Wow, my tenants have a 5 star "Host" rating on AirBnB! For my Property???

[David Oberlander]

Good morning, BPers.  Hope your weekend is going better than mine.  As you can see by the subject line, tenants at one of my rental properties have decided to increase their income by renting out rooms at the house they rent from us.  It's a duplex.  The tenant next door called yesterday and told me he thought they were having various people coming and staying for the past month and that he hadn't seen either of the couple living there for a week.

It took less than five minutes to find the listing for our property on AirBnb and to start reading the 31 reviews they have received (almost a 5 star average) for the "property" they "own".  LOL  (no, actually I've been doing a slow burn for about 16 hours)

So, what do we do next?  As they are in violation of their lease, various city ordinances, building codes, etc I intend to shortly ride over there and slap a 7 day vacate notice on the front door.  Then should I sign up on AirBnb as a guest and leave a "review" telling people not to try booking a room at this "hotel" and that those who have booked up already need to request a refund?  Yes they have reservations booked thru September.  I'm sure my insurance company would love handling a claim from some one getting injured there.

The thing is I kind of like the AirBnB concept.  As I intend to add vacation rental properties to our holdings and use them for bookings.  But this proves to me that AirBnb has no way of verifying owners or renters at properties listed there.

Anybody else have this situation occur? Or have any suggestions or comments as I'm open to any ideas.

[JR T.]

@James R. - After asking your performing tenant to leave due to their AirBnB usage how long was the unit vacant? How much did you spend advertising it? How much time did you put into turning over the unit and reletting it?

@Israel Tab - Please explain to me what the reason would be for an insurance company denying coverage for injuries to one of your tenant's guests. YOU did not bring that person there illegally, your tenant did.

@Robert R. - You would seriously run up legal fees over a tenant who is current on their rent?

[Account Closed]

No one would want a drug dealer or sex offender, the felon is questionable , as far as your preference of residents this is a business, profit is the goal reviewing and adjusting your contract with airbnb if possible should help your concerns but  anyone is capable of wrong doing.

[Edward B.]

There is a reason most landlords do not allow tenants to run a business out of their properties and it is the liability. Not to mention your insurance company will not like it either, forcing you to deal with that to ensure you are properly covered.

I agree 100% with the poster who asked why you would want to partner up with someone who has not been upfront with you. I would definitely vet my partners better than that. And I firmly believe that allowing them to continue is a recipe for disaster. It may be going good right now but there are way too many likely story lines where this ends badly. Mainly because you are no longer in control of your property and they have no real incentive to screen their AirBnB'ers because it is not really their property anyway.

You are handling this correctly. If they fix it fine, let them stay till the end of their lease. If not, they need to go. And I would seriously consider not renewing their lease too if they are at all bitter about you shutting down their illegal business.

[JD Martin]

The question I would ask of the people who say "Hey, it's OK, just be happy you have the rent" or "Just get a little more rent money to cover the costs" is this: would you be OK with the tenant operating any kind of business out of the home as long as it wasn't explicitly illegal? If so, do you have a clause in your lease that prohibits tenants from operating a business out of the home, or do you encourage such activity? 

I don't think most landlords see their only objective as making immediate rent money. Protection of principal, managing risk, ensuring long-term neighborhood viability, and possibly even social factors (providing a nice home for a reasonable price) are all important issues, maybe even more important than a few short-term dollars. Otherwise, shouldn't everyone run slums? 

There are downsides to allowing tenants to operate a business inside the home, which is why most landlords don't allow it. Aside from whether or not it's permissible in the area's zoning, with a few exceptions such as nice downtown areas, housing in commercial areas tends to be less desirable. Consider this example scenario: right now you have, let's say, a one-year lease with a tenant who is keeping the place up and making lots of money for themselves. They decide to leave after a year to own their own place and make more money. In the meantime, people living in the same apartment building, or on the same street, get fed up with the parade of non-stop strangers and move out. Now there are multiple vacancies on your same street, and when you go to re-rent you end up taking less money.

I could go on, but the point of the matter is whether or not the landlord should be OK with the tenants operating a business out of his home without his permission. 

[John Wilson]

@David Hays, Great points. I think the initial issue with the landlord finding out was surprise and discomfort with his tenants making money. I would be very interested in hearing more about your property management business. I'll connect with you.

[Marcia Maynard]

Originally posted by @Al Williamson:

If you can work around city ordinances and quantify how much the proper insurance will cost, I would joint venture with the tenant.

Taking a probation stance and not letting your business evolve is a lost opportunity.

Evolve legally - someone will always move your cheese.

That is good advice, in general. If it were not a duplex unit with a tenant on the other side being negatively affected, maybe it could work out and become a win-win. I'd be concerned about more than the extra income potential in this scenario. The landlord has a responsibility to both tenants and the neighborhood too.

[Tim Ryan]

Increase the rent to make it worthwhile ... short term renters insurance is easy to get.  Mine is with Foremost.

I can think of much bigger problems than a paying tenant hosting "guests".

[Tim Ryan]

[quote]

Consider this example scenario: right now you have, let's say, a one-year lease with a tenant who is keeping the place up and making lots of money for themselves. They decide to leave after a year to own their own place and make more money. In the meantime, people living in the same apartment building, or on the same street, get fed up with the parade of non-stop strangers and move out. Now there are multiple vacancies on your same street, and when you go to re-rent you end up taking less money.

[/quote]

FWIW ,  I've been renting a property via Airbnb for a couple years.  Transients, crack-heads and bums don't have the means to drop a couple K on a credit card for a few nights stay.  Heck even my long term tenants can't do this.  Easy to see a win-win out of this one.

[Jane A.]

Marcia Maynard Absolutely agree !

[Colleen F.]

I agree with @Marcia Maynard there is an obligation to the other half of the duplex. The airnb rental could hurt the relationship with those tenants.  While airnb might be fine now if the rentals vary seasonally you could lose a good tenant and then you take a while to get the airnb tenants out so you wind up with two vacant units and the off season.   Better to take action now. 

Its not that an airnb model could not work, it is my thought that it would work best if you wanted to do it and did it with both units.  We have short term rental houses in our area and there are always neighborhood complaints.  Owners have parties until the wee hours or hang out on their decks and no complaints but a renter does it and they call the police.  You could still have this scenario but you are better positioned if people complaining are at least a house away.

I try to make a longer sublet work if my tenant have prolonged travel but it doesn't sound like that  is the case with 50 reviews

On the posting on the door I would also send by registered mail or a written form.  You may just be informing "guests"  if the tenants aren't living there.  

[Jennifer L.]

I would contact my insurance broker to find out what liability I would have for the AirBnB sublet scenario.  If additional insurance is needed, which I'm sure it is, I would contact the tenants and demand at a minimum that they have proper insurance coverage for the above arrangement.  If not, then I think an eviction is in order because of the increase potential liability.

I do think it would be fun to serve the notice by renting out the place personally for a night and having the tenant show up with the keys to your own place.  ;-)

[Jen Kurtz]

As far as I am concerned, they are conducting business in your rental and this is a liability. Its not like they are merely blogging or selling items on amazon. I'd let them know right away to cease the activity, and give them a notice to leave- unless you believe they are good tenants to keep and you are certain they stop. If not, then kick them out and go AirBnB for yourself if it in fact is more profitable then regular rent :)

[David Oberlander]

Time for an update.

Our tenants have agreed to vacate the property by Aug 2 and we agreed not to follow thru with legal action.  As our lease agreement was written by the Florida BAR association.  It includes sections that do not allow subletting or running a business out of the rented property.  I doubt that we would have had any problem getting a court to evict.

I also doubt having any problems in renting it out again. Last time (in December) I posted an ad on Craigslist at 9 Am on a weekday.  Had the first inquiry 20 minutes later and by 6 Pm that night had seven showings and 5 applications filled out.  Had to shut off my rental phone after that and had over 20 messages in voice mail.  Yes, I keep one cell number just to rent out properties.  Actually ending up renting another property (a more difficult place to rent) to one of the other applicants.

For those whose asked about our renting it out thru Airbnb I have multiple reasons to never use them.  

The first ones concern the property. It's in what St. Petersburg calls a Traditional Neighborhood.  That means the uses are restricted and I only fight city hall when I think I have a chance.  The limited extra income is not worth the trouble.

Who's responsible for collecting the hotel taxes?  Not Airbnb.  The sales & use tax runs at least 20% for this location but hey wait until the government fines you for not collecting them.  But Airbnb will take 3% for their service.  LMAO.  (and collect an additional 12% from the Guests.)

Their review system is worthless.  It's been proven that Airbnb removes negative reviews.  That's way everone has a 4+ star rating.  LOL

Their insurance?  It's a secondary policy that MAY only pay off after your insurance coverage ends.  No one has been able to use it yet.  (good luck)

Guest verification?  Same as their Host verification.  If you've got a Paypal account you're good.  And I know crackheads with Paypal accounts.  YOU DO NOT NEED A CREDIT CARD!

Customer service?  They haven't responded to my email yet.  Not even a "Shut up and GTFO" letter.

So, with the exception of a nice website what does Airbnb do for you?  I don't see anything of value there.  There are many better places to rent out vacation rental properties if you are professional.  And not just an idiot trying to make a quick buck.

And for those who have asked Airbnb's customer service phone number is 855-424-7262.  I wish you good luck.

[JD Martin]

Thanks for the update, I think you have handled it wisely. 

[David Hays]

Wow @David Oberlander... While I completely understand your feelings here, and how you would not consider Airbnb to be the best result in your own cost/benefit analysis, you could not be more wrong about Airbnb. 

If your muni assesses those taxes you´re concerned about, it´s your responsibility (just as any other person representing their self-employment income) to handle your taxes. I pay my taxes just fine, and have had no problems. You´re complaining about their 3% fee for hosts? You realize that this is no more (on average) than you would pay for any merchant account to accept credit cards, AND you have the benefit of a global booking engine and PMS to boot. Engines like Expedia and Booking.com charge hotels anywhere from 15-40% of their bookings, for reference, so 3% is hardly a burden to bear. Who told you Airbnb makes a practice of removing bad reviews to ensure everybody´s rating? I can tell you for absolute fact that that is untrue - we´ve experienced some dreadful reviews, and have left a few of our own, and barring inappropriate language nothing has been censored. Their insurance policy is perfectly functional, and I´m not sure where you´re saying ¨nobody´s been able to use it¨, and verification is performed by providing an official ID linked to matching social profiles. 

Look for problems and complaints, and you´ll find them (usually perpetuated by people who´ve had little exposure). Like I´m said, I´m really not trying to convince you one way or another - and I´m sorry for the bad experience you´ve had thus far - I´d just rather not see misinformation perpetuated.

[David Oberlander]

Originally posted by @David Hays:

Wow @David Oberlander... While I completely understand your feelings here, and how you would not consider Airbnb to be the best result in your own cost/benefit analysis, you could not be more wrong about Airbnb. 

If your muni assesses those taxes you´re concerned about, it´s your responsibility (just as any other person representing their self-employment income) to handle your taxes. I pay my taxes just fine, and have had no problems. 

Of course, it's the "hotel's" responsibility to collect and pay the taxes but since Airbnb neglects to inform their Hosts of that how many are going to be on the hook when their muni catches up with them?

You´re complaining about their 3% fee for hosts? You realize that this is no more (on average) than you would pay for any merchant account to accept credit cards, AND you have the benefit of a global booking engine and PMS to boot. 

I'm actually complaining about the 12% they collect from the Guests in addition to the extra fees and Host charges.  And what would I want with PreMenstrual Syndrome?  Do I look like I have a uterus??

Engines like Expedia and Booking.com charge hotels anywhere from 15-40% of their bookings, for reference, so 3% is hardly a burden to bear. 

Priceline charges 15% and Expedia 25% for example.  But if you're a 20 room hotel with empty rooms then it just another expense.  Plus I've seen Expedia charge 25% higher for the same room.  So it doesn't come out of the hotel's pocket.

Who told you Airbnb makes a practice of removing bad reviews to ensure everybody´s rating?

How about Boston University? 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id...

 I can tell you for absolute fact that that is untrue - we´ve experienced some dreadful reviews, and have left a few of our own, and barring inappropriate language nothing has been censored. 

Guess again!

http://maphappy.org/2015/05/why-you-really-cant-tr...

Now link your listing on Airbnb here so everyone can see your reviews.  Bet you're averaging 4.5 stars or better ROFLMAO

Their insurance policy is perfectly functional, and I´m not sure where you´re saying ¨nobody´s been able to use it¨, and verification is performed by providing an official ID linked to matching social profiles. 

Here's the insurance answer.

http://www.tnooz.com/article/homeaway-thinks-1m-ai...

And do you really think I'm stupid enough to give out my driver's license and SS number

over the internet.  LMAO

Look for problems and complaints, and you´ll find them (usually perpetuated by people who´ve had little exposure). Like I´m said, I´m really not trying to convince you one way or another - and I´m sorry for the bad experience you´ve had thus far - I´d just rather not see misinformation perpetuated.

Misinformation?  The only one I see spreading misinfo is you. Oh and the Venture capital people who put money into Airbnb recently.  Airbnb is on track to LOSE $150 million this year.  An accountant told me 30 years ago the value of a business losing money.  "It's worthless" and not worth 24 billion.  But you don't see is that those VC guys are working on the Bernie Madoff finance plan.  They'll cash out of this Ponzi scheme after the IPO hits next year.

[Carlos Enriquez]

You know, notwithstanding all the great comments and suggestions, the bottom line here is how did you, the owner, feel about it?  Due to the liability and government interest in this type of business, I see that you decided to get them the hell out.  That's your prerogative and right, and I'm glad to see you acting upon that.  I see too many people being influenced by good intentions and then get screwed.  You probably dodged a bullet.  Some may say that you don't know that, but now you can be comfortable in knowing that you won't have to.  Kudos!

[Mike Hurney]

@Colleen F.

"Owners have parties until the wee hours or hang out on their decks and no complaints but a renter does it and they call the police." No kidding;-)

@David Hays

"you could not be more wrong about Airbnb." which bnb office do you work out of?

[David Hays]

[David Hays]

 My own. I don't work for the company at all, though I'm very happy with the experience I've had with them overall. Having spent enough years dealing with conventional booking engines (Expedia, Travelocity, Orbitz, etc), I'll gladly take the client relations team at Airbnb any day of the week. 

I've said a dozen times before that under no circumstances am I trying to convince this owner one way or another, and I'm glad that he was able to resolve the situation in a satisfactory manner. The fact here is that you have an increasing number of REI that think that STRs (whether through Airbnb or otherwise) are just another facet of their industry, when in reality the hospitality industry is immensely complex on its own. I will freely admit that I have more professional experience in the hospitality industry, but I've been involved enough in the RE industry to understand where they overlap, and where they don't.

[David Oberlander]

I replied to David H.'s post of Aug 5th last week but somebody deleted it (the post directly below his).  I made point by point rebuttals of all his comments.  I included links to research papers and other articles on the web about Airbnb.  It showed how bad Airbnb really is.  Somebody working for Airbnb had that post deleted.  I've already written to Joshua Dorkin and intend to fire off another Pm to Brandon Turner.  If it's not re-instated today that shows you how much Bigger Pockets has fallen.  

[post edited]

[Brandon Turner]

Originally posted by @David Oberlander:

I replied to David H.'s post of Aug 5th last week but somebody deleted it (the post directly below his).  I made point by point rebuttals of all his comments.  I included links to research papers and other articles on the web about Airbnb.  It showed how bad Airbnb really is.  Somebody working for Airbnb had that post deleted.  I've already written to Joshua Dorkin and intend to fire off another Pm to Brandon Turner.  If it's not re-instated today that shows you how much Bigger Pockets has fallen.  

 Hi David Oberlander,

It looks like you are correct, your post was deleted, but not because of an AirBnB conspiracy. You simply posted incorrectly, quoting the other David and then writing within that quote so the message appeared blank to the moderators, which is why it was removed. We routinely delete duplicate posts and "quotes" that have no information added to them, as your post appears. Notice how the text I'm writing on right now is darker in color and moved over to the right from the above quote. Yours was written directly inside the quote, hence the confusion. Sorry for the post being removed, but no need to insult BiggerPockets over it. We are happy to close you account for you and there are many other online forums that would love to have your participation if you feel BP no longer suits you. 

Shall I close your account? 

[David Oberlander]

Thanks Brandon

I could not post my original reply properly because of the way the forum software works.  that post from the 9th was supposed to be each of David H's points followed by my counter argument.  Apparently I need to click on the "Bold" icon at the top for my answers but now i can't turn off the bold LOL  (seriously you need better software.  Ever hear of vBulletin??)

But that's not what Rubelyn P. told me in her PM about deleting it.  She claimed I had advertising in the post.  Told her I was writing you and Joshua.  Had she said what you said  (hey the bolding stopped)  I wouldn't be so grouchy.   Do you understand?  Telling me it was deleted for having advertising is a lie and I hate people who lie to me.

David

[Brandon Turner]

@David Oberlander- Makes sense David. She must have clicked the wrong button and sent the wrong canned response (those messages are all pre-populated with about a dozen different options. Sorry about that!) 

[Ama Mills]

I am currently Air BnBing with the permission of my landlord, he is more concerned about me paying rent. Being a host has saved me big time when living in New York.