Has anyone rented out to tenants who hosts Airbnb?
Los Angeles, CA · Member since 2016 · 41 posts · 29 votes
Has anyone rented out to tenants who hosts Airbnb?
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Nicole A.Pro Member
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes@Michael Choi You recently finished dealing with tenant issues when you acquired your multi-unit; Are you already prepared for more potential headaches, drama, and stress? I would recommend, at least for now, that you just rent to normal tenants rather than tenants making money off of your property. Let them buy their own properties if they want to rent out space for money.
33 Replies
- 8yRoy N.Pro MemberRental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
Our lease prohibits subleasing (including short term stays like AiBnB) without the explicit written consent of the landlord.
In addition to assuring the tenants have sufficient insurance, there may be local licensing requirements (on you, not them) for hosting short-term stays ... here, stays of less than a week technically make you a hotelier, not a landlord.
If you allow tenants to sublease, you give up control over screening and vetting who stays in your property - yes, your tenants are still accountable, but you could be taking on more wear and higher maintenance with no benefit.
- Investor · National · Member since 2017 · 123 posts · 101 votes8yI currently rent units from landlords for this purpose, but without occupying them. The truth is the return can be quite healthy, in some areas 2-3 times what you get paid in rent. Start with checking the local laws and see what your area stipulates for short term rentals and if it’s allowed that is your biggest hurdle. Airbnb has a new program in place for landlords that allows you to see everyone who books, when they arrive and depart, you can even see what is being paid. The program provides another lease for both you and the tenants to sign as well as an additional incentive of a percentage of the commission to ease your choice. I usually offer to property owners to pay a higher rate or cover items that usually are paid for by the tenant as an additional bonus for agreeing. https://www.airbnb.com/help/article/1195/what-s-the-airbnb-friendly-buildings-program. At the end of the day, do what’s in the best interest of your property and other tenants.
- 8yNicole A.Pro MemberRental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
@Michael Choi You recently finished dealing with tenant issues when you acquired your multi-unit; Are you already prepared for more potential headaches, drama, and stress? I would recommend, at least for now, that you just rent to normal tenants rather than tenants making money off of your property. Let them buy their own properties if they want to rent out space for money.
- Los Angeles, CA · Member since 2016 · 41 posts · 29 votes8y
Thanks everyone for the reply.
@Roy N. Yes, my lease agreement prohibits from subleasing hence why they want me to use their agreement which includes my written consent. All tenants applicants are required to apply and show proof of rental insurance before signing the lease. And yes sublease feels risky that I won't have any control but they argue their higher price point and how they set up the place acts as a screening for more affluent guests.
@Account Closed Yes I have and I don't want any additional headaches haha. They are moving out of a three bedroom condo they lived for the last three years due to landlord selling the property. I spoke with their landlord and it seems legit and never had an issue with them. Sometimes I wonder if applicants give out fake reference number...
The new applicants say they will clean and maintain the property every day for their guest and to maintain their Superhost status and it will have less wear and tear since all the rooms won't be occupied all the time throughout the year.
I have a newly remodeled three bedroom/three bathroom unit in the middle of very trendy Los Angeles neighborhood (no rent control) it's a perfect location for hosting on Airbnb, I thought of hosting myself but didn't want to add any additional working hours to my current full-time job so I made a request to Airbnb co-hosting program and that's how I came in contact with the current applicants.
Overall, I don't feel comfortable but my wife thinks it's a great idea and that they will keep up with the maintaining the house clean upon looking into their profile on Airbnb.
Originally posted by @Roy N.:
Our lease prohibits subleasing (including short term stays like AiBnB) without the explicit written consent of the landlord.
In addition to assuring the tenants hav sufficient insurance, there may be local licensing requirements (on you, not them) for hosting short-term stays ... here, stays of less than a week technically make you a hotelier, not a landlord.
If you allow tenants to sublease, you give up control over screening and vetting who stays in your property - yes, your tenants are still accountable, but you could be taking on more wear and higher maintenance with no benefit.
Excellent, Roy. The first thing I thought was potential tax consequences for operating as a hotelier. Logic tells us the hotel industry is a pretty powerful lobby that will want to do everything they can to limit competition. A great way to do that is to lobby tax jurisdictions to tax AirBnB operators as hoteliers.
- 8yLee RipmaPro MemberRental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votesI’m in the great idea camp. They are being totally honest and upfront with you and are even providing their own lease, and they have good credit. Lots of folks have alternative sources of employment including Airbnb hosting and freelance marketing. I would tell them that you’ll do it with them for one year and you want a 20% cut of their profit or you want to change them higher rent. There will be more wear and tear on your place so I think getting premium rent or a cut is fair. I would look at their reviews, look at their credit, judge them as people, and make the call. From what you have said I would do it. They are the ones dealing with the headaches, you’re getting more rent, they could potentially even partner with you in the future to do this on more units. Let us know what you decide!
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes8y
I own a 4600 sq. ft. house on 20 acres in Redding, CA. I leased it out to Youth With A Mission (YWAM) where they were to house a max of 12 ministry students. The lease had a clause prohibiting sub leasing without prior written consent, such as @Roy N. mentioned, and I specifically told them they weren't allowed to do that. Of course, they ignored that, and advertised my house on Airbnb along with several other sites. To my astonishment, they had 34 beds in the house!
I received a letter of a code violation from the County Building Department, investigating me for operating an illegal Bed and Breakfast. They had looked at the Airbnb and other sites (making sure they're getting their taxes) and because some of the reviews mentioned food, it kicks it into the "Bed and Breakfast" use. Also, YWAM hadn't paid any bed taxes.
Because my property is on septic and not sewer, such a heavy use (34 beds) triggered the County Environmental Health to get involved. I am now dealing with having to increase the size of septic and leech field on the property, which will end up costing me around $15,000.
Yes, I did evict the tenants from the house, and I am in the process of going through the process of getting the code violations on the house released. I cannot sell the house until it's all dealt with.
I'd strongly suggest that everyone make sure if you lease a property and do not want to end up with an issue like this, specifically forbid it in the lease, with a clause stating the tenant is responsible for any financial costs related to it if they break the provision.
- Rental Property Investor · Jacksonville, FL · Member since 2016 · 155 posts · 68 votes8y
I currently lease apartments in Jersey City from landlords, who allow me to sublet them as short-term furnished rentals. We run 14 units and attach an addendum to every lease in which the landlord gives us permission to do this.
As far as things to look out for:
- Check your local laws and regulations. I recommend consulting with an attorney on this, as these laws can be confusing.
- If you are in an HOA, make sure to check your bylaws.
- Make sure the operator you are leasing to has commercial insurance that covers vacation rentals/short stays. Most standard insurance policies do not cover short stays.
- If you have a multi-family, ask the operator what precautions they have in place to make sure other residents are not disturbed. We have strict screening policies as well as noise alert devices, which notify of us if noise goes above a certain decibel level for over 3 minutes.
- Are you paying the utilities or are the tenants? Keep in mind that vacation renters often use more utilities than normal tenants, so I would ask your tenants to cover utilities.
If you follow the above and your tenants are professional operators, you shouldn't run into many issues. We have a great relationship with all our landlords. Also, since your tenants are living in the other room they will be keeping a close eye on guests/subtenants.
- Property Manager · Mammoth Lakes, CA · Member since 2014 · 263 posts · 230 votes8y
I would actually disagree with the view that STRs have more wear and tear on your unit than a long term tenant. To maintain a superhost status, you have to have 80% 5 star reviews. That means the property has to be in complete working order and spotless every time a guest arrives. Whereas a normal long term tenant might never clean the carpet and scrub the toilet only once a month, or let the sink leak, you can't get away with that as an Airbnb host and still get good reviews. My airbnbs are in much better shape and much cleaner than my primary residence!
But of course, listen to every one elses advice about following up with local codes and make sure the tenants are paying appropriate taxes. If they are up front with you about what they are trying to do, they are most likely up front about paying their taxes and being appropriately licensed too. Lastly, talk to your insurance agent about adding some extra liability coverage just in case. You could always pass this cost on to your tenant.
- Rental Property Investor · Arlington, TX · Member since 2016 · 706 posts · 611 votes8y
The only thing you really have to be worried about is something happening in the property such as someone getting hurt or the place getting trashed but if you have a good lawyer he will draw up a good contract that will put full responsibility on the tenant.
Renting out to tenants that Airbnb I would just verify that they have experience doing it. Also if they do have experience doing it then tell them to send you their business profile page from Airbnb and take a look at their properties and the reviews on them. This is pretty much their short term rental portfolio. If they are superhosts and are averaging 5 star reviews then I wouldn't find an issue at all with renting out your unit to them.
Also on your end you could furnish the place yourself and just have someone manage it if you don't have the time and triple your money off of the property.
If I were you , it passes code and you are prepared for any additional headaches, I would do it for either a 50% cut of the income or a significant increase in the rent, double comes to mind.
Think of yourself as the money partner in a real estate purchase. It is normally a 50/50 split between the equity partner and the and the partner doing the work. This situation is no different.
Question is can you trust your new potential business partner.
- Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes8y
If you don't want to take on this deal, you can follow @Thomas S.'s advice - doubling rent and/or taking 50% of income would almost certainly take every bit of their profitability in a Los Angeles market. I'm in talks with an owner for a similar deal in LA, in a very hot part of town, and if I bring in double the rent I'll be THRILLED. (don't forget the tenants are also taking on all the utilities, etc. as additional expenses - they won't make a dime until all those things are covered, plus they're furnishing it)
Asking for a (lesser) cut or a somewhat higher rent is certainly an option, and I believe a lot of landlords in your situation do exactly that. But double is outrageous and the potential tenants would not be wise to accept such an offer.
@Shelby Pracht has an accurate take - these tenants are HIGHLY motivated to keep your property in its best possible shape, as doing so is necessary to their continuing to do business! It will get cleaned regularly, minor repairs will be made promptly (and they should be handling most of that on their own, not bugging you about it), and in all likelihood the people who actually stay there will be out and about for the most part vs. living in the space. @Myka Artis is absolutely correct that you should look at their current listings and read the reviews - that will give you a very good sense of how they will care for your property. And as @Michael McKay and others have said, BE SURE that the tenants have commercial insurance designed for VRs - your landlord policy doesn't! Proper and CBIZ are two companies that specialize in such insurance.
I'll be curious what you decide to do!
- 8yRoy N.Pro MemberRental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
Originally posted by @Julie McCoy:
@Shelby Pracht has an accurate take - these tenants are HIGHLY motivated to keep your property in its best possible shape, as doing so is necessary to their continuing to do business! It will get cleaned regularly, minor repairs will be made promptly (and they should be handling most of that on their own, not bugging you about it), and in all likelihood the people who actually stay there will be out and about for the most part vs. living in the space
Tenants should not be making any repairs or modifications to your property without your explicit consent.
- Property Manager · Mammoth Lakes, CA · Member since 2014 · 263 posts · 230 votes8y
@Roy N. If a light bulb goes out or the carpet needs to be cleaned, I would take care of that as a tenant. As a landlord, I would hope my tenants would take care of those sorts of things too. I don't think anyone is talking about replacing a water heater or running new electrical or anything like that.
- Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes8y
@Roy N. - What @Shelby Pracht said. Hence my use of "minor".
- 8yRoy N.Pro MemberRental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
Originally posted by @Shelby Pracht:
@Roy N. If a light bulb goes out or the carpet needs to be cleaned, I would take care of that as a tenant. As a landlord, I would hope my tenants would take care of those sorts of things too. I don't think anyone is talking about replacing a water heater or running new electrical or anything like that.
Naturally a tenant is responsable for "consumables" and for cleaning the leased premises. However, these things are not repairs.
- I’ve heard from several airbnb operators that they charge 20-30% more than a regular rental. I would say close monitoring and a more stringent clauses. If it were me, I will add an addendum to their provided lease agreement to protect my own interest, ie I can check the house anytime, the property will only have x occupants at any given time, and of course they will be liable to any government code violations without recourse or question; on top of a bloated deposit. Their provided lease agreement will be one sided protecting their own interest, if they are removing safety clauses to accommodate what they want to do, you would have to add another set of clause outside the realms of their operations to protect your own.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes8y
Your insurance policy likely does not cover short term rentals.
District Invest Group545 Reviews - Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes8y
Question: why give part/most of your profit to a "partner" that is putting up virtually nothing? If you want to Air bnb, just hire a management company, do it yourself and keep 100% of the profits.
Personally, I don't see what you have to gain by letting people with no financial skin in your property market it to other people and keep most/all of the profits.
Skyline Properties - Los Angeles, CA · Member since 2016 · 41 posts · 29 votes8y
Wow, thank you everyone for all the replies sharing your thoughtful concern and suggestions.
@Stan Hill In the lease contract they've included in the lease agreement to apply for a proper permit, short-term occupancy tax and obtain a commercial short-term rental insurance along with Airbnb Liability insurance.
@Lee Ripma Yeah, as individuals they have credit ratings above 800 and passed the screening test. I've decided to go ahead and give it a go, if all good we can potentially partner up with other units.
@Karen Margrave So sorry for your bad experience, wow 34 beds is just crazy especially when you've rented out to a YWAM, aren't they non-profit organization? What a bunch scammers, I hope you filed a lawsuit against them. I've realized this could happen to anyone even with regular tenants. At least my applicants are upfront and proposed their plan backing up with their current Superhost status with 5-star reviews. They've added a couple of more clause to the agreement upon my request, I'm having a lawyer to go over them just to double check. Hopefully, I won't have to experience a bad situation but you never know. Crossing my fingers.
6. SUBLETTING OR ASSIGNING: TENANT agrees not to assign, or sublet the premises or any part thereof for a period exceeding 30 days (long-term sublease) without first obtaining written permission from OWNER.
9. LIABILITY, PERMITS, BUSINESS LEGALITY: TENANT shall obtain proper permit to legally conduct short-term transient occupancy. TENANT will remit proper transient occupancy tax when applicable and retain full liability for compliance with city, state, and local ordinances. TENANT is personally liable for obtaining and maintaining any applicable insurance to fully indemnify OWNER from claims arising from injury, damages, or loss of personal property.
@Michael McKay Thank you for suggestions, as far as I understand LA regulation will be requiring Airbnb host to use the residence as their primary while renting out other rooms as short-term basis hence they will be occupying the unit. The tenants agreed to provide commercial ST rental insurance as well as paying for GAS and Electric. I cover mainly water and sewage since it's shared with other units.
@Shelby Pracht Yes, that's what they proposed saying they will keep it a top notch to maintain their Superhost status. I think your suggestion to ask my insurance agent is a great idea, that way my agent can keep up with their commercial insurance status, Thanks!
@Myka Artis Me and my wife deeply thought about hosting Airbnb ourselves but decided to try out the new Airbnb co-hosting program. We offered to furnish but they insisted bringing their own since they know exactly what their clients like based on their experience, I have no issues with that.
@Thomas S. They offered incentives if they I give them a break on rent which I declined and suggested to pay full rent and no need for incentives. Since we are starting out I want them to succeed and be motivated while I don't have to lose a portion of my rent due to not working out for whatever reason.
@Julie McCoy Thanks Julie for recommending those companies, hopefully, my agent deals with them.
@Roy N. Yup, added in the clause
12. ALTERATIONS: TENANT may, at times need to make an alteration to the premises, including but not limited to aerials, lighting fixtures, washing machines, dryers or other items. They will first obtain written permission from OWNER. TENANT may change or install new smart locks for ease of guest entry, install smart home devices, smart thermostats, but will not paint, or wallpaper said premises without OWNER'S prior written consent, TENANT will not place placards, signs, or other exhibits in a window or any other place where they can be viewed by other residents or by the general public.
@Manolo D. Yeah, I totally agree with your suggestion, I was first wary of them providing their own rental agreement but upon reading through it wasn't all that one-sided which made a good impression on them plus they agreed to add few additional clause to further protect myself from liabilities although I understand nothing is bulletproof.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes8y
I still don't understand the value to you. Reading through all the posts, as far as I can see all that you are getting is regular full rent for a fully remodeled trendy location. Why can't you get that with a regular tenant? I didn't see anywhere that you were getting a premium; in fact, one of your posts I believe said the tenants were getting a discount for hosting this?
Skyline Properties
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