Short term rental properties have become a considerably larger part of the real estate industry in the last decade or so. Whether it is in the form of vacation homes or co-working offices, these properties have become much more prominent in our industry.
You Work, I Work, WeWork
Recently, I have seen articles about one of the largest Co-work companies–WeWork. It is their anticipation that they will IPO on the stock market soon, with an evaluation of over 47 billion dollars. That would make it the second largest company to IPO this year.
Italics = Soapbox Alert
We won’t talk about the fact that they haven’t made a dollar yet, and they are still evaluated to be worth that much. This seems very similar to the early 2000’s when every company was worth a few billion whether there was an actual business behind it or not. OK, I will get off my soap box for the time being.
WeWork offers hundreds of office spaces throughout the world. A person or business can rent these facilities on an hourly, daily, weekly or monthly basis. Giving the businesses that rents this space the flexibility to use an office setting on its terms. This seems very similar to the vacation rental market that Inpeak Properties is expanding its property management operations into.
More Flexibility
Property owners often don’t want to be forced to sign long term leases. These new innovations help owners rent their properties on a more flexible basis. With the ability to advertise to the world on the internet, these short term rentals can reach out to prospective clients more effectively.
Only a few years ago it was necessary to rent on a longer term because of the difficulty to find reliable tenants that would keep your property in good condition while also paying on time. Now that is considerably easier. Just a click of a few buttons and you have signed a short term lease, with payment having already been received.
Of course I would be a clod (yeah I think that is still a word) if I did not mention the added expenses that comes with this kind of venture. For a vacation rental there is more expense in the creation of a website, or using websites like AirBNB, or VRBO. There is also the added expense of cleaning and maintaining the properties, for more use. All the while giving yourself more risk that with so many new tenants you may find one that destroys the property.
My history dictates that I point out the other side of the coin, in which a property manager/owner taking advantage of this, by charging for damage that was never committed, knowing that the tenant lives far away and wouldn’t be able to fight the charges. A friend of mine got screwed by that situation. I still feel bad about that one. I warned you about the soapbox.
Higher Costs?
There is also the added expense of higher management costs. A co-work facility needs to hire staff to supervise the properties, while a vacation rental needs someone close by to help when a tenant has a problem. Technology can alleviate some of these situations with smart building gear, but that is for another time.
Most times that added expense if offset by the added income that can be generated by renting for considerably shorter periods. With co-working facilities especially, the ability to rent the same desk to several people at the same time means a lot more revenue for the same square footage. It is understandable that there are so many more of these buildings appearing, including here in Poulsbo, Washington.
Co-Working for Peace
Flexibility is definitely increasing the demand of these properties, but so is necessity. I would go crazy in a hotel room with my family for a week, but a house that we can rent on the shore, where I can cook my own food (my wife does most of the cooking, because she is so good at it. I don’t want anyone to get the wrong idea.) That sounds like a vacation to me.
Co-working is virtually the same thing. My small business feels more authentic if I have an office away from the home to work at. It may only be a few blocks away but that small commute makes all the difference in the world.
Commercial and residential real estate tend to be very different, but in these things they seem to be the same. Short term rentals mean more comforts, more flexibility and for the owners more income generally. Something I think we can all get behind.