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Corporate housing has been around for years, but mostly in the hands of the big international companies like Marriott and Oakwood. As the demand for corporate housing expands, smaller, nimbler players are entering the field and opening the door to this profitable niche market. Now individual investors can play with the big boys in the corporate housing sand box.

The timing could not be better. Many investors are holding properties that they cannot sell because of a high loan-to-value and a dip in prices. Additionally, current rents are not covering mortgage payments. Converting rentals to corporate housing is an opportunity to hang on to properties while the market recovers and cover the mortgage more comfortably.

RENTALS TO THE RESCUE
About three years ago, three business partners were facing that challenge. "We had purchased several properties in Phoenix, Arizona at a high loan-to-value, and the rents were not covering mortgage costs," said Wesley Zlotoff, co-founder of Rental Space Network. "We were upside down and needed a solution." They knew about corporate housing, and decided to pursue it to increase their rental income.

How much would their income increase? Each city is different, but a furnished corporate rental is often twice that of an unfurnished, long-term rental. "In downtown Denver, Colorado, rent for an unfurnished one-bedroom ranges from $685 to $985. Nicely-furnished one-bedrooms go for $1,795 to $2,295," said Kimberly Smith, co-founder with her husband Eric, of Denver-based Corporate Housing By Owner. 

Corporate-housing customers are organizations that pay the housing costs for workers they send out-of-town on extended assignments. Compared to the cost of a room at a mid-range hotel, corporate housing is a bargain. A mid-range hotel may charge $150 a day. Thirty days adds up to $4,500.

The organizations may be law firms, software companies, dance companies, accounting firms; and tenants may be attorneys, programmers, dancers, or auditors. Those who pay are looking to reduce costs, and those who stay want a more home-like environment. Corporate housing is the solution.

WELCOME HOME
What type of property has corporate housing potential? Sadly, you cani? wave a magic wand over a run-of-the-mill bungalow and turn it into corporate housing. The most obvious candidates are centrally located, upscale condos with a pool and workout-room, but some houses are appropriate too. 

Creating the corporate-housing ambience can be costly. In addition to the right location and amenities, youi?l need to add attractive furniture, linens, and a fully-stocked kitchen; enough to make hard-working travelers feel at home.

"We purchased everything in bulk. We fixed up the properties so you would feel right at home, including Internet service and phone. We ended up renting them out for $2,000 a month," said Zlotoff. Previously, the same units rented for $1,000 a month.

After covering their upfront costs for furniture and amenities, they made more money. "It was more expensive upfront but increased rental intake covered the mortgages," Zlotoff said.

NEWER & NIMBLER
Success with corporate housing led Kimberly and Eric Smith to found Corporate Housing By Owner, and Zlotoff and his partners founded Rental Space Network. Both new companies developed Web sites that individual investors can use to offer their properties as corporate housing.

After 15 years in the industry, co-founders Eric Smith and Kimberly Smith developed a Web site to help individual investors reach the organizations looking for long-term, upscale rentals. "We created a vehicle to match up these two parties," said Kim Smith.

The key is marketing. "Now, we travel around the country and talk to companies about using individual properties rather than the ones owned by big companies. We're out there marketing and driving people to the Web site. This is the prime way to connect," said Kimberly. The day we spoke, she was attending the National Travelersi Association conference.  

The Corporate Housing By Owner Web site allows individual investors to post a detailed listing starting at $300 and up for a listing with additional photographs. Owners keep 100 percent of the rental income (less the listing fee). 

Rental Space Network converted all its properties to corporate housing. Now they are calling on companies that send people to the Valley for special projects, like light rail. Through their contacts, they have low vacancy rates. Advertising fees for Rental Space Network are $99 per year, which includes a 12-month listing, and access to all payments, documents, and other keyword network sites. In addition to corporate housing, their site includes vacation rentals, and long-term rentals for apartments, homes and condos.

NEXT-GENERATION PAPERWORK
"Renting out our properties was very labor intensive," said Zlotoff.  "We spent too much of our time faxing, driving papers across town for a signature, or to the post office or FedEx. We saw this as an opportunity. How can we make paperwork easier and less time intensive?" 

Through research, they discovered that it is possible to create legally-binding contracts over the Internet. They spent the next two years developing a system that allows users to do all the paperwork necessary for a rental. 

"It's especially convenient for our clients who live away from their property. It cuts down the time it takes to get the transaction done," said Zlotoff. They built into the system all the federal laws, and the laws of all 50 U.S. states. "Landlords always get the correct contract that reflects the laws of the state where the rental is sited," he said.

What is the future of corporate housing? "Change is good for corporate housing," said Smith. "Companies want to operate on a temporary basis. They sign a minimum lease and extend if needed. There's a lot going on with attorneys and consultants being transferred. They can't sell their homes, and buying a home or condo is difficult too. So they can't commit to buying."