Corporate rentals, or medium-term rentals, are for renters who need a place to stay over 30 days but less than a long-term lease. Usually, these stays are for 1-3 months. For investors, corporate rentals can be a sweet spot between short- and long-term rentals since they’re less labor intensive than short-term but go for higher rates than long-term rentals. I sat down with Diana Tapia of Dublinplace Corporate Housing based in Colorado Springs to learn more about corporate rentals.
- Listen to the podcast “#32: Long Term vs Corporate Rentals: A Side by Side Analysis” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
How do you get started in corporate rentals?
In 2016, Diana owned a fourplex in Colorado Springs that she ran as a short term, VRBO-style rental. She dreamed of living overseas, but that vision was not compatible with the labor-intensive work of running a short term rental.
When her tenant of seven years ended their lease, she decided to take a risk and list the unit as a corporate rental instead. There was—and still is—a shortage of housing for military families in the area who need short term housing before transitioning to military housing. Instead of charging $650 a month for the unit, she rented it out at $1600 for a three month lease and quickly found a renter.
Soon, she had enough income to spend two years traveling and volunteering in South America. She decided to turn her success into a business that helps other real estate investors with their own corporate rentals.
What is a corporate rental, and who stays in them?
A corporate rental lease is longer than a short term rental, which is 30 days or less. The average corporate rental length is three months, though one month or even years long stays are possible. Rates for corporate rentals are higher than typical rentals, and the units are fully furnished and equipped with basic necessities. While there has been a slew of legislation regulating short term rentals, such as Airbnb’s, corporate rentals have yet to be affected because they are considered medium or long term rentals.
When it comes to what type of property makes the best corporate rental, Diana’s philosophy is that less is more. Because of the high rate these properties go for, less square footage will yield the greatest return. That doesn’t mean that investors should find the smallest property to rent out, though. Since renters will be staying for at least a month, they want to be able to have some space and feel at home. Diana’s sweet spot for size is 1500sqft max and finds that townhouses are the best units. That way, people will feel like they’re living in a real home, but Diana doesn’t have to spend the extra money on furnishing and maintaining a large space. Most of her properties are located in northern Colorado Springs, though the downtown area is hot right now, too.
Generally, people in transition are the biggest users of corporate rentals. Typically, the renters are individuals in the medical field, a research and development company housing employees, or real estate buyers and sellers between properties. The average income of renters is $260K per year.
How do you manage corporate rentals?
Dublin Place offers two main services for property owners: advertising and support services. Investors can choose how much or how little involvement they want from the company. The only areas that the company cannot help with are financial or legal matters.
When Diana started in the world of corporate rentals, she decided to create her own website to advertise her properties. She was so successful that soon other owners were reaching out to her asking if they could advertise their properties on her website, too. Now, investors can team up with Dublin Place to market their properties. They receive a property evaluation and list of recommendations to make sure the property is in line with the exclusive rentals in which Dublin Place specializes.
Support services help owners get in place everything they need to be successful in renting out their properties. These services can range from buying and staging furniture, to white glove cleaning services, to arranging contractors to make repairs. Owners are in charge of coordinating deposits with renters, though the cleaners will provide them with a checklist of any missing or damaged items. That way, the owners can determine how much of the deposit to return.
Is it worth it? Let’s analyze.
I happen to own a townhouse next door to one of Diana’s properties, so it was easy to do a side by side comparison of a long term rental vs a corporate rental. I ran the numbers using the Rental Property spreadsheet.
Long Term Rental Spreadsheet
Corporate Rental Spreadsheet
The biggest difference in initial costs between a long term and corporate rental is that corporate rentals are fully furnished. Diana’s average cost for buying furniture, linens, and other essentials and having them professionally staged is around $13-16K.
When I was able to rent out my townhome as a long term rental for $1695 a month, I was very pleased. But when I saw that Diana’s townhome goes for $2900 a month, I was blown away. Even though the vacancy rate for a corporate rental greater, 8% compared to 3%, the higher rent more than makes up the difference.
Long Term Rental Monthly Operating Expenses
Corporate Rental Monthly Operating Expenses
Other unique costs for a corporate rental are a personal property assistant and advertising. The personal property assistant manages the day to day aspects of the rental, such as checking renters in and out, coordinating repairs, and replacing items that are damaged or running low. These services together run about $5K per year.
Diana recommends that property owners call their insurance companies to see what is covered if they switch their homes from a long term to corporate rental. Most companies have this coverage built in, but it’s usually worth it to see if there is additional coverage available. The cost of this type of insurance may be a bit more expensive, but it’s usually not significant.
Long Term Rental First Year Returns
Corporate Rental First Year Returns
The first year returns analysis shows just how different long term vs corporate rental properties are. The annual cashflow for a corporate rental townhome is nearly double that of the long term rental home, even though the homes themselves are the same. Altogether, the corporate rental yields a much stronger return than the long term rental.
Connect With Guest Diana Tapia
If you are an investor interested in turning your property into a corporate rental, reach out to Diana via her website. Use the online form to submit your information, and she will personally respond. And if you are thinking of buying a property, schedule a free real estate investment consultation. I can help you find the home that best suits your needs and connect you with Diana if you want to turn it into a corporate rental.
How to Get Started Building Your Own Rental Portfolio
For information on how to get started investing in Colorado Springs, check out our free 2021 Colorado Springs Real Estate Investing Guide.