A case study in furnishing a first unit for $9,400 and landing a company lease at $2,950 for four months

The rule this room repeats is to have a buyer before you buy a mattress, and a worked case shows what that looks like with real numbers. Take a three-bedroom townhouse in a suburb about six miles from a business park with a few engineering and medical device employers, closing in the fall. Plain rent for the townhouse is $1,900, and that is what it gets underwritten at, so everything below is upside the deal did not need. Before closing, the operator emails eleven people: HR contacts at four employers identifiable in the business park, two staffing firms, three relocation management companies, and the two corporate housing providers that show up in the market. The message says a furnished three-bedroom will be available in about 60 days and asks what they typically pay and what they require. Six reply. Four say get on the vendor list, which is a process. One provider offers to master lease it at $2,150, everything on them. One staffing coordinator at a medical device employer has an ongoing problem placing validation engineers who come in for eight to sixteen weeks in groups of two or three, and hotels are not working for them. That is the lead to take. Furnishing runs $9,400 over three weeks, mostly one retailer's delivery package for beds and sofas, plus a used dining set and a lot of kitchen stock from a warehouse store. First lease is four months at $2,950 including utilities, internet and a cleaning every other week. The company signs as tenant, three named occupants, invoice on the first, net 15. In this case they pay on day 9 both times. Running costs while occupied are about $500 a month, so the net is roughly $2,450 against $1,900 plain. That is $550 a month over plain, or about $2,200 across the four months, on $9,400 of furniture. Not paid back yet. The part that nearly breaks it: the company asks for a certificate of insurance with their entity as additional insured and a signed vendor form with net terms, with four business days to produce both. The insurance agent handles the COI. The vendor form carries an indemnity paragraph most first-time operators will not understand, and $600 to an attorney to read it is worth every dollar. What to keep from the case: emailing eleven people before owning anything. Ten hours of work that changes what the first year looks like.

ehernandez74 PC3BPRO 12

17 replies

renee_dubois PS1APRO 12

The eleven emails is the whole post. Everything after it is execution. Question on the master lease offer that was turned down. $2,150 with nothing on the owner versus $2,950 with utilities, internet, cleaning, and vendor paperwork on the owner. Included costs of $500 put the net at $2,450 when occupied. That's $300 a month better than the master lease, and only when occupied. If the vacancy gap between placements runs more than about six weeks a year, the master lease wins. Worth pricing that out rather than defaulting to a preference for control.

renee_dubois PS1APRO 12

aaron_fitz10 PU1APRO 13

@renee_dubois has it right, that's the same reaction worth having here. $300 a month of spread for taking on all the operating risk reads thin. Though a master lease provider would have wanted a term and a right to renew at their number, so the alternative would have meant locking in the thin end anyway.

aaron_fitz10 PU1APRO 13

samantha_ruizPassivePRO

I'd take the direct relationship at $2,950 every time, and not for the $300. Once you're the person that staffing coordinator calls, you get told about the next project before anyone else does. Under a master lease you're invisible to the actual demand and you find out what your unit is worth when the provider renews.

@ehernandez74 what happened at month five? You wrote four months and then stopped.

samantha_ruizPassivePRO

megan_doyle15PassivePRO

Basic question and sorry if it's obvious. When you say the company signed as tenant, does that mean the engineers aren't on the lease at all? Who do you go after if they wreck the place?

megan_doyle15PassivePRO

luis_carrera CS1CPRO 12

Left an old field last year and land banking is the strategy that keeps drawing interest, mostly because it doesn't require managing tenants around a job. For a 10 acre parcel like this, the discipline is knowing what comparable land actually trades at before treating an asking price as a starting point. Two agents' opinions on one parcel isn't enough of a sample to know if a per acre number is fair.

luis_carrera CS1CPRO 12

dpatel_re CP3APRO 22

The number that matters is annual furnished occupancy, and that isn't known yet. One four-month lease confirms the rate is real. It says nothing about whether the unit runs eight months furnished a year or four. At $550 a month over plain rent, eight occupied months a year is $4,400 and the furnishing package pays back in a bit over two years, before replacement. Four occupied months a year is $2,200, with vacancy carried at a higher included-cost base while the furniture depreciates. Same rate, completely different investment. Also worth being precise: a $500 included cost is the occupied number. Utilities and internet during a furnished vacancy don't go to zero, they run closer to $250. That's the line most operators forget when comparing furnished to plain, and it's why gap weeks hurt more than they do on an unfurnished unit.

dpatel_re CP3APRO 22

dmitri_248 CB2CPRO 11

The money spent on legal review of the indemnity paragraph is often the best money in a corporate housing agreement. Corporate vendor forms are drafted by the corporate side and they routinely ask the housing provider to indemnify them broadly, including for things arising out of their own occupants' conduct. Sometimes that is negotiable, sometimes it is take it or leave it depending on how much the corporate client needs the provider. Worth asking what the paragraph ends up saying, and whether any of it can be struck.

dmitri_248 CB2CPRO 11

aliyah_bActivePRO

$9,400 for a three-bedroom is lower than the numbers I've been writing down. Was that everything including linens and the kitchen, or is that just furniture?

aliyah_bActivePRO

devon_pierce SS4APRO 15

@aliyah_b an itemization is worth asking for. A reasonable working estimate for a three-bedroom furnished unit runs $14k to $18k, and if $9,400 is achievable that changes the math on several comparable deals. @ehernandez74, six miles from a business park is worth testing on pushback. The common wisdom is that corporate furnished works best downtown, so a result that far out is worth understanding rather than assuming it won't repeat.

devon_pierce SS4APRO 15

omar_haddadPassivePRO

Three weeks to furnish a three-bedroom with delivery lead times and a used dining set is fast. Either you got lucky on the sectional or you were flexible about what you'd accept. On my rehabs the furniture package is always the thing that slips, and it slips because someone decides the gray sofa is wrong after it's ordered.

omar_haddadPassivePRO

gregpowell66 AC4BPRO 19

One thing nobody has asked. Three validation engineers in a three-bedroom means three people cooking, three sets of laundry, and probably three cars. What does the parking situation look like, and what did four months of that do to the unit? Wear from three unrelated adults on a short assignment would be expected to run harder than a family on a two-year lease.

gregpowell66 AC4BPRO 19

paulgrant17CapitalPRO

How did you screen them, or did you? If the company is the tenant and they hand you three names, do you run anything on those names, or is the corporate signature the screening?

paulgrant17CapitalPRO

karen_whitfieldPassivePRO

The part that impresses me is that you underwrote it at $1,900 plain and bought it on that basis. Everything since is optional. That's the position that lets you say no to a $2,150 master lease without sweating.

karen_whitfieldPassivePRO

kevin_lombardPassivePRO

Saving this whole thread. @dpatel_re's point about utilities not going to zero during a furnished vacancy is something I would not have thought of for another year.

kevin_lombardPassivePRO

tashaford30 SG2CPRO 16

@ehernandez74, do the four providers who said to get on the vendor list ever actually come through? A common failure point is assuming vendor approval is a formality, when it can carry a two-year operating history requirement that catches operators off guard. Worth asking whether those queues have converted for anyone yet, and what they required to get there.

tashaford30 SG2CPRO 16

luis_carrera CS1CPRO 12

Worth flagging on this kind of pre-close outreach. Sending offers to prospective corporate tenants before closing means, if the deal falls apart, the emails already went out about a unit not yet owned. Framing matters here: it should always be presented as under contract rather than available, so a fallen deal doesn't turn into a promise that can't be kept.

luis_carrera CS1CPRO 12

marcus_hale41CapitalPRO

I'll push on the one variable that actually breaks this. Your buyer is one staffing coordinator at one employer with a specific recurring need. She changes jobs, or that validation program finishes, and your $2,950 goes away in a single phone call. The four vendor-list applications are the thing that makes this a strategy instead of a relationship, and they're the part you haven't finished.

I'd spend the next four months of paperwork time on those queues while the current lease pays. Concentration in a single counterparty is fine at one unit. It's what kills people at four.

marcus_hale41CapitalPRO

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