The New Hybrid Professional
One of the best examples of why Kevin Morgan decided to experiment with the short-term rental business is the physical state of one of his apartment units after a long-term renter’s recent departure.
“Long-term renters are hard on apartments,” said Morgan, surveying the filthy walls, broken blinds, and scratched floors of one of his rental units that was recently vacated by a tenant of four years. In short, the place was trashed—despite the fact that it was a gut-rehab before the recent long-term tenant moved in.
The realization that long-term tenants inflict more wear and tear was not the original light bulb for Morgan’s idea to turn traditional apartments into furnished, short-term extended stay units—but it’s another benefit to the hybrid business model he created with the apartment buildings he owns and manages in Chicago’s western suburbs.
Morgan was relatively new to real estate, having shifted from a career in banking and retail lending, when he saw a unique opportunity to do something different with the small, multifamily apartment buildings he was buying. His move into the professionally managed short-term rental sector began as a hunch and an experiment.
“I started noticing a demand for extended stays beyond the traditional three days to a week,” he said. “I was renovating these buildings and I was deciding whether to combine a one-bedroom and a studio into a larger, longer-term rental. I just had a feeling that the location would be good for short-term renters. But I chickened out and didn’t do it at first.”
He did, however, decide to try the short-term rental experiment on a unit he had renovated for himself to live in when he was in town—and it took off from there. “No one was as surprised as I was when the place booked up for months,” Morgan said. “So I started converting other apartments into short-term rentals as longer-term tenants. Whenever someone left, I converted it.”
Now, out of the 25 apartments Morgan owns in two Chicago suburbs, 18 are short-term rentals—and 21 will be converted by this summer.
Riches in Niches
Morgan said he has seen demand for short-term rentals accelerate as a result of the pandemic, particularly because his focus for renters is on professionals, not just vacationers. He first noticed a need with healthcare professionals: medical students doing rotations who needed proximity to city and suburban hospitals, and traveling nurses and other medical professionals who were on short-term assignments.
He started seeking that category of renters out directly, expanding his advertising and marketing to websites those professionals typically use to network with one another and to find housing. The typical guest in a medical profession stays about 13 weeks, he said.
Another early decision Morgan made was to make his properties pet-friendly. “A lot of traveling professionals have dogs, so allowing pets and having a reasonable pet policy really helps,” he said.
The COVID-19 pandemic uncovered another category of longer-term renters who were not necessarily ready to sign a lease: people who had been displaced and were relocating, along with people who needed housing because they were renovating, buying, or selling a home and needed a temporary landing place.
Morgan’s short-term rentals are designed to be appealing because of their décor as well as their location and amenities. He originally furnished them in a boilerplate way, he said, then decided to differentiate each of them with unique themes, catchy names, and a story for each rental. He and his associate, Ephi Maglaris, comb thrift shops and off-price home furnishing stores to find items that fit the themes of the units, like Mid-Century Modern, Book Nook, Boho Retreat, Happy Camper, Higge House, and Vacation Vibes.
“Who wouldn’t want to stay in a Florida-themed apartment in Chicago?” Morgan joked. “But really, it’s cheery, and people like it.”
“Hotels are a vanilla box,” Maglaris said. “Everyone gets the same experience. It was really about creating a great sense of place—an immersive experience,” Maglaris said. “And it’s also about thinking about the needs of the guests in that experience—making it pet-friendly, making sure the Wi-Fi always works, having easy parking and close proximity to amenities. The more you can optimize for that, the better.”
A Professional Edge
One of the most critical elements of Morgan’s hybrid long-term/short-term rental strategy is that he approaches it like a business, and that his buildings and the rental process are professionally managed.
“This isn’t like I’m renting a bedroom in the back of a house,” he said. “We have a laundry facility where we keep a lot of supplies. We have a staff of people who are available for maintenance issues, and who turn, clean, and sanitize the units between guests.”
Morgan’s aspiration clearly is to make his short-term rental effort a business: His goal, he said, is to get at least three times the revenue per unit he would get from a traditional one-year lease tenant.
“If you keep occupancy high, it’s a lot better return on investment on the real estate,” he said. He also hasn’t had any complaints or pushback from his remaining longer-term tenants. In fact, one of Morgan’s buildings has two entrances—one for long-term tenants and one for short-term renters—to keep some separation. But he attributes the lack of problems to the fact that he’s marketing to professionals and not the vacation market.
One of the next steps in Morgan’s hybrid experiment will be to launch his own website and try to market his short-term rental properties for direct booking rather than sharing a piece of the revenue. And that apartment that was trashed after a long-term tenant’s departure is another proof point that the hybrid model is good for the lasting success of Morgan’s business.
“The apartments stay in much better shape,” he said. “We’re in them between guest [stays] all the time, cleaning them and fixing things, so they are just in much better condition.”
What Guests are Saying
Real reviews from some of Morgan’s short-term guests
“I am an avid cook, and I was pleasantly surprised to find everything I needed in the kitchen. Kudos for having a well-furnished place. This is great place for professional travel, or for a couple who want to have comfort and convenience to the city.”
“This space is in a perfect location for the city or western suburbs. The apartment is clean, has everything you need, and Kevin makes check in and communication super easy. All that for a great price. Will definitely stay again.”
“Kevin is an exceptional host, and this place, or another one of his other apartments, would be my first pick. The place was spotless, and Kevin has quite the eye for interior design. Absolutely loved the Boho theme, which was so calming and peaceful. Great neighborhood with an endless amount of restaurant options and diverse cuisines, not to mention the location is 25 minutes from downtown. I thoroughly enjoyed my stay here.”
“Kevin's place was cute and clean. I appreciated that shops and restaurants were in walking distance. It was also nice to have a parking space. Kevin was easy to communicate with. I would definitely stay again when in I'm the area.”
“Convenient parking, very close to the train, and located within a short walking distance to lots of restaurants, coffee shops, and stores. It is a very short drive into downtown (depending on traffic). The apartment has lots of space, a small but well-equipped kitchen, and is nicely kept. Kevin was incredibly responsive and had thorough check in and out instructions.”