Afraid of renting to long-term tenants? Here’s a profitable alternative

Posted June 19th, 2014 in News by wpengine

Apartment hunters in San Francisco would be dismayed to learn that in this very challenging rental environment thousands of rent-controlled housing units are being held off the market. Although some units are kept off the market for personal or family use, many are simply kept vacant by owners who fear the potential legal and other complications associated with the City’s stringent rent and eviction control laws. For many of these owners, the risk of havoc that just one bad tenant can wreak on their pocketbook and psyche is enough for them to keep their rental unit(s) off the market.That said, however, many of these owners can ill afford the loss of income, and might welcome an alternative way to generate substantial additional income from their vacant or underutilized units.

 ..thousands of rent-controlled housing units are being held off the market.

What is “furnished housing?”

Furnished housing is typically associated with temporary accommodations. People who want or need to live in the city—visiting executives, vacationers, interns, even families whose own home is undergoing renovation, consistently opt for “turnkey units.” These rentals come at a premium. Furnished one-bedroom units, depending on condition and location, rent for $3,700 to $5,000 per month just by virtue of their turnkey condition and the city’s lack of inventory. Even furnished studios are seeing rents from $2,000 per month for smaller units up to $3,700 for larger ones. Furthermore, in California the owner of a furnished rental unit can charge up to the equivalent of three months rent as security deposit versus only two for an unfurnished one. Eric Baird, with ReLISTO, a company that specializes in furnished/corporate rentals, explains: “We present our properties as interim solutions, and they are priced as such.”

Furnished rentals meet a specific need

Take, for example, the extended vacationer or the out-of-town corporate executive faced with an average $200 per night or a $6,000 per month hotel bill, or a family of four needing a place for three months and forced to pay up to double that amount for a hotel suite. It’s likely that the owners of many of the rental units currently off the market could and would gladly accommodate such renters at a rate lower than a hotel but substantially higher than market rate for an unfurnished long-term rental. Maybe it’s time owners rethink the traditional San Francisco rental market and start targeting renters who need accommodations for less than a year. Consider that hundreds of companies are headquartered here, bringing in thousands of executives and interns. They all need places to live. And the controversy surrounding short-term rentals (with stays typically under 30 days) is absent from this class of rentals. Renting a San Francisco apartment for as little as 30 days is entirely legal.

..what keeps the resident from staying and becoming the long-term tenant?

 Why is furnished housing different?

Why is furnished housing different from unfurnished in this rental market, and what keeps the resident from staying and becoming the long-term tenant you wish to avoid? The answer is of economics and circumstance. Someone paying hefty rent for a fully furnished unit and here for only a limited time is unlikely to become a holdover tenant. Typically, those who rent furnished homes are visiting the area or on temporary assignment, and more aptly fit the profile of a hotel guest than that of a long-term renter. They will pay substantially higher rents due to the convenience of a furnished home and the nature of their stay.

Hire a professional

With Bay Area rental and fair housing laws as stringent as they are, and with tenant rights groups and housing activists always looking for ways to curtail the rights of rental property owners, it is strongly recommended that owners of furnished rentals engage the services of a professional real estate firm to position the property properly. A good agency will create multiple levels of interest bringing the unit to the attention of a broader spectrum of qualified candidates.

Pick a good real estate agency based on its:

• knowledge and experience in setting best pricing.
• compliance with all fair housing laws. No landlord wants to be accused of discrimination just because he or she is seeking premium rent.
• inventory of at least 70 rental units.
• being part of a network that includes corporations needing housing.
• adequate advertising budget and breadth directed toward individuals and companies seeking housing.

Conclusion

If you’re keeping a unit vacant or otherwise holding it off the market because you don’t want a “tenant for life,” consider the benefits of the shorter-term furnished rental market: higher monthly rents, shorter tenancies free of the hassles or controversy of short-term rentals, and more control over your property.
ReLISTO Furnished Housing