Lease terms when allowing short term arbitrage in my building

[John Kennedy]

I have a rental duplex and am about to enter into a lease with a tenant who intends to do short term rental arbitrage in one of the units. Does anyone have any recommendations for what type of insurance clause I should include in the lease for this type of arrangement? I am thinking of requiring the tenant to carry $1mil biz liability insurance naming me as additional insured. And, with a tenant doing short term arbitrage in my building, does that require me to get the more expensive STR insurance myself, or would my normal landlord policy be enough (in combination with the tenants extra coverage), since I'm not personally running that STR business?

Thanks for any suggestions! 

[Nathan Gesner]

I would recommend against it. Does your zoning allow short-term rentals? If it does, are you certain this person knows what they're doing and that they're running a reputable business, paying taxes, maintaining the home, not disturbing the neighbors, etc? Are they cramming eight people into a 2bed/1bath and over-using the systems and appliances? 

From what I've seen, most of the arbitrage people are young with no business sense. They do this for a cash grab, they don't make as much as they think, and as soon as things go bad they will disappear into the night and leave you in a lurch.

Unless you can prove they have a strong, stable business with a couple years of experience, I wouldn't touch it with a ten-foot pole. If you move forward, I recommend standard insurance for yourself with strong insurance for the renter with you as additional insured or additional interest. Personally, I would charge a higher rate or at least make the renter responsible for ordinary maintenance so you're not unclogging toilets or fixing appliances that his guests have broke.