Guest Suites are quickly making a comeback in the Multifamily industry throughout the United States. Many were decommissioned during the boom times, but with vacancy slowly climbing and new supply entering major markets, it’s time for everyone to seriously consider them. Current residents view them as an amenity they very much desire, but traditionally the amenity has been difficult and costly to maintain. The introduction of short-term rentals changes everything.
Our very first ApartmentJet unit was an underutilized guest suite. By working with the owner/operator, we’ve taken that guest suite, introduced short-term rental management, minimized its risk, increased its usage, created a revenue stream that exceeds the unit’s typical monthly rent, and improved upon the amenity for residents.
Guest suites, therefore, can be extremely valuable, and the three reasons listed below demonstrate how.
The easiest way for owners to dip a toe in the home sharing waters is to open their underutilized guest suite calendar to short-term rentals. The financial goal is simple: add revenue to a community’s bottom line whenever residents are not utilizing the unit. Sometimes this can have additional benefits.
Most of our clients have moved all guest suite management to ApartmentJet. Our Concierge team relieves site teams of the burden of bookings and communication. The stay is insured. And we run a criminal background check on each guest.
The results have been impressive. Many long-term residents rave about the amenity, and we haven’t heard a single complaint. Plus, we’ve generated valuable additional revenue.
Most importantly, on multiple occasions, short-stay guests have signed leases for other units after completing an enjoyable stay in a guest suite. It’s hard to argue with increased revenue, leads, and lease conversions, all from a previously underutilized guest suite.
The growing short-term rental market will continue to make this a viable strategy to gain new long term residents.
Vacancy loss prevention / Rent rate preservation
If a property begins to see rents degrade or feels compelled to offer concessions, creating a guest suite is a solid solution to reduce available inventory but continue to receive income.
Even the largest owner of revenue management software in Multifamily agrees in a recent quote *:
“… pushing inventory out of the long-term rental pool helps constrain supply, which YieldStar and LRO monetize for owners in the form of higher rents.” ~ Keith Dunkin, SVP of Asset Monetization RealPage
By creating one or more guest suites, a property can add a valuable amenity for residents and maintain rental rate integrity. While not everyone can achieve rates equivalent to a 12 month lease, the unit will generate revenue when it otherwise would be vacant.
To be clear, we do not encourage this in areas where rent control is an issue, but in other areas this is a solid financial decision.
By adding guest suites, communities in urban core markets (Chicago, Austin, San Francisco, Atlanta, etc..) have experienced significant revenue gains that surpass their average 12 month rentals. Our Austin case study and upcoming Chicago case study demonstrate our clients, on average, generate increases of 25% – 75% in net revenue per unit.
Most communities new to the sharing economy will start with 1 unit and add more units based on financial goals, with a mix of 1 and 2 bedroom guest suites.
We are witnessing significant guest suite growth across our clients’ portfolios, which include 7 of the top 10 largest property management companies. The revenue is accretive to the bottom line, and risk is minimized through our screening and insurance programs.
Guest suites are becoming a revenue generating product in their own right, a perfect new tool for your NOI toolbox. They continue to be a highly-desired amenity for long-term residents, but it’s an amenity made increasingly feasible only because of the growing short-term rental market.
* Press release, “RealPage Launches KigoHospitality™ for Multifamily Short-Term Rentals”