Anyone Rent to Tenants Who Run a STR? Risks & Advice Needed

Investor · Santa Clara, CA · Member since 2015 · 56 posts · 16 votes

I have a short-term rental in Palm Springs, but the market has slowed and we’re losing money. Instead of selling, I’m planning to convert it to a long-term rental. Some inquiries on Zillow are asking to rent it for vacation rental use. Has anyone allowed tenants to operate a STR? I'm worried about extra wear-and-tear and any unexpected issues.

Any advice or experiences would be appreciated. Thanks!

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

10mo

Quote from @Sam Liu:

The house is already furnished. How to ensure that this type of tenant will pay rent on time? For normal tenants, I usually ask for their income proof and credit report etc.

First off, if you can't run it successfully as a short term rental, what makes you think someone else will be able to do so, with the added baggage of paying you and furnishing the place (assuming you wouldn't just give them your furniture)?

Beyond that, be warned - most people who want to do this have heard about "arbitrage" strategy from some guru somewhere, have no idea what they are doing, and are likely to leave you without rent and with a damaged and/or worn out house if they can even manage to get anyone in there. As they struggle to come up with the money to pay your LTR, they'll start dropping minimum night stays and letting people use it as a party house, then after a month or two or three when they figure out they're making nothing they'll slink off into the night and you'll have the fun of repairing your house.

I wouldn't do it, period. You'd have to have something pretty special for an experienced operator to agree to pay your fixed rent and operate it profitably while maintaining good quality tenant stays. There's also a pretty good chance your insurance company is not going to cover any damages done by a third party operator, so you would really need to stay on top of their insurance coverage.

At the end of the day, it's a lot of risk for very little reward. You would be better off selling if you don't think you can make any money owning it and running it yourself. Because you could simply find a great vacation property manager, and pay them a commission to run the property - so why go with some schmuck that crawls off Zillow?

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Taylor DaschBusiness Member
Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
10mo
Like the tenant would be furnishing it and later renting it short / long term? I would do that but would want to make sure that the contract is very clear about the tenant having to pay the rent regardless of the outcome. For the wear and tear, you can give them a higher deposit to make up for the extra risk.
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Sam Liu
OP
Investor · Santa Clara, CA · Member since 2015 · 56 posts · 16 votes
10mo
The house is already furnished. How to ensure that this type of tenant will pay rent on time? For normal tenants, I usually ask for their income proof and credit report etc.
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- JD MartinBusiness Member
  Moderator
  Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
  10mo
  Quote from @Sam Liu:
  
  The house is already furnished. How to ensure that this type of tenant will pay rent on time? For normal tenants, I usually ask for their income proof and credit report etc.
  
  First off, if you can't run it successfully as a short term rental, what makes you think someone else will be able to do so, with the added baggage of paying you and furnishing the place (assuming you wouldn't just give them your furniture)?
  Beyond that, be warned - most people who want to do this have heard about "arbitrage" strategy from some guru somewhere, have no idea what they are doing, and are likely to leave you without rent and with a damaged and/or worn out house if they can even manage to get anyone in there. As they struggle to come up with the money to pay your LTR, they'll start dropping minimum night stays and letting people use it as a party house, then after a month or two or three when they figure out they're making nothing they'll slink off into the night and you'll have the fun of repairing your house.
  I wouldn't do it, period. You'd have to have something pretty special for an experienced operator to agree to pay your fixed rent and operate it profitably while maintaining good quality tenant stays. There's also a pretty good chance your insurance company is not going to cover any damages done by a third party operator, so you would really need to stay on top of their insurance coverage.
  At the end of the day, it's a lot of risk for very little reward. You would be better off selling if you don't think you can make any money owning it and running it yourself. Because you could simply find a great vacation property manager, and pay them a commission to run the property - so why go with some schmuck that crawls off Zillow?
  Podcast Guest on Show #243
  Skyline Properties
  View Page
  4 Reply
Sam Liu
OP
Investor · Santa Clara, CA · Member since 2015 · 56 posts · 16 votes
10mo
Thanks for sharing the potential risks — it definitely doesn’t sound like a good idea. The real estate market there is tough right now and selling has been difficult. So at this point, I either sell at a one-time, bigger loss, or keep renting it out and take smaller losses every month until the market recovers.
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- JD MartinBusiness Member
  Moderator
  Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
  10mo
  Quote from @Sam Liu:
  
  Thanks for sharing the potential risks — it definitely doesn’t sound like a good idea. The real estate market there is tough right now and selling has been difficult. So at this point, I either sell at a one-time, bigger loss, or keep renting it out and take smaller losses every month until the market recovers.
  
  Why not just turn it into a long term rental with legitimate tenants? It sounds like that's what you had in mind anyway when this "deal" was presented to you for the STR arbitrage.
  *Most* of the time, time heals all wounds with RE. Meaning that if you can afford to hold it during the tougher times you're going to realize gains long-term. If you're losing a few thousand a month, for example, trying to rent it short term, maybe you can turn it into a break even with a legitimate long-term tenant.
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- Sam Liu
  OP
  Investor · Santa Clara, CA · Member since 2015 · 56 posts · 16 votes
  10mo
  Quote from @Account Closed:
  
  Quote from @Sam Liu:
  
  Thanks for sharing the potential risks — it definitely doesn’t sound like a good idea. The real estate market there is tough right now and selling has been difficult. So at this point, I either sell at a one-time, bigger loss, or keep renting it out and take smaller losses every month until the market recovers.
  It's probably an added liability you don't want to take on. You would want to clear it with your insurance agent first. I've read that it is very difficult to evict in California, so I'd check that too. Your mortgage agreement may or may not allow that.
  Yeah, a potential eviction is also a big risk.
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Sam Liu
OP
Investor · Santa Clara, CA · Member since 2015 · 56 posts · 16 votes
10mo
Good point! I'll try that option as well.
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Emily Koelsch
Rental Property Investor · Memphis, TN · Member since 2022 · 48 posts · 43 votes
10mo
I'd go with long-term rental. If the market adjusts in a few years, you can go back to a STR. Another option is mid-term rentals - usually 1 -6 months (in my experience, average of around 3 months). We have a lot of travel nurses in my area, so this is a really good strategy. Since it's already furnished, this might be something to consider.
With a mid-term rental, you largely treat it like a LTR (do full tenant screening, have a good lease, single tenant who is there for a couple of months). You can charge a little more than rent with a LTR, so it can be a good way to increase returns.
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- Sam Liu
  OP
  Investor · Santa Clara, CA · Member since 2015 · 56 posts · 16 votes
  10mo
  Quote from @Emily Koelsch:
  
  I'd go with long-term rental. If the market adjusts in a few years, you can go back to a STR. Another option is mid-term rentals - usually 1 -6 months (in my experience, average of around 3 months). We have a lot of travel nurses in my area, so this is a really good strategy. Since it's already furnished, this might be something to consider.
  With a mid-term rental, you largely treat it like a LTR (do full tenant screening, have a good lease, single tenant who is there for a couple of months). You can charge a little more than rent with a LTR, so it can be a good way to increase returns.
  Which platforms do you use to find mid-term tenants? I've considered mid-term and used Furnished Finder. But people on that platform usually only need 1-2 brs. My house is 4brs.
  
  0 Reply
Lucas De Carvalho
Rental Property Investor · NYC · Member since 2024 · 52 posts · 17 votes
9mo
Sam — this thread hits close to home. I'm an STR operator myself, and I've seen both sides of this.

JD's concerns are valid. There are a lot of people who took a course, have no track record, and approach landlords with vague promises. That's a real risk.

But there's also a category of operator who runs a legitimate business — multiple properties, established systems, insurance, references. The problem is there's no obvious way to tell them apart from the Zillow inbox.

A few things that separate serious operators from risky ones:

Track record (how many properties, how long)
Proof of STR insurance (not just relying on yours)
Willingness to sign a master lease with clear terms
References from current landlords
Actual business entity, not just a side hustle
The biggest gap I've seen is there's no central place where landlords can find vetted operators — it's all cold outreach and word of mouth. That's actually something I've been working on (vantagestr.co), but setting that aside, the short answer is: the right operator can absolutely be a great tenant. The challenge is finding them and knowing how to vet them.

Happy to share more on what to look for if helpful.
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Jeremy R.Business Member
Property Manager · San Antonio, TX · Member since 2024 · 37 posts · 15 votes
9mo
Maybe I'm an anomaly, but a 3/2.5 arbitrage in San Antonio, TX was my first venture into STR in 2021 and I successfully held that lease for three years. I operated it at a high level and cared deeply about providing a great home and being a great tenant. I even found another arbitrage tenant for the landlord to keep it going. Now I have a large portfolio of managed homes between San Antonio and Austin.
[email protected]210-934-5318
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- Joe S.Pro Member
  Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
  9mo
  Quote from @Jeremy R.:
  
  Maybe I'm an anomaly, but a 3/2.5 arbitrage in San Antonio, TX was my first venture into STR in 2021 and I successfully held that lease for three years. I operated it at a high level and cared deeply about providing a great home and being a great tenant. I even found another arbitrage tenant for the landlord to keep it going. Now I have a large portfolio of managed homes between San Antonio and Austin.
  
  Maybe I'm an anomaly, but a 3/2.5 arbitrage in San Antonio, TX was my first venture into STR in 2021 and I successfully held that lease for three years…
  
  why did you let it go after 3 years of success?
  1 Reply
- Lucas De Carvalho
  Rental Property Investor · NYC · Member since 2024 · 52 posts · 17 votes
  9mo
  Quote from @Joe S.:
  
  why did you let it go after 3 years of success?
  
  Interested in this answer too.
  1 Reply
- Jeremy R.Business Member
  Property Manager · San Antonio, TX · Member since 2024 · 37 posts · 15 votes
  9mo
  Quote from @Joe S.:
  
  Quote from @Jeremy R.:
  
  Maybe I'm an anomaly, but a 3/2.5 arbitrage in San Antonio, TX was my first venture into STR in 2021 and I successfully held that lease for three years. I operated it at a high level and cared deeply about providing a great home and being a great tenant. I even found another arbitrage tenant for the landlord to keep it going. Now I have a large portfolio of managed homes between San Antonio and Austin.
  
  Maybe I'm an anomaly, but a 3/2.5 arbitrage in San Antonio, TX was my first venture into STR in 2021 and I successfully held that lease for three years…
  
  why did you let it go after 3 years of success?
  
  Valid question Joe. During that 3 year lease I grew my portfolio of pure management clients to over 20 and the profit wasn't the same as when I started in 2022. It was a "base hit" at the time to prove my ability to future clients, and arbitrage wasn't my business model anymore. The plan going into it was always to cap it at 3 years, but I was fortunate to be able to mentor my replacement, and he's doing fantastic already.
  [email protected]210-934-5318
  Five Star Vacation Home Rentals5196 Reviews
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