30 Day Minimum Short Term Rental Analysis &amp; Risks in Los Angeles

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

@Luke Carl I'm sorry, what are you claiming isn't legal? It's definitely legal to rent on Airbnb for a minimum of 30 days. Not sure what you're referencing.

https://www.marketwatch.com/st...

Michael BaumPro Member

Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes

5y

Hey @Kim Hopkins, I think what @Luke Carl is saying is that it might not be wise to do this. You know the CA laws really favor the tenant. I personally think that you might be asking for trouble. Here is an article that talks about how confusing the current moratorium is:

From what I understand, once someone is in there for 30 days, they are considered permanent residents. I think that if they wanted to stay and stop paying you, you would have little recourse.

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Hi @michael baum I see. I checked your article but I don't see anything about a 30-day renter becoming automatically a permanent resident regardless of their rental term date. This would be a key factor and a deal breaker. Do you by chance have any articles linking to this rule? Thanks!

Jon Schwartz

Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes

5y

Originally posted by @Kim Hopkins:

Hello!

I'm an experienced industrial real estate investor, but a completely inexperienced potential short term housing rental investor.

We recently moved from Los Angeles to Flagstaff, Arizona. We kept our home in Los Angeles and would like to still visit so are not yet ready to sell. We are contemplating turning it into a short term rental.

The rules in Los Angeles apparently say that we can only rent for a minimum of 30-day periods since it will not be our primary residence. I'm trying to assess three things:

How do I get some data on rental rate and yearly occupancy % for Los Angeles with a 30-day minimum period so I can put together a pro-forma on if the numbers make sense? I can't find anything like this since most websites like Air DNA seem to focus on short term (no 30 day minimum) rentals.
Does anyone know or have a guess to the laws pertaining to evictions with these kinds of stays? I would think that I can always evict a guest at the end of the rental term regardless of any moratorium but I want to be damn sure the current Covid LA eviction moratorium and any other crazy LA eviction laws don't apply to this short-but-long-term rental situation.
Is there anything else I should consider, pros or cons, before doing this that I may not be thinking of?

We are in general very hesitant to do any business in California (all our properties are outside the state), but I thought this would be hopefully low risk and offset some of the mortgage and other costs on the house.

Thank you!
Kim

Kim, this is definitely legal. (Never take advice from Floridians.)

For rental comps, maybe check other short-term rental sites for rates? Check out www.furnishedfinder.com and google "corporate housing los angeles" and see what the competition is charging?

As for the eviction moratorium, it is across the board. There are no exceptions. I have a friend with a 100% valid Ellis Act eviction that's on hold until evictions are heard again. There are 0 evictions of any kind happening. So you will be at risk until the moratorium ends.

Best,

Jon

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Haha thanks Jon! But what about evictions AFTER the rental term date has ended?

Lauren Kormylo

Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes

5y

Most of the country has laws that treat stays of 30 days or more as long term rentals, which gives tenants more rights than short term renters have. If your renter refuses to pay you, or refuses to leave, you'd have to go through the courts to evict.

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Hi Lauren, again my question is if these rules apply after the lease term has ended

Lauren Kormylo

Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes

5y

I don't know specifically about LA's laws. But in general, yes, having a 30 day lease would require the same eviction as if you had a 1 year lease with them. The lease ends, and they refuse to leave. In both cases you now have to go through the courts to evict them. There are places that have plenty of seasonal renters, like here in AZ. So it's not common for someone to refuse to pay or to leave. But there are "professional tenants" who take advantage of landlords. That's why a lot of short term rental owners refuse to let renters stay more than 28 days, so they don't reach that magic 30 day number.

Lauren Kormylo

Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes

5y

If I were going to rent over 30 days like you are thinking of, I would make sure the person has a permanent residence somewhere else to go back to. Especially with Covid, when evictions are on hold.

2 Reply

Nadia O.

Member since 2020 · 82 posts · 100 votes

5y

@Kim Hopkins I believe what you referring are month to month lease. I’m not sure if it’s considered short term rental. 30 day rental is considered as standard rental in California. I want to agree with @Lauren Kormylo. Those renters may still be protected by eviction moratorium.
so in this case, you still have to screen those renters individually. That seem like a lot of work to you but I don’t know if there is a way around it. I believe you can still advertise on Airbnb or similar site for monthly rental. And if you do receive renters from the site, you’re more protected in case those renters over extend their stay. But don’t quote me on this because I have never encountered this problem before.

Kenneth Brisco

Rental Property Investor · Member since 2020 · 3 posts · 0 votes

5y

I have done Airbnb on a lease in LA before. 2018 through 2019 before the new permit regulations kicked in November of 2019. My advice would be to do less than 30 days by having someone else manage it for you. There’s ways around it but it all depends on how you want to set it up. My advice would be to rent by the room on Airbnb and offer a property manager low rent to manage the day to day operations, cleaning, etc.

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

@kennethbrisco hi Kenneth could you clarify what you mean? The law is that I can't rent it for less than 30 days because it is not my primary residence. Hiring a property manager wouldn't make it my primary residence or theirs unless they were willing to claim it as their primary residence which I don't think is what you were saying.

Melody R.

Real Estate Agent · Los Angeles · Member since 2018 · 80 posts · 75 votes

5y

Hi Kim, your short-term tenancy agreement falls under month-to-month.

“A landlord can use a 30 day-notice to end a month-to-month tenancy if the tenant has been renting for less than a year. A landlord should use a 60-day notice if the tenant has been renting for 1 year or more and the landlord wants the tenant to move out.”

“In rent-controlled cities, a landlord cannot cancel a month-to-month tenancy for just any reason. The landlord must find out if the unit is in a rent-controlled city, and if so, whether the landlord has the right to evict the tenant. Contact your local city or county government office to find out if you live in a rent-controlled area. Or talk to your self-help center, or a lawyer for help.”

For the clarity and before proceeding, you may want to reach out to an attorney.

Source: https://www.courts.ca.gov/27810.htm?rdeLocaleAttr=en

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Thanks @Melody R.! That's helpful to know it would be month-to-month. So the question would be then: Does the California eviction moratorium apply to month-to-month tenants?

Jon Schwartz

Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes

5y

@Kim Hopkins, yes!

The LA eviction moratorium applies to all renters.

This is what I was trying to say in my last post: eviction court is not in session. There literally isn’t an eviction court in LA hearing cases. It’s not that some evictions aren’t being processed; eviction court is closed until further notice.

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Originally posted by @Jon Schwartz:

@Kim Hopkins, yes!

The LA eviction moratorium applies to all renters.

This is what I was trying to say in my last post: eviction court is not in session. There literally isn’t an eviction court in LA hearing cases. It’s not that some evictions aren’t being processed; eviction court is closed until further notice.

Thanks Jon! So what does that mean if I have a 30 day air bnb renter who refuses to leave after their term ends?

Sean McCluskey

Rental Property Investor · Newport Beach, CA · Member since 2017 · 218 posts · 138 votes

5y

@Kim Hopkins They would get to stay in the house until the eviction moratorium ends, and then while you wait at the back of the very long queue of filed evictions. And then if you do anything incorrectly during the eviction process, they would get to stay while you file again with a lawyer. And then....

Nadia O.

Member since 2020 · 82 posts · 100 votes

5y

@Kim Hopkins I have a suggestion for you. Having done STR in the past, I know Airbnb allows security deposit in case damages occur within your property. So you can tag in extra couple of hundreds to prevent overextended stays & you may want to mention in the listing description. And if your renters comply then they will be refunded fully. Plus you can be more selective with your renters based on their past reviews. You don't have to screen their credit individually. Also another plus side, Airbnb will have their credit card on hand in case something happens.

Melody R.

Real Estate Agent · Los Angeles · Member since 2018 · 80 posts · 75 votes

5y

Hi Kim, at the start of the pandemic I turned my Airbnb to a month-to-month tenancy agreement. I wanted the income to offset the mortgage and didn’t want to manage the uncertainty of Covid and Airbnb. I made it a priority to vet the tenants very well. I also only considered tenants whose plans aligned with mine. Taking the time to screen and find the right tenant will save you in the long run. Check credit, check rental history, verify everything, google them (check their social pages, do a background check, and require an increased deposit. For furnished rentals, the landlord can charge up to three month's rent for the security deposit. I charged two months rent.

The eviction moratorium is not nice to landlords so we must take precautions to mitigate the risks as much as possible.

Eviction laws do apply to month-to-month.

If it helps at all, I am also a property manger for 80 other doors and 77 of the 80 residents are paying on time. One was a late payer prior to Covid and the other two are still paying what they can, but just not in full. I’ve found that most people care and prioritize their rent payments. Good people do not want to stiff us for the rent. :)

Melody R.

Real Estate Agent · Los Angeles · Member since 2018 · 80 posts · 75 votes

5y

For context, I understand that my numbers may not be the norm so here is an article that details percentage of late payers in the city of LA. https://news.usc.edu/175065/los-angeles-tenants-covid-19-pandemic-rent-usc-study/

Jon Schwartz

Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes

5y

@Kim Hopkins, it means you have the same recourse as every other landlord with a non-paying tenant: none.

Sofia Sharkey

Property Manager · Kansas City, MO · Member since 2018 · 280 posts · 221 votes

5y

Hi @Nadia O. What you suggest is not entirely accurate. Airbnb does not withhold the security deposit, you can request a security deposit but in case it has to be used, the guest has to accept the charges and at that point Airbnb bills them for it. If they refuse, the host doesn’t just get the deposit money. You could do a true security deposit with direct bookings.

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Hi @Sean McCluskey & @Jon Schwartz thank you for this. Sounds like a very high risk thanks to the current state of Los Angeles' tenant laws, although they aren't that great without Covid either. Hmmm.. Definitely an obstacle to this idea.

OP

Investor · Member since 2018 · 259 posts · 74 votes

5y

Hi @Nadia O. good idea on the security deposit. I could just make a very high security deposit based on what @Melody R. said. Interesting what @Sofia Sharkey said though. I've heard similar things about Airbnb not helping Landlords out in this way. Does anyone know if VRBO is different? I believe they do allow the Landlord's discretion on the security deposit but definitely don't quote me on this.

@Melody R. this is very helpful information. I'm just not sure if it's worth it for us to run all these background checks if our intention is for people to have 30 day stays and not much more (so we can visit when we want). I also appreciate your comment about the majority of renters paying on time - same for us in our commercial real estate. My concern would be a "professional squatter" who gets passed us in a rental and doesn't leave. Apparently....they exist. Or if someone came for a short visit and unforeseen circumstances happened like a job loss, and they didn't want to leave. Great suggestions though.

@Sofia Sharkey do you have any thoughts on how you do direct bookings?