As an investment property owner, your primary goal is to achieve higher rental returns. In today’s competitive real estate market, simply renting your property unfurnished might mean missing out on substantial income. What if there was a strategic approach that consistently delivered higher rental returns, along with superior tenant quality and greater stability? For the right property, this strategy is midterm corporate housing – a powerful avenue for unlocking your property’s highest and best use.
At AvenueWest, we specialize in helping property owners identify and capitalize on this lucrative niche, ensuring they achieve higher rental returns. Let’s explore how you can determine if midterm corporate rentals are the optimal strategy to maximize your investment.
Understanding “Highest and Best Use” for Higher Rental Returns
In real estate, “highest and best use” refers to the most profitable, legal, and physically possible use of a property that maximizes its value. For investment properties, this concept directly translates to the strategy that generates the greatest net income and, ultimately, higher rental returns.
While traditional unfurnished rentals and short-term vacation rentals (like Airbnbs) are common, they often present challenges regarding profit margins, tenant quality, and evolving regulations. Midterm corporate housing often provides a compelling, more profitable alternative for higher rental returns.
Why Corporate Housing Delivers Higher Rental Returns
“Every property has a highest and best use. If your property happens to be one that corporations will rent, renting it as midterm corporate housing will be its highest and best use,” says Angela Healy, CEO of AvenueWest Global. This directly translates to achieving higher rental returns.
Here’s a closer look at why corporate housing frequently leads to significantly higher rental returns compared to other options:
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Significantly Higher Rental Returns and Cash Flow
Yes, management fees for corporate housing might be higher than what traditional rentals may pay. However, the substantial increase in rental income typically leads to a much greater overall cash flow. “Even though you are paying management fees that may be higher than traditional real estate unfurnished rentals, your overall cashflow will be higher because the corporations are paying top dollar for that property,” emphasizes Healy. This premium pricing reflects the strong demand for fully furnished, move-in-ready accommodations for corporate transferees, project teams, and business travelers, directly resulting in higher rental returns.
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Superior Tenant Quality for Protected Investments
One of the most appealing aspects of corporate rentals is the exceptional caliber of tenants, which helps protect your investment and indirectly boosts higher rental returns by reducing repair costs. Corporations prioritize their employees’ well-being and productivity. Angela Healy observes, “When a corporation is paying, no one’s going to do anything to their corporate apartment that will make them get disciplined at work… Corporate rentals are very friendly and easy on the property versus traditional unfurnished renters.” This means less wear and tear, fewer maintenance headaches, and greater peace of mind for you.
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Reduced Vacancy Impact: Focus on Annual Cash Flow for Higher Rental Returns
Some property owners worry about potential vacancy with midterm rentals. However, Healy encourages a crucial shift in perspective: “If you are willing to look at the property on an annual cash flow basis, if your property is right for midterm corporate rental, you can make more money on an annual basis, even though you have some vacancy.” The significantly higher rental returns per occupied period often offset shorter periods of vacancy, leading to greater annual earnings than consistently lower-priced traditional rentals.
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Adaptability to Evolving Rental Regulations
With increasing restrictions on short-term rentals (like Airbnb) in many cities, midterm (30+ day) rentals offer a stable and compliant solution. Healy recounts a critical situation in Las Vegas where “the city, within a matter of days, passed legislation forbidding Airbnb for under 30 days.” Properties previously set up for short-term stays suddenly needed a new strategy. By focusing on 30-day minimum stays, property owners can bypass many of these escalating restrictions and tap into a different, often more reliable, clientele, securing more consistent higher rental returns.
Is Your Property Primed for Higher Rental Returns Through Corporate Housing?
While not every property is an ideal fit, many have untapped potential for higher rental returns as corporate housing. Here are key indicators that your property could thrive in this segment:
- Strategic Location: Corporate housing thrives in urban and business areas where executives travel to often. It also does well near hospitals and universities, which tend to bring on temporary staff or relocate professors or doctors to the area.
- Essential Amenities: Corporate tenants expect comfort and modern conveniences. It should be fully equipped and furnished. “You must have an upgraded kitchen, granite countertops, nice cabinets, stainless steel appliances, nice flooring,” advises Healy. Additionally, a king-size bed and large screen TVs are highly sought after. Healy reveals, “75% of our occupants are men, and those are the two things that they look for.”
- Adequate Space: Corporate transferees often require more space than a typical hotel room. “We have properties from one bedroom all the way up to fully executive homes that are 5,000 square feet,” says Healy, highlighting the importance of matching property size to what an employee is accustomed to for a comfortable stay.
- Fully Furnished & Equipped: Corporate housing must be move-in ready. This includes quality furnishings, a fully equipped kitchen, fresh linens, and all utilities conveniently included.
- Professional, 24/7 Management: Corporations demand seamless service and immediate support. Unlike a typical Airbnb host who might be juggling a side job, corporate housing requires professional, 24/7 availability for maintenance and assistance. As Healy points out regarding less structured alternatives, “What happens if your internet goes down in the middle of a workday? Your employee needs that internet back up and running while your Airbnb host could be at their own job and unable to come and assist until that evening.” AvenueWest provides this dedicated support, ensuring your guests and property are always taken care of.
Discover Your Property’s True Potential for Higher Rental Returns
“At AvenueWest, we’ll take a look at your property and help you to determine what is the highest and best use. If it’s not midterm rental, we will absolutely let you know so that you can work then on its highest and best use,” assures Angela Healy. “We are committed to helping you achieve the best possible outcomes for your investment.”
Don’t let your investment property underperform when it could be generating significantly higher rental returns. By exploring the potential of midterm corporate housing, you could unlock a powerful new revenue stream, attract top-tier tenants, and achieve the maximized financial success you’ve been striving for.
Ready to find out if your property is a perfect fit for corporate housing and can deliver higher rental returns?
Contact AvenueWest today for a personalized assessment! We also invite you to explore our other blog posts on maximizing real estate investments for more insights!
