Multifamily Short-Term Rental Benefits
While there are many multifamily complex owners who believe that operating in the short-term rental space is a bad decision, there seems to be some serious money being invested in exploring these options.
While long-term leasing may be the easiest and more stable choice for owners and managers of multifamily properties, there are a number of reasons using a two-pronged approach can be a smart decision.
Developing new multifamily properties and selling units takes time and money. While waiting for all units to be sold or construction to be completed, you could rent out the property’s display units. They’re already fully constructed and furnished because you used them as samples for prospective buyers or renters; they could easily be converted to short-term rental units to help offset costs.
Many apartment and condominium complexes carry a percentage of unrented units at any given time. Converting one or two units to short-term rental units may help with that problem. You can set them up - nice furniture helps market them - and hold walkthroughs on days with vacancies. This has the added bonus of showing your long-term units in a good light and may even attract new long-term tenants.
Space for Visitors
Setting aside some available units as short-term rental units could be a major bonus for your existing tenants or owners. Traditionally, visiting family or friends have to stay at a hotel or motel, but offering short-term rental units means that your long-term renters could house their visitors nearby. They even get the full suite experience instead of just having one hotel bedroom to themselves.
Selling Undecided Potential Tenants
If you have a prospective long-term tenant who is on the fence, you could give them the opportunity to rent one of your short-term units for a week or two to get to know the neighborhood and their future neighbors. If they enjoy the experience, it could be enough to convince them to sign. This also gives you an idea of the kind of long-term tenant they’ll be.
Make More Money
Short-term rental agreements, much like hotels, always cost more than long-term leases. While you may not have the place rented every day, you still can make as much as - or in most cases, even more than - you do from long-term leasing. If you rent a long-term unit for $2,000 a month and a comparable short-term unit for $150 a day, you only need to rent for 14 days a month to match that income. More than 14 days and you’ve already made a healthy profit on the unit.
Some companies provide financing for buyers who set aside short-term rental units in the properties they purchase. For example, Loftium will help with the down payment for housing purchases if the buyer agrees to rent a portion of their home through Airbnb. Disruptive industries like this are not going away and more people will soon be capitalizing upon them.
This approach to multifamily unit buying and renting is becoming more popular and investors in companies building out opportunities and platforms to help are growing. The Wall Street Journal reported that a company called Lyric, formerly known as AJJK Inc., has recently fundraised $15.5 million in a venture to create an “upscale rental brand” within multifamily buildings by convincing developers building new apartment buildings to set aside a few units for short-term rentals. This is similar to the Friendly Buildings Program that Airbnb launched in 2016, which also allowed developers to list rental units, but Lyric wants to differentiate itself by providing an environment where guests can feel like community residents.
Optimizing and managing short-term rental units can be made easy by short-term property management companies like Voyajoy. These companies offer services that range from full management to do-it-yourself options.
The benefits to setting aside short-term rental units in your multifamily complex are real and this was by far nowhere near an exhaustive list. If you own, manage, or develop multifamily properties it is something you should consider.