Sorry if this is a repeat question, but I could not find a match to my specific situation.
I have a rental property halfway between San Francisco and San Jose in the center of the Bay Area (i.e. Silicon Valley). I am considering two strategies. The first is renting out my house to a company that, will in turn, rent it out in a mix of MTR and STR. The way the company works is as follows. For MTR I think they rent out rooms to companies that need to have employees in the area for a month or two. And for STR they use Airbnb and other such things. My other options is traditional LTR to a family or a group of people. In both cases I am only dealing with a tenant on a long term basis. And in both cases, I would be renting the property for the same amount. So I am not capturing any of the upside of the MTR/STR strategy. So the question is not about income, the question is more about hassle, wear on the property, damage and other such things.
Sorry if this is a repeat question, but I could not find a match to my specific situation.
I have a rental property halfway between San Francisco and San Jose in the center of the Bay Area (i.e. Silicon Valley). I am considering two strategies. The first is renting out my house to a company that, will in turn, rent it out in a mix of MTR and STR. The way the company works is as follows. For MTR I think they rent out rooms to companies that need to have employees in the area for a month or two. And for STR they use Airbnb and other such things. My other options is traditional LTR to a family or a group of people. In both cases I am only dealing with a tenant on a long term basis. And in both cases, I would be renting the property for the same amount. So I am not capturing any of the upside of the MTR/STR strategy. So the question is not about income, the question is more about hassle, wear on the property, damage and other such things.
Has the company been doing this a long time and is reputable? If so, I would be inclined to give this a try since California keeps changing the rental laws in favor of the tenant. In fact, can you share the name of the company since I am thinking of trying the MTR/traveling nurse route with one of our vacant apartment units in San Francisco.
Hey Tony. Generally speaking, MTR/STR guests make less damage/wear on the property due to the shorter length of stays. You also have the benefit of having cleaners keep an eye on your property, so any issues can get addressed right away, as supposed to your LTR tenants who may not even notice anything until it's too late. However, MTR/STR has its upfront cost, about $5k per bedroom from my experience, and occupancy rate can be a hit or miss. The demographics of your guests and the size of your property (larger property = more guests = potential for more tears/wears) also play a role as well.
Sorry if this is a repeat question, but I could not find a match to my specific situation.
I have a rental property halfway between San Francisco and San Jose in the center of the Bay Area (i.e. Silicon Valley). I am considering two strategies. The first is renting out my house to a company that, will in turn, rent it out in a mix of MTR and STR. The way the company works is as follows. For MTR I think they rent out rooms to companies that need to have employees in the area for a month or two. And for STR they use Airbnb and other such things. My other options is traditional LTR to a family or a group of people. In both cases I am only dealing with a tenant on a long term basis. And in both cases, I would be renting the property for the same amount. So I am not capturing any of the upside of the MTR/STR strategy. So the question is not about income, the question is more about hassle, wear on the property, damage and other such things.
Has the company been doing this a long time and is reputable? If so, I would be inclined to give this a try since California keeps changing the rental laws in favor of the tenant. In fact, can you share the name of the company since I am thinking of trying the MTR/traveling nurse route with one of our vacant apartment units in San Francisco.
Hi, Tony. Have you already decided that you want someone to manage the property for you whether you go the LTR or MTR route? Either of these are very doable on your own if you have the time and desire to do it. An LTR manager will typically charge ~10% of gross rent whereas an MTR manager typically wants anywhere from 15%-30%. Just know that these are very different strategies. MTR is a hospitality business and you need a manager who understands that and will operate accordingly. An average rule of thumb is that MTRs will make 1.5x - 2x what an LTR makes though in your area MTR could be higher than the average. I suspect you have someone wanting to do rental arbitrage with your place if you say you'd make the same whether they do LTR or MTR. I'm a property owner in CA and am not scared to rent to long term tenants where I live albeit CA does have stricter tenant-friendly laws than other states. However, some cities in the Bay area have even stricter rules and lean even more landlord friendly and you're right to proceed with caution. For this reason, make sure if you do go the MTR route and you do end up either allowing rental arbitrage or using an MTR management company that you a) have a water tight, attorney drafted, state-specific lease with the arbitrager and b) they have the same in the lease agreements they're using to rent out your property. Do not leave anything to chance.
@Wilson Lau makes good points about the lighter wear-and-tear with short-term tenants, as does @David S. about arbitrage being a safeguard from the California laws which are less favorable to landlords.
My suggestion is that you find out how much cash your would-be tenant (the one doing the arbitrage) has in reserves (because it might take a little time to get the first booking). You might ask for the first few months of rent upfront.
Also, ask your would-be tenant about other properties they are subletting. Are they relatively experienced, or is this a first time for them? You are likely going to have a better experience when someone with more experience leases your property for arbitrage.
@tony@Tony W. If allowing a company to do arbitrage, vet them well. Several companies / people have tried this in the past few years with things not ending well. Search BP for some stories.