ATTENTION ALL LANDLORDS: Airbnb Invading

Patrick Soukup · 2016-03-04T14:57:20-08:00

Alrighty. I need ALL of your help. In the ‪#‎RealEstate‬ or‪#‎PropertyManagment‬ industry or not, I've got a duplex downtown in a very desirable location. Three miles to Colorado State University and 6 miles to downtown Old Town Fort Collins, Co --- Currently, one of the "tenants" is using the one bedroom/one bathroom and loft as an Airbnb. I wouldn't have KNOWN, but that the neighbors complained of "all the people coming in and out always." She is charging $91/night, taking REALLY good care of the unit (as she has incentive to make it a nice place to stay for STR's - short term renters). She has gotten great reviews by people that have stayed there. SO ---- what do you do? Evict her for violating the lease (subleasing without permission)? Implement a revenue sharing model as discussed on Multifamily Executivehttp://www.multifamilyexecutive.com/…/deal-or-no-deal-airbn… ? OR --- evict/talk her into moving out and start the Airbnb myself? (This would increase my revenue substantially as the duplex is in a very desirable area- but add considerable labor on a monthly basis.) Things to think about: Liability - no background/credit checks --- long term tenant annoyance --- City of Fort Collins, Colorado - Government is currently talking about STR's and how they are going to handle them. Thank you for your input! It is much appreciated.

Mark Holencik

Investor · Coplay, PA · Member since 2015 · 404 posts · 315 votes

10y

I am glad I am not your tenant. You rented me a place I can call my home, and all your are thinking about my complaint is how it affects you. You do not care about us at all. Your only worry is complying with the law and not losing money.

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Roy N.Pro Member

Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes

10y

Originally posted by @Mark Holencik:

I am glad I am not your tenant. You rented me a place I can call my home, and all your are thinking about my complaint is how it affects you. You do not care about us at all. Your only worry is complying with the law and not losing money.

Mark:

Let's flip your narrative and look at things from the other side. The landlord has rented a place to you for your "quite enjoyment" as your "home".

You then decide to become a hotelier and begin sub-letting a portion of your "home" for short-term stays irrespective of the fact your lease forbids conducting a business from the premises. You also do not bother to check with your landlord prior to commencing to see if your idea for a venture was something that could be accommodated.

A while after launching your venture, your neighbours - folks who have rented other units in the building for their own quite enjoyment - complain about the transient traffic to your unit. As a result your landlord discovers you are conducting a business from the home you are renting.

In launching your venture, your only consideration is putting money in your pocket and not the "quite enjoyment" of your neighbours to their own "homes", nor the legal and liability exposure that has been created for your landlord.

I would also be glad you were not my tenant.

3 Reply

Matthew Paul

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

10y

The rent is getting paid , and the place is in good shape . Now I am pretty sure the lease will say something about overnight guests being allowed . Now in the lease does it say anything about knowing your guests? Depending on whats in the lease and how its written , the tenant may not be doing anything wrong .

0 Reply

Patrick Soukup

OP

Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes

10y

@Matthew Paul the tenant lied on their application (not renting elsewhere) - they have 4 other Airbnbs going as well. They are running a business ourt of the property, subleasing without my consent... The list goes on. You're right though, they are taking good care of it, and I am grateful for that. Had they approached me in the beginning with a business plan or mode that shows what they wanted to do and show that it works (which it clearly does) I may have been very receptive to it. But @Mark Holencik you're nuts --- no way is that all I care about. Clearly I posed this topic so that I can get perspective from all sorts of people. If you read this thread, there are people who think I should immediately evict, some think I should partner, some think I should let it ride... It has been a great conversation thus far. Don't throw your "all I care" ******** in here, cuz clearly I do. Thanks @Roy N. I couldn't have said it better, myself.

1 Reply

Patrick Soukup

OP

Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes

10y

Originally posted by @Jason V.:

I think I understand the compassion and understanding here for someone who is being entrepreneurial and thinking in new ways to make extra money, but let's change the context and see how many folks still think this tenant would be a good business partner:

What some folks are essentially suggesting is that they would be wiling to partner with someone who is knowingly violating a rental/lease agreement, and deliberately lying to at least two parties (the owner and AirBnB) for her own personal gain, which puts the owner at a significant risk (he doesn't just get to walk away if it all goes horribly wrong, etc.)

If you worked with a Contractor who lied to you, broke agreements, violated contracts, etc. how likely would you be to work with them again? I've heard of folks on here not using GCs again for much less than that.

Thanks Jason. Trust in ANY relationship is key. Starting a relationship without it, is asking for trouble. Thank you for your insights and thoughts. I am fortunate enough that I have an amazing team of contractors who we have all built trust over the years and the synergy and momentum we have together is phenomenal! Maybe I can create a trusting relationship with someone who wants to do this Airbnb after renting idea in the future, but not with her.

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Patrick Soukup

OP

Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes

10y

Originally posted by @Michael Hayworth:

Some slightly different thoughts here:

1. See if you have an issue with your insurance company. Hopefully, you have a good agent you can talk to "off the record" and get his input. Your renter who's operating the AirBnB needs to be the one to carry insurance that covers whatever this is.

2. AirBnB and VRBO guests tend to be pretty kind to the property. They get rated by the hosts, just like hosts get rated by the guests.

3. A lot of people seem to be jumping to the conclusion that your renter is "knowingly violating her lease." Maybe she is...maybe she just saw an income opportunity and didn't even think about it.

4. I WOULD NOT implement a revenue sharing model. Too much overhead to deal with - you have to look at her books,, figure out how much she gained, calculate your percentage, figure out if she's cooking the books. That's a lot of overhead. INSTEAD, just raise her rent $400 (or whatever) per month. ( I saw you commented her lease runs for awhile,but she is in violation of her lease...her choice would be increased rent or lose the AirBnB.) Then you don't have to worry about reviewing her records and all that. Maybe put $300 of the increase in your pocket and offer the tenant who complained $100/mo off her lease. Everybody is happy then.

The woman is trying to pick up some extra cash and seems to be doing it without doing damage to your house. If you can work it out so you both benefit, great. Take the AirBnB away from her and she'll have to find something else....she could end up offering "adult massages" out of your apartment. Or worse yet, end up on here asking how she can make millions in real estate by wholesaling houses with no money down!

I LOVE your thoughts. I was originally mad at her, but respect her entrepreneurial mindset. I just wish she would have come to me (but I know she may have tried this with other landlords and have been denied - so she doesn't ask anymore). I think that she will ultimately be asked to leave.

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Mark Holencik

Investor · Coplay, PA · Member since 2015 · 404 posts · 315 votes

10y

Originally posted by @Roy N.:

Originally posted by @Mark Holencik:

I am glad I am not your tenant. You rented me a place I can call my home, and all your are thinking about my complaint is how it affects you. You do not care about us at all. Your only worry is complying with the law and not losing money.

Mark:

Let's flip your narrative and look at things from the other side. The landlord has rented a place to you for your "quite enjoyment" as your "home".

You then decide to become a hotelier and begin sub-letting a portion of your "home" for short-term stays irrespective of the fact your lease forbids conducting a business from the premises. You also do not bother to check with your landlord prior to commencing to see if your idea for a venture was something that could be accommodated.

A while after launching your venture, your neighbours - folks who have rented other units in the building for their own quite enjoyment - complain about the transient traffic to your unit. As a result your landlord discovers you are conducting a business from the home you are renting.

In launching your venture, your only consideration is putting money in your pocket and not the "quite enjoyment" of your neighbours to their own "homes", nor the legal and liability exposure that has been created for your landlord.

I would also be glad you were not my tenant.

I was talking about the other tenants, not the one causing the disturbance. She is disturbing my other tenants she has to go. I would not consider anything else.

I would venture to have her as a manager, and pursue what she is doing with another building.

0 Reply

Matthew Paul

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

10y

i get it now , I thought she was LIVING there while doing this . Thats really a great business model , rent a place , furnish it , then re rent it out by the night . Very little cash outlay , and cash flows well . Run into a problem and the ultimate liability goes back to the property owner . I have to admire her , its a great way to make money with minimal risk .

0 Reply

Roy N.Pro Member

Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes

10y

Originally posted by @Matthew Paul:

i get it now , I thought she was LIVING there while doing this . Thats really a great business model , rent a place , furnish it , then re rent it out by the night . Very little cash outlay , and cash flows well . Run into a problem and the ultimate liability goes back to the property owner . I have to admire her , its a great way to make money with minimal risk .

With the little exception of misrepresentation and {borderline?} fraudulent conduct ;-)

0 Reply

Roy N.Pro Member

Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes

10y

@Patrick Soukup

If your tenant is not actually living in the unit, then she misrepresented her intentions when she applied and signed the lease. Obviously a chat with your counsel is in order, but you should have no trouble annulling that agreement.

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Jose Ramirez

Investor · Hartford, CT · Member since 2016 · 4 posts · 2 votes

10y

@Joe Splitrock
I made the millennial comment to point to the current time period and entrepreneurship. Replace millennial in my comment with "modern day entrepreneurs".

I looked up sublet and google says it involves a lease and a minimum of a month rental. I think the tenant or her representatives at Patrick's apartment are constantly at the property and in control of it so they might not be technically subletting.

It might be a good idea for property owners landlords should specify in the lease that services cannot be provided to or for others in the premises so then anyone doing Airbnb would be breaking the lease.

Also to your point of the day care and company car, I think that's valid and I would add that it it might also look legally like a home office - she still maintains part of the house for her personal use (to store cleaning supplies and linens)., Interestingly enough my mother's best friend runs a day care out of her personal apartment in NYC. And to do so you have to be licensed and inspectors come to assure everything is as it should be by their codes. Obviously Patrick is not in NYC where it's all apartments.

I hope this classifies my earlier post. Thank you for reading it.

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Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

10y

I am not sure if you picked up the point (I didn't at first) that she is renting several places around town and using them all for Airbnb. It is not a case of a person renting an extra room to make money or working from home in a home office.

I see Airbnb as new enough that laws and maybe even leases have not caught up to address the concerns. I guess this lady could argue that her Airbnb guests are overnight visitors, but she herself is not living in the properties. I think the definition of subletting is charging someone else to live in a property you are renting and not living in, whether that is a day, month or year. I think a court would agree with that definition because you could easily argue it is being rented for a month or more, just to 30 different people. Having a friend stay in a room free of charge for a night is very different than operating a business where you charge people. I suspect eventually there will be a court case that will set precedence for this issue.

The daycare issue becomes one of liability. Maybe the laws are different in NY, but in my city I could be sued if a child is hurt on my property. My insurance will not cover me if a day care is run in my rental property. Again, this may be different in NY or maybe the landlord doesn't know.

1 Reply

Patrick Soukup

OP

Rental Property Investor · Fort Collins, CO · Member since 2015 · 273 posts · 127 votes

10y

@Joe Splitrock I don't think I made that clear in my original post. Yes. She has 5 listings on Airbnb. Crazy! @Jose Ramirez I've talked with my lawyer, and he believes this does fall under the sublet parameters. So, if I HAVE to evict her (which I hope I don't, I hope we can do a notice to terminate lease and have her leave peacefully), I am covered and the law should be in my favor. @Roy N. and @Matthew Paul --- aboslutely, a great business model and very creative. Just tons of the misrepresentation and lying. She should make a business plan and present it to landlords! "Here's what I can do for you, GUARANTEE you, your monthly rent of $XXX.XX dollars/month, and what I will be doing is renting out the place and 'manage' it for you as an Airbnb. I am insured and have made this work in the past. I will take care of all damages caused BY tenant, but ask building defects be handled by said owner/landlord." She might strike out 10 times, but get 1. At least she is presenting full disclosure.

2 Reply

Jose Ramirez

Investor · Hartford, CT · Member since 2016 · 4 posts · 2 votes

10y

@Patrick great points about full representation!!!

0 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

10y

Originally posted by @Patrick Soukup:

@Joe Splitrock I don't think I made that clear in my original post. Yes. She has 5 listings on Airbnb. Crazy! @Jose Ramirez I've talked with my lawyer, and he believes this does fall under the sublet parameters. So, if I HAVE to evict her (which I hope I don't, I hope we can do a notice to terminate lease and have her leave peacefully), I am covered and the law should be in my favor. @Roy N. and @Matthew Paul --- aboslutely, a great business model and very creative. Just tons of the misrepresentation and lying. She should make a business plan and present it to landlords! "Here's what I can do for you, GUARANTEE you, your monthly rent of $XXX.XX dollars/month, and what I will be doing is renting out the place and 'manage' it for you as an Airbnb. I am insured and have made this work in the past. I will take care of all damages caused BY tenant, but ask building defects be handled by said owner/landlord." She might strike out 10 times, but get 1. At least she is presenting full disclosure.

If you have difficulty with her leaving, tell her you will report her to Airbnb. I doubt they would be ok with her subletting properties on Airbnb without landlords permission and they would probably drop all her listings. Or you can tell her you will notify the other landlords. That can be your leverage for her to leave without trouble.

The reason she didn't notify the other landlords is because she knows the rent would be higher and she knows it would violate the subletting clause. Why is everyone making excuses for her and saying she didn't know better. She seems pretty smart to me so I am positive she knows exactly what she is doing. I know some people have indicated that Airbnb guests are easier on a property than renters, but this is really a generalization. Hotels suffer considerable wear due to people coming and going so often.

There is an interesting ethical question here. Should you notify the other landlords out of professional courtesy?

1 Reply

David Hays

Investor · Malaga, Andalucía · Member since 2014 · 150 posts · 73 votes

10y

Originally posted by : @Patrick Soukup

Funny that you mention that, as I built quite a business having that exact same conversation - I agree wholeheartedly that this is what she should have done in the first place, and I know that I did not make that particular distinction clear in my first post.

Originally posted by @Joe Splitrock:

If you have difficulty with her leaving, tell her you will report her to Airbnb. I doubt they would be ok with her subletting properties on Airbnb without landlords permission and they would probably drop all her listings.

They won't. The person calling could just as easily be someone maliciously trying to harm a competitor, and they will generally refuse to get in the middle. I do not work for Airbnb, but I have worked with them extensively for several years, and have worked with clients dealing with this particular issue before.

0 Reply

Brit Foshee

Investor · Fort Myers, FL · Member since 2012 · 462 posts · 200 votes

10y

Originally posted by @Jerry W.:

@Patrick Soukup, I have a much different view than the others. I admire those who have the intelligence and fortitude to try to make money other than an hourly wage. I suggest you look into its legality. Next I would look into the insurance needed to take the risk out of it. if you can get both figured out to your satisfaction you talk with your renter and make sure she gets any special permits or insurance needed to protect you. I might double up on or more on the deposit, just in case. Then I would see if you can get more rentals near her and make a deal for you buying and her managing while giving her a slice of the pie for running it. Someone is making a killing there, why not let it be you? You are making money with folks just paying regular rent, imagine if you rent them out by the day. This way you both win, you both profit. If all goes well maybe you end up owning 20 rentals there and pocketing an extra $1K or $2K per month on each. Think of this as a stroke of luck.

I'm with Jerry. Without knowing the details, my first thought would be to let her run a business that makes you money. You do none of the work but share in perhaps half of the profits. Sounds like a win win for everyone.

0 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

10y

Originally posted by @David Hays:

Originally posted by : @Patrick Soukup

Funny that you mention that, as I built quite a business having that exact same conversation - I agree wholeheartedly that this is what she should have done in the first place, and I know that I did not make that particular distinction clear in my first post.

Originally posted by @Joe Splitrock:

If you have difficulty with her leaving, tell her you will report her to Airbnb. I doubt they would be ok with her subletting properties on Airbnb without landlords permission and they would probably drop all her listings.

They won't. The person calling could just as easily be someone maliciously trying to harm a competitor, and they will generally refuse to get in the middle. I do not work for Airbnb, but I have worked with them extensively for several years, and have worked with clients dealing with this particular issue before.

Good input. Still, she may not know how Airbnb would react and probably would not take her chances. The second option of looking up property owners to contact her landlords may be better. I am assuming she would just leave so there would be no need to contact anyone.

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ATTENTION ALL LANDLORDS: Airbnb Invading - Pay ATTENTION

ATTENTION ALL LANDLORDS: Airbnb Invading - Pay ATTENTION

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