A Shift in Rental Preferences
The rental market is undergoing a transformation as property owners are embracing furnished rentals as a means of income and tenants as a means of flexibility. This shift from traditional long-term leasing to furnished rentals has seen a significant rise in recent years, with multiple factors contributing to its popularity.
Reasons for the Change
Why are property owners and tenants gravitating towards this new trend? Let’s explore some of the key drivers behind the shift.
Advantages of Furnished Rentals
Furnished rentals offer a number of benefits to property owners and tenants, including:
Attracting a Diverse Tenant Pool
Furnished rentals appeal to a wide range of potential tenants, from business travelers to students, vacationers, and even those in between homes. This diversity helps to ensure a steady stream of tenants and reduces vacancy rates.
But the renter type doesn’t stop there. According to an article on RegisteredNursing.org, there are mass nursing shortages across the country that aren’t projected to be filled until 2030. Places like California and Texas top that list. This means travel nurses and clinicians from all over the country will be accepting contracts – most of which are 13 weeks or more – in these locations to help plug the gaps. 
Savvy hosts positioned to take advantage of this dynamic with rentals that are well-equipped for these customers will reap the benefits of mid-term rentals over leasing their investment properties to traditional long-term renters.
Flexibility for Tenants
Furnished rentals offer tenants the flexibility they need in today’s fast-paced world. With the ability to secure shorter-term leases, tenants can easily move from one location to another without the hassle of transporting furniture or signing long-term leases. The digital nomad is here to stay.
The COVID-19 Pandemic introduced perhaps the largest social and business experiment the world has ever seen in companies determining if remote work was something that could work for their business and employees. For some, the answer was a resounding yes. Today it’s common for us to host business professionals for three or months in our Southern California and Texas locations as they travel the country exploring and experiencing the different locations they visit.
Higher Rental Income
By providing fully furnished spaces, property owners can command higher rental rates compared to traditional unfurnished rentals. This can lead to increased revenue and potentially higher returns on investment. In our own portfolio, we’ve found that gross revenues for a furnished rental will range on average from 1.8x-2.5x higher than market rent for a traditional, unfurnished long-term lease.
And the demand for such from people needing temporary homes continues to rise. Airdna, an industry data analytics company, highlighted in their 2023 outlook that as of the 3rd quarter in 2022, YoY renter demand continues to rise and was up by 20.9%.
Easier Property Management
With furnished rentals, property owners often find it easier to manage their properties. The turnkey nature of these rentals means that guests can move in and out with minimal disruption, reducing the need for extensive cleaning, repairs, or maintenance. The reality is that every guest expects their stay to be exactly as pictured and described by the online listing they read. Experienced professional hosts conduct hotel-level cleaning with every checkout and proactively run maintenance checks with each checkout to ensure the 100th guest has as great of a stay as the first. — even many years into operation.
Owner Challenges of Furnished Rentals
While the advantages are clear, there are also some challenges to consider when offering furnished rentals:
Meeting Tenant Expectations
Guestss expect a certain level of comfort and quality in furnished rentals, which can put pressure on property owners to maintain high standards. This may include investing in quality furnishings and amenities. And this is where a professional hospitality management company can benefit owners the most. Well-designed spaces, built to last, attract quality guests. Well-managed spaces keep them coming back. Creating experiences that meet and exceed expectations inspires positive reviews, which then lead to higher rates and greater profits. It’s a virtuous cycle.
Legal and Regulatory Considerations
Property owners need to stay informed about local laws and regulations governing short-term rentals, which can vary by location. This may include obtaining necessary permits, adhering to zoning requirements, and paying relevant taxes.
Just a few years ago, furnished rentals were very much like the wild west. Take a listing, throw it online, and you could make very high returns. But with that abundance comes regulation. Today is important to understand what your local city and county expect. This can often be found on the local city/county website in the ordinances section of the site. There are two tips we have for understanding your course of action:
1) pay no attention to news articles and salacious headlines. Only official government Websites with their ordinances and laws published can provide a clear picture of tax, permitting, and licensing expectations.
2) Understand that many ordinances define what a short-term rental is for these purposes. And the number one aspect of the definition is “length-of-stay” or LoS. The most common definition can be seen in the following example from the city of Irvine, Ca: “A short-term rental is a dwelling unit rented for fewer than 31 consecutive days.” Therefore note that if you aren’t able to use a property as a short-term rental, you are in fact able to use it as a mid-term rental, which we define as anything above this LoS threshold.
Adapting to the Short Stay Revolution
To capitalize on this growing trend, property owners must adapt their approach to property management and marketing. Here are some strategies to consider:
Marketing Your Property
An effective marketing strategy is essential in attracting guestss to your furnished rental. This includes professional photography, clear descriptions of amenities, and highlighting the unique features of your property. It also includes leveraging a multi-channel marketing approach that includes SEO, social media, email marketing, direct booking Websites, OTAs, and a strong referral network of professionals that interact with your potential guests on a daily basis. More on this shortly.
Tailoring Your Offerings
Consider the needs of your target tenant demographic and tailor your offerings accordingly. This may include providing high-speed internet for business travelers, kid-friendly amenities for families, or proximity to local attractions for vacationers.
At Continuum Homes, our first question is “Whom do you wish to serve.” We understand uniquely that having a specific customer type in mind will help determine a strategic approach that defines the type of dwelling, location, amenities, and marketing channels that are leveraged for attracting the perfect guest.
For example, if you’re catering to travel nurses and clinicians, you’ll want to ensure your property is within 5-10 miles from their work location, is outfitted with black-out shades, includes noise machines, and has a washer and dryer in the unit. All of these conveniences are appreciated because it shows as a host, you have their unique needs in mind.
Building a Strong Online Presence
A strong online presence is crucial for reaching potential guests. Optimize your property listings for search engines, engage with users on social media platforms, and encourage positive reviews from past guests. One creative way we increase the trustworthiness of the rentals we manage is by encouraging multi-channel review posting. So when we receive a positive review from a guest, we’ll also provide them the links to dedicated Google and Facebook pages to repost the same review. So the positive footprint of the guest stay can be viewed by future guests in multiple locations online.
Partnering with Professionals
Working with professional hosting companies and/or partnering with short-term rental platforms can help streamline the process of managing and marketing your furnished rental property. As of April 2022, professional hosts only represented 1% of hosts on platforms like Airbnb and VRBO, but they accounted for 23% of all listings and 28% of all revenue. So the questions an owner of an investment property should ask themself is, how much more money can I make by allowing a professional to host my property versus doing it myself? And even if I wanted to try it out, what does it entail?
Tips for Success in Furnished Rentals
To maximize the benefits of offering furnished rentals, consider these tips for success:
Setting Competitive Rates
Research the market and set competitive rates for your furnished rental. This may involve adjusting rates based on seasonality, local events, or market demand. Professional hosts not only consider these variables, but they also use automated pricing tools that change rates daily based on a multitude of other data points. This is similar to the hotel and airline industry and is designed to maximize daily profitability.
But rates alone don’t even come close to understanding where the highest profit comes from. Competitive rates can translate into high occupancy, but that doesn’t necessarily equate to profitability. Professional hosts know that advertising lower rates maximize eyes and interest in a listing. Crafting a unique experience for the target guest allows a listing to earn far more than the advertised rate. So consider this when setting your rate.
Investing in Quality Furniture and Amenities
Guests expect a comfortable and well-equipped space. Invest in durable, stylish furniture and high-quality amenities to ensure your property stands out from the competition. And remember, you’re creating a space for a guest with unique expectations, not yourself. Keeping dated furniture to try and save money because it’s ‘good enough’ will only serve to diminish the guest experience and reflect poorly in the reviews guests leave your listing (which impacts the bottom line). Let’s showcase your investment property, with fresh interior design that surpasses expectations and leaves guests talking about their stay far into the future.
Ensuring Top-Notch Customer Service
Providing excellent customer service is essential in fostering tenant satisfaction and generating positive reviews. Be responsive to tenant inquiries, address maintenance issues promptly, and strive to create a welcoming environment. Savvy hosts will be available 24 hours a day and have multiple ways of being contacted – whether it be chat, text, email, and phone.
How Realtors Partner with Professional Hosting Companies (And Why They Aren’t The Same)
Did you know there are more than 100 ways to cook an egg? In fact, great chefs the world over earn their hats by mastering the most important ways. Each crease in their chef’s hat represents another way to cook an egg. Why does this matter and what does it have to do with earning top dollar for your furnished rental?
Just as a farmer raises and nurtures chickens that produce eggs that will be sold to restaurants and mastered by chefs, realtors advise property owners on ways to improve and market their homes in order to sell them. But a professional hosting company is more like a chef and holds an entirely different purpose: hospitality. And this is the main difference between the role of a realtor and that of a professional hosting company. One has mastered the art of selling property. One has mastered the art of making that property operate for maximum cash flow.
If you’re considering using your property as a furnished rental for short or mid-term stays, and you want to maximize your monthly returns for greater cash flow, then your goal is the perfect souffle so to say. It’s to create an experience. It’s hospitality.
Many times professional hosting companies partner with realtors for referrals of quality guests. The most common scenario is a realtor’s client who is selling their home but needs a temporary residence before they relocate to their permanent abode.
What motivates each? In general, realtors want to represent buyers and sellers of real property to market and sell that property. They make their living with each sale. And hosting companies want to create an experience to service guests in a way that generates maximum regular returns throughout each year. One is transactional in nature. And one is ongoing. They both have their place, and savvy property owners leverage both during the course of their ownership of a property.
Why Realtors Don’t Usually Like Managing Furnished Rentals
If you’ve made it this far, then you are beginning to understand the work that goes into managing a furnished rental for short and mid-term stays. And it’s precisely why most realtors we’ve partnered with say they don’t want to do this kind of work for owners. What they really want is to retain the relationship with the owner so that they can represent them during the next sales transaction.
But they don’t want to troubleshoot poor wifi connections, field questions about how the shower works at 2 am, or change the batteries of electronic door locks. Realtors most certainly do not want to deal with cleaning, maintenance, or pest control issues. And they absolutely don’t want to hear about how a tenant broke the bed (more on that in another post). And that’s ok. Because they aren’t the chef; they are the farmer.
As the farmer and chef have two different roles and co-exist in harmony, so too do the realtor and professional hosting company. We love realtors. We aren’t realtors. And realtors aren’t hosting companies.
Conclusion
The Short Stay Revolution presents a significant opportunity for property owners to tap into the growing demand for furnished rentals. By understanding the advantages and challenges, adapting marketing strategies, and implementing best practices, property owners can capitalize on this trend and enjoy the benefits of higher rental income and a more diverse tenant pool.
Frequently Asked Questions
What is the Short Stay Revolution?
The Short Stay Revolution refers to the growing trend of property owners offering furnished rentals for short-term stays, as opposed to traditional long-term leases.
Why are property owners choosing furnished rentals over traditional leasing?
Property owners are choosing furnished rentals because they can attract a diverse tenant pool, offer flexibility to tenants, generate higher rental income, and potentially simplify property management.
What are some challenges associated with furnished rentals?
Challenges of furnished rentals include meeting tenant expectations, increased maintenance requirements, and navigating legal and regulatory considerations.
How can property owners adapt to the Short Stay Revolution?
Property owners can adapt by marketing their properties effectively, tailoring their offerings to target tenant demographics, building a strong online presence, and partnering with professionals in the short-term rental industry.
What are some tips for success in furnished rentals?
Tips for success include setting competitive rates, investing in quality furniture and amenities, and ensuring top-notch customer service
