Any one doing monthly rentals?

Question

Hey guys. Looking to do furnished monthly rentals. Most likely to flight attendants or students. Not closed off to other people that would be potential renters. My 2 questions are:

How do I go about showing the income from the property for taxes and any future financing?

What type of lease agreements do you need to have them sign?

There will be multiple renters in one SFH so just wanted to get a idea of what others have done. Thanks!

Joe Kim · Answer

I'm sorry David.   Biggerpockets has become less friendly and even less helpful comments on the forums to legitimate questions.

Some people seem way too "smart" for their own good.

Income from the property can be done easily - if you are marketing on airbnb - Airbnb has this nice feature called "proof of income" that is acceptable to mortgage lenders as proof of income.    Also, if you keep your own good bookkeeping with separate business checking account showing income/expenses.   You could even do a simple profit and loss (per month) bookkeeping on Excel.  You don't need anything fancy like quickbooks (at least not yet).

Lease agreements - I take a standard lease agreement for each state you belong to - you can find standard lease on biggerpockets here -

https://www.biggerpockets.com/landlord-forms

or you could even just google one for your state.

You can easily modify a lease with a "special stipulation" section:   "the following special stipulations for leasing the property (address) if conflicting with any exhibit, addendum or preceding paragraph (including any changes thereto made by the parties), shall control:

1)  state whatever terms you want to clearly outline here. "

Targeting flight attendants, students - I think you are talking about "niche marketing". if you have an unfair advantage (you are a flight attendant or have family/friends who are), then you can use that advantage to go after that market.

Ignore the negativity.   Move forward!

Joe

Don Konipol · Answer

@David Van

I’m not sure why flight attendants would need a month to month lease more than any other group, they don’t have 30 day lay overs.  Students typically look for 9 month leases.

Month to month rentals usually, but not always, come fully furnished.  The target market for these is often dependent on your location, quality of the property, and price range.  Month to month attract people whose house has been temporarily tended uninhabitable, people who have just separated from a spouse, people who have just moved into the area and are waiting to close on or are building a house, people in for medical treatment, people visiting family, people with temporary job assignments, and people whose life is “in flux”.

The income from the property, as well as the expenses, will be listed separately on your tax return.  Additionally, you will have the executed month to month leases.

Most local Realtor associations have standard residential leases for their members use. Merely insert the monthly start and end dates, and insert a provision that the lease automatically renews month to month.

Your competition will be corporate housing providers.  They provide monthly leases on fully furnished residences, including linens, kitchenware, etc. for about a 50% premium over the unfurnished 12 month lease rare.  So if an apartment is available for $3000 monthly on a 12 month lease unfurnished, they’ll rent it to you for $4500 fully furnished.  The “premium” percentage is higher for lower rent properties.

Depending on your situation, the differential income may not be enough to make it worth doing vs a 12 month lease.  In a month to month situation you have increased costs for cleaning, make ready, damage, repairs, administration, management, local taxes, and vacancy.  I have a fully furnished rental condo in Tempe, AZ I was going to STR, but the rate I was able to get on a 12 month lease made any additional potential income from a STR not worth it.  I’ve had the same tenant there for six years with yearly rent increases.  Plus, I don’t have the hassle of fighting the condo association, marketing the property continually, cleaning the property, replacing broken items, paying STR taxes, evicting bad tenants, dealing with neighbor complaints, dealing with new tenant questions and expectations, and having to fight to collect the monthly rent.

I think the conclusion drawn by those experienced in STR is that they are best in popular year round vacation destinations.  Second would be large cities without restrictive municipal ordinances limiting STR, and without prohibitive taxes.  In most other situations, any differential is eaten up by vacancies, cleaning, repairs and management.  Of course, there are no absolutes.  Any individual situation may be different.

Luke Carl · Answer

I have to agree with Paul I feel there are several bad ideas here. Especially multiple renters in one house. And 30+ days.

Just beware 30+ days will REQUIRE a lease. May I ask where these ideas came from? Will the property not make money with a long term tenant?

Luke Carl · Answer

Uncle Paul has been telling it like it is on this forum since this forum existed. He’s also not being negative it’s his sense of humor. He is the mayor of STR and I for one look up to him.

Michael Baum · Answer

I don't think @Paul Sandhu was meaning to be rude, just stating things in his own way. What I think he is trying to say is that you aren't ready to proceed yet.

@David Van, I think you need to spend some time on the forum and reading up on things before you move forward. @Joe Kim has some good points, but I recommend you do your own rental agreement instead of recycling someone else's or a generic one and modify yourself. I would consult an attorney seeing as you are on the cusp of STR vs LTR. Each requires their own kind of agreement.

Definitely have separate accounts for each rental.

You will need at least 2 years of verifiable rental income for it to be used by any lender (hard money not withstanding). No lender will use projections on possible rental income. Maybe in 10 or 20 deals with the same lender and you have a proven track record it will be possible.

Frankly @Paul Sandhu is the king of multi room rentals for traveling workers. You would be wise to search for his posts and friend him and ask him for some help. His demographic is different, but the methods will be similar.

I don't think this is negative, but without getting all your ducks in a row, you can expect a negative result. Plan to fail when you fail to plan!

Chris Karley · Answer

For students, you can require a parent be on the lease to offset the lack of income. I rent to college interns at a couple local companies. They both screen their employees well so I can circumvent background checks and most interviews. I also don't need to verify income, just the internship.  Short term renting can be more profitable than a duplex or single family, but there is defiantly a learning curve for the amount of turnover. (4 leases and a cleaning minimum every 3 months). After my experience with 'college professionals' I'm not sure I would want to get into the student housing scene. Same rent with more headache IMO

ALWAYS GET SIGNATURES AND DEPOSITS. NEVER BEND PAYMENT AND EVICTION RULES.

Paul Sandhu · Answer

If I ever read a book on the recipe to failure, I think you just wrote it in the above post.

Flight attendants. WTF?

Students. WTF?

Showing income for taxes. WTF?

Lease agreements.  WTF?

edit:  Throw some travelling nurses in there too.  WTF?

Any one doing monthly rentals?

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