This side income idea is really similar to Nick Sidoti’s concept of creating a niche product for a niche market. We’ve already covered veteran housing and special needs housing, but this is one of the residual income ideas that typically dismissed.
You’ve got to clear your mind to catch it.
Residual Income Ideas Can Be Simple
Let’s consider the upper half of the idea envelope. “Special Needs” housing is a much bigger idea than housing government-funded people with disabilities.
It also includes well-qualified people that need custom lease arrangements. If you’re willing to serve them, they will happily pay above market rates to rent a room from you.
You should NOT make the mistake of classifying this residual income idea as:
* A typical boarding house available to the general population.
* An option for people staying up to one year. They can find normal market rate options. I’m not talking typical student housing
* An alternative for people who wouldn’t qualify for a normal rental
Instead, you should center your thoughts on renting rooms to an exclusive population that benefits from networking together. These people are well qualified to make rent payments.
Take a look at the following idea breakdown table:
| What | Convert multi bedroom apartment/house into a housing solution for desirable short term renters. | |
| Difficulty: ○○●○○ | Time Commitment: ○○○●○ | |
| Why | There is likely a desirable population near your rental that, for business reasons, needs a fully furnished place for only a month or two. You may be able to double your residual income by providing a housing solution for them. | |
| Increase Net Income By | Renting furnished rooms for an amount equivalent to an unfurnished one bedroom apartment. | |
| Basic Components | 1. Multiple bedroom unit with at least one bathroom for every two bedrooms
2. Nearby Company/Hospital/Hotel 3. Check out and check in procedure 4. Potential to contract directly with business 5. Lock on each bedroom |
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| The Extreme Version | Create a web kiosk that allows users to book themselves in, pay for room in advance, get their keycode, schedule cleaner at move out, and collect testimonials. | |
| Possible New Income Streams | 1. Car and/or bicycle rental
2. Franchise opportunities 3. Advertisement via web traffic |
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| Nontangible Benefits | May become a “trusted advisor” that refers short term renters to other businesses | |
| Steps to Implement/Test |
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Right Target – Right Price
As a consulting engineer, I travel a lot for business. I’m always happy to find a nice housing option that is less than my per diem, because I’m able to pocket the difference.
To exploit this, you could find the largest company in town, find out if they have regular out of town workers/visitors , then price your room so they’ll want to stay at your property. Aim for a $10 – $20 delta, so monthly users can save over $300.
Compete with Hotels
I’ve notice many companies have their blue collar workers share hotel rooms. Those workers would gladly stay at your place that was priced at the same rate and allowed them to have more privacy.
If you have a hotel nearby:
1 – Drive the parking lot around 9:00 PM and see which company trucks are in the parking lot.
2 – Contact those companies and strike a deal.
3 – Leave a flyer on the company trucks and make a direct pitch.
DocDorm Experiment
If your unit is near a hospital, network with their traveling nursing staff and fourth year med students on rotation. These people need short term housing; they need month to month leases. They don’t have time to deal with finding furnishings – they are super busy. I’m finding that I can rent each room in my 2 bedroom 1 bath apartment for the price I was getting for an entire unit.
This should make you lift your eyebrow. Yep, I’ve doubled the income from this one unit!
I’ve essentially turned my 8-unit complex into a 9-unit complex.
A commercial appraiser is going to have to give me credit for this unusually high income stream. So I’m going into this short stay housing business with the idea that I will sell it with my apartment building.
Is there a teaching hospital near you?
The Downside
You may have to eat a month of vacancies as you get your unit in shape, and you do need to spend some money up front. This is why it is important to gauge interest before spending a lot to build out this idea.
So measure first. Place your ad, and see if the phone rings.
Cost / Projected Revenue
Currently, local hotels charge $90 – 150 per night for a room with two beds.
I know, via trial and error on pricing, that in my area medical student is simply looking for a bed and Wi-Fi for around $500 – $600 per month. My $625 pricing is the upper limit for them. So would you be surprised to know that’s exactly what I charge?
There are sponsorship opportunities that I still need to explore. After all, I do have a platform for a pharmaceutical company to reach a future doctor.
But be aware that startup expenses add up fast. Nicely furnishing a room is flat out expensive.
Again, it’s best to measure first and know that your business model will work before shelling out money. So post a few test ads and see if your phone rings.
For more residual income ideas click HERE to learn about my book: 40 Ways to Increase the Net Income of your Rental Property
I actually bought Nick’s course. So far, I have been unsuccessful. It does take a bit of marketing effort, and I have not had as much time as was needed.
Many cities have a zoning law that prohibits lease terms of less than 30 days.
I know. It’s stupid.
There is a national group addressing the issue: http://www.nlc.org/media-center/news-search/sharing-economy-advisory-network-created-as-resource-for-cities
Solving the problem locally is more likely, zoning is controlled by City Council.
City Councils nationwide are only just becoming aware of the “Sharing Economy”. Airbnb, VRBO, Lyft, and Uber are the private sector players. Airbnb is effectively the largest “hotel” in the world.
You’re absolutely correct Kevin. It’s not an issue in Sacramento, but I’m set up to sublets to med students. If it looks like I’m aiming at a technicality – well, I am. My LLC leases the apartments to DocDorm – a housing service provider.
This is a great innovative strategy. Appealing to the underrepresented short term renters who are likely to pay premiums for the accommodation is a great idea. If you can get it to work, if will make a great strategy, but like you said, the potential cost is a few months of vacancies as you learn work to reach the right tenant. Thanks, Al.
I’m still diving deep into this niche community. Let’s see if I can keep things going for a year. If so, I can really build off this.
Please keep us updated with how this is working out for you. I’m really interested in this one. Also wondering if you had considered and rejected for some reason the idea of renting it as an AirBnB space. If you did, it would be interesting to know your viewpoint on this topic.
Virginia, I’m in my 7th month of operating the DocDorm and I’m learning my way still. I reject AirBnB unless I’m renting out an entire apartment. For example, I rent an entire apartment to my local medical center from July – December each year. I AirBnB their furnished unit from Jan – Jun. Don’t get me wrong, I love AirBnB from a user and host perspective, but the best tactic is to own your own pipeline of clients. Eventually when AirBnB goes public, they won’t be as awesome to work with.