calculate the difference between your expected corporate rental earnings and your local market rent. The going rent for a one-bedroom apartment in Sacramento is $950 per month. At that rate, you potentially could make $910 extra each month ($1,860 - $950) if you converted a traditional rental into a corporate rental.
A Sacramento corporate rental that rents for $1,860 per month offers business travelers a potentially cheaper option than the average GSA hotel/lodging rate of $2,730 per month. Even with an additional monthly charge of $50 to keep your pet with you, it’s still a more affordable choice.
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, there is potential for additional net income versus a traditional rental.
Focus on “Extended Stay” Market
Extended stay hotels have been around for decades and they are growing in popularity.
Extended Stay America and Residence Inn by Marriott know this market is on the rise due to cloud computing, laptops and mobile devices which make the white-collar workforce more mobile than ever.
By focusing on extended stay rentals, it’s possible your IRA can sign month-to-month lease agreements with business travelers. This could possibly provide more stable and predictable income from rents to your IRA.
Al Williamson is not an employee of Equity Trust Company. Opinions or ideas expressed are not necessarily those of Equity Trust Company nor do they reflect their views or endorsement. These materials are for informational purposes only. Equity Trust Company, and their affiliates, representatives and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal.
Equity Trust is a passive custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.