Beyond Bending Tell You How
Corporate housing has become a popular option for business travelers who need temporary accommodations. Many companies prefer corporate housing over hotels because it offers more space, privacy, and comfort. As a result, the demand for corporate housing has increased, making it a lucrative market for real estate investors.
One way to profit from corporate housing is through arbitrage. Corporate housing arbitrage involves renting a property on a long-term lease and then subleasing it to corporate clients for short-term stays. The goal is to generate a higher rental income from the sublease than the cost of the long-term lease, resulting in a profit.
How Corporate Housing Arbitrage Works
The first step in corporate housing arbitrage is to find a property that is suitable for corporate housing. The property should be located in a desirable area, have easy access to transportation, and offer amenities that are attractive to corporate clients, such as high-speed internet and a fully equipped kitchen.
Once you have found a suitable property, negotiate a long-term lease with the landlord. The lease should have a duration of at least one year and include a clause that allows subleasing. You should also negotiate a rent that is lower than the market rate to increase your profit margin.
Next, furnish the property with high-quality furniture and appliances. The furnishings should be comfortable and functional, but not too personal or unique. Corporate clients want a space that feels like home, but not too personalized or cluttered.
| Item | Cost |
|---|---|
| Furniture | $5,000 |
| Appliances | $2,000 |
| Linens and towels | $500 |
| Kitchenware | $1,000 |
| Total | $8,500 |
After furnishing the property, create a listing on corporate housing websites, such as CorporateHousingByOwner.com or FurnishedFinder.com. These websites allow you to advertise your property to corporate clients who are looking for short-term housing.
When a corporate client expresses interest in renting your property, negotiate a rental rate that is higher than the cost of the long-term lease. The rental rate should also cover the cost of utilities, cleaning, and maintenance. The goal is to generate a profit from the difference between the rental rate and the cost of the long-term lease.
The Benefits of Corporate Housing Arbitrage
Corporate housing arbitrage offers several benefits for real estate investors:
- Higher rental income: Corporate clients are willing to pay a premium for short-term housing that offers comfort and convenience.
- Lower occupancy costs: By negotiating a lower rent on a long-term lease, you can reduce your occupancy costs and increase your profit margin.
- More stable income: Corporate clients typically stay for several months, providing a steady stream of income.
- Less wear and tear: Corporate clients are less likely to damage the property because they are only staying for a short period of time.
The Risks of Corporate Housing Arbitrage
While corporate housing arbitrage can be a profitable investment strategy, it also comes with risks:
- Market fluctuations: The demand for corporate housing can fluctuate based on economic conditions and industry trends.
- Legal and regulatory issues: Subleasing may not be allowed in some jurisdictions, and there may be restrictions on the duration and frequency of subleasing.
- Operational challenges: Managing a corporate housing property requires time and effort, including cleaning, maintenance, and communication with clients.
How to Mitigate the Risks of Corporate Housing Arbitrage
To mitigate the risks of corporate housing arbitrage, follow these best practices:
- Perform market research: Before investing in a property, research the demand for corporate housing in the area and evaluate the competition.
- Consult with legal and financial experts: Consult with a lawyer and an accountant to ensure that you are complying with all legal and regulatory requirements.
- Develop a comprehensive operational plan: Create a plan for managing the property, including cleaning, maintenance, and communication with clients.
- Invest in quality furnishings: Quality furnishings can attract corporate clients and reduce wear and tear on the property.
Conclusion
Corporate housing arbitrage can be a profitable investment strategy for real estate investors who are willing to take on some risk. By finding a suitable property, negotiating a favorable long-term lease, furnishing the property with high-quality furniture and appliances, and advertising the property to corporate clients, you can generate a steady stream of income and maximize your profits. However, it is important to mitigate the risks of corporate housing arbitrage by performing market research, consulting with legal and financial experts, and developing a comprehensive operational plan.
