Short Term Furnished Housing

One of my specialties is providing short-term furnished housing for clients. I met yesterday with a representative of another temporary housing company to find out more about how they operate. First we looked at a duplex in Eastlake, with a two-bedroom unit that currently rents for $1600 and a three-bedroom unit that currently rents for $1995 unfurnished on a one-year lease. Utilities and parking are paid for separately, a la carte.

In temporary, furnished housing, the owner is responsible for completely furnishing the unit, including appliances, blinds, curtains, furniture, rugs, art, pots, pans, linens, bedding, plates and utensils. A complete list of furnishings can be found on sites like CorporateHousingByOwner.com. To furnish the two duplex units, the corporate representative suggested the owner would likely spend $8000 or so in furnishings.

In addition, the owner would be paying for all utilities, all yard maintenance, internet, and cable TV. Parking should be included, especially in high-end properties in dense urban neighborhoods. Maid service may or may not be provided, but the security deposit ($750) will typically include a $250 non-refundable turnover and cleaning fee. A pet fee of $300-600 covers cleaning and replacement costs associated with pet damage, and is non-refundable.

The owner also pays a one-time web development and set-up fee of $1800. This particular company charges a 20% management fee, which includes tenant recruitment, lease up, rent collection, accounting and reporting.

The two-bedroom unit could probably rent for $2400/month; and as there are not a lot of two-bedroom units, would stay rented 90% of the year in this location. The larger unit is trickier, would probably be more challenging to rent because of its size and awkward layout. Maybe $2895? The yards are a plus with this particular property, as it makes it possible to have pets or a play area for children.

We then looked at a couple of one-bedroom units across the street in a six-plex apartment building. These currently rent for $1295-$1395 per month. These would be easier to rent as temporary furnished units, and would stay rented all the time. The one-bedroom unit with a view might rent for $2100; the other for $1800-1900/month.

So on a $1295/mo unit, utilities might run another $150/month; garage or parking rental another $150; cable, internet and utilities maybe another $200. Plus the amortized costs of furnishings and higher management fees of $375 or so. The owners would need to recover about $2175 to make the same profit they make now. In this case, converting to furnished short-term housing would not make sense.

The cost-basis would be $100 more for the one-bedroom unit with a view, again hardly offsetting the costs to change to short-term furnished housing under this scenario.

The utility costs for the three-bedroom duplex unit might be higher, so the owner would need to recover at least $3000 for this model to make sense. Again, the projected rents fall short of the needed income, assuming both furnished and unfurnished units would rent for the same percentage of occupancy.

A lower management fee; furnishing in a frugal but attractive way; and foregoing expensive web advertising would help make this model pencil out. It may well be worth it for the owners to experiment in-house with a staged unit and flexible, all-inclusive leasing terms the next time a unit becomes available.