Mid Term Rentals: Pros and Cons & What Do Companies Look for in Corporate Housing?

Commercial Real Estate Investing From A-Z

Why should you have a mid-term rental? What are the pros and cons of mid-term rentals? What do corporations look for when looking for corporate housing? Angela Healy, CEO of AvenueWest Managed Corporate Housing shares her knowledge.

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What are midterm rentals? Why should someone have to offer a midterm rental as an investor?

Most people are very familiar with long-term unfurnished rentals, and in the last decade, short-term rentals have been very popular with Airbnb. Those midterm rentals have slid under the radar for quite some time, but we're making more headlines now because so many cities are prohibiting short-term rentals. In New York and Denver, we have a lot of regulations around short-term rentals, whether you need a license, whether you're restricted in which kind of properties you can offer, whether it has to be your primary residence, or whether you can only do it for 90 days. A lot of regulations happening around short-term rentals so what people are finding is, instead of either selling the property, especially in this real estate market, or switching it back to an unfurnished, long-term rental. They have another opportunity to be able to keep the rental furniture there and still be able to make a higher yield than they would be renting it unfurnished.

The nice thing about midterm rentals is if you work with a corporation like ours, you could rent them to corporations in the area, so you have a really solid customer base. No one's going to do anything to their corporate apartment that will make them get disciplined at work, and the average stay is about 99- 100 Days. You do have a couple of turns a year but nowhere like what you were doing with Airbnb in terms of maybe a couple of nights and then a turn. It is a nice medium compared to the unfurnished rental.

We have a couple of offices in California where the rules and laws around renting properties are very much geared toward the tenant or The occupant. By having the corporation rent the property for a specific assignment, you're not going to have somebody end up squatting or staying there beyond their term of what they're allowed, which also allows you to keep the rental rate up with the market. Once someone moves out, you're not subject to rent control, you can set your new market. If the industry or the real estate market is on an upswing, you can certainly get the increased prices related to the upswing and it is a nice way to diversify your overall portfolio.

What are some cons to midterm rentals?

We are subject to corporations and their ebbs and flows. That doesn't necessarily mean that it's only good in an up environment, because when there's a down environment, we do see movement of employees when they consolidate locations. Maybe they're closing this office and they're going to relocate everyone to this office. If your property is located near the office that closed, that could certainly be a con.

And then, there are times where we can be affected by the overall economy, like, if the government shuts down for a week, and everyone takes a deep breath and they're like, "Oh, what's going on? How long will they be closed?" We could see pockets of times when everyone is kind of taking a breath and trying to adjust to the new economy but once they do start making those plans, like either closing places, maybe they're going to expand, or maybe interest rates are rising, and everyone's kind of taking a breath, businesses will start to adapt to that and start to make some sort of change, and that change is good for corporate housing.

Corporations do not relocate people, and they do not start new assignments in December but that doesn't mean that we go vacant in that month, but if your tenant happens to leave in December, the likelihood of us finding somebody new before January slips.

Angela Healy

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https://www.linkedin.com/in/angela-healy-avenuewest/