My Tenant Wants to Rent my Unit on Airbnb. Should I allow this?

66 Replies

Originally posted by @Todd Goedeke :

@Sara Reeder,did you find Loftium or did they find you?

Was your lease with them triple net where they paid taxes, insurance and maintenance?

Our situation is a bit different than the original commenter's story so I'll clarify. Our property is a 4 bed 2 bath. There are two bedrooms and a bath upstairs and a finished basement with an additional 2 beds and a bath WITH the ability to lockoff the basement to the rest of the house. Loftium (the main tenant on the lease) sub-leased the upstairs unit to a permanent tenant at a discounted rate and that sub-tenant manages the lower airbnb rental for them. Loftium pays us a premium rent for the house (about $250-300 above market rent). We still take care of maintenance issues, taxes, insurance; however, Loftium is responsible for repairs stemming from an Airbnb guest and Loftium carries additional insurance for the STR.

Originally posted by @Todd Goedeke :

@Sara Reeder,did you find Loftium or did they find you?

Was your lease with them triple net where they paid taxes, insurance and maintenance?

Oops, missed your first question. They found me. I had the property listed available for rent and they reached out to me. They are very particular about the type (and location) of the property they are looking for. It has to be able to be split off into two units (one for a permanent tenant and the airbnb side. They also know which municipalities work with STR. This property is in Denver which is STR friendly. I manage properties all over the metro, but most of the other cities have too much red tape (or flat out don't allow them).


Loftium handled getting the proper licenses and insurance - so definitely make sure you/they know all of the rules and regs of your particular market before pursuing or you'll get a cease and desist notice real quick. 

 

@Gerry Magrini I Airbnb/short term rent my properties myself but I do have quite a few that I rent from a landlord or PM and Airbnb. The liability really lies upon the host if you force him to get renters insurance. If you have home owners insurance, he has renters insurance, and Airbnb automatically insures all of their properties. You have 3 layers of protection right there. The first thing you need to do is ask him about his experience doing it and ask to see his Airbnb profile to check his reviews. If he's new then you have to decide if you want to take that chance. 

Pros
Your place is going to be well maintained (If he's a good host)
You can negotiate items that has to be fixed at his expense and they will more than likely agree.
You can negotiate some of the profits to come back to you. (More cashflow)
Some Airbnb hosts will even fix your place up. New Floors, counters, etc.
You can negotiate more for rent

Cons/Questions
You don't know how experienced he is to make sure the place is maintained
Does he have a system to detour parties?
How does he ensure his guests follow the rules?
Does your city even allow short term rentals?
Are there STR taxes that need to be paid? Who pays them? Host? Landlord? Airbnb?

These are just a few things to consider in your decision. Just make sure to do your due diligence and good luck.

Seems like lots of no's from people who are worry bugs. Seems like the people who are worried don't use the Airbnb platform themselves. There are ways to set up your Airbnb so you can charge more money and keep certain types of people away. You can get sound sensors that alert you when it gets too loud if your worried about parties. Get smart doorbells with a cameras to see how many people enter. Just like many things, don't let fear make the decision for you. Sure there are horror stories to owning LTR but you don't let that scare you. STR can be another tool in your belt to succeed. They hire cleaners and keep your place clean. Most guests are just looking for a place to stay, just like a hotel but like the usually cheaper and more homely feel.

If you look into STR yourself, you'll see this is a very common strategy to grow.

Even Jay Hendricks is testing out STR.

@Gerry Magrini I would do it in a heartbeat. Full Disclosure, I own long term rentals and one short rental that I rent out via Airbnb and Booking.com. If my LTR's were in a market that had STR demand, I would convert them to STR's. The obvious advantage renting your unit to an Airbnb Host is you are getting paid a premium rent over your current rents. And all maintenance, wear and tear and furnishing is the responsibility of the Host. Make sure you vet this Host properly. If he is a serious Airbnb Host then he will take care of your property better than any LT tenant. Also, make sure your locality allows for STR's. Make sure your lease spells outs his responsibility. Also you should notify your Ins carrier as rates will be a bit higher. Go for it.

@Gerry Magrini lol, if this person is really asking to do Airbnb, firstly how many are hey doing and secondly why your house?

Honestly...treat it like a commercial loan in your mind. Take all the precautions a commercial loan officer would take. If they don’t qualify then move on. Man already sounds like a headache but nothing wrong with thinking creatively.

@Gerry Magrini

Does the tenant own a business? You could do a commercial lease and have his business rent the property. Make sure they have insurance and you need to have a lawyer look it over. Write in clauses where you can take the property back if it’s not maintained properly, missed rent, and anything that makes you feel comfortable doing this. Just like a residential lease.

It sounds like there’s a huge liability factor if

you rent it to the person and not the business. If he’s serious then he should have no problem putting his business’ credibility on the line.

I wonder from the landlord/tenant law side something I didn’t see come up yet. Could your ltr use fair housing violations for lease terms like “no subletting, no business use” or other specific terms they have been held to during their residency and their not being given a choice to renew or continue renting their unit with the potential change in neighboring units use? Holding tenants to different leases could be a problem if landlord and tenant laws have the appearance of not being equal. How can you send notices for noise etc or be willing to uphold current renters rights for residential lease without being put in the middle of making money over the ltr who’s been there longer? I like the idea but where do we go for legal assurance on how to keep it from being liability regarding fair housing?

Lots of people bringing up liability issues, but only one person brought up the fact that Airbnb provides liability insurance.  With Airbnb, your property is insured for liability to the tune of a million bucks.

As for homeowner's insurance, my policy did not allow STRs and I had to purchase a more expensive policy.

@Gerry Magrini

Hi Gerry. I would be open to it since he is willing to pay more than market rent. I run three STRs myself, but I own them. But I have heard of this business model. Why don't you ask to view his other listings on airbnb? Is he a super host? That speaks well. The good thing about airbnb is that cleaners are constantly in there viewing the property. If damage is done, the host can request funds from the guest to fix it through Airbnb's resolution center. Small things get fixed quickly this way. What other LTR do you own where visual inspections get done on the property condition every few days? If the tenant does this professionally, he is probably willing to make small repairs himself. Just make sure the property zoning allows for this. Draw up a lease that spells out the details for everyone's responsibility.

So, when he has an airbnb tenant who manages to establish the rights of a tenant, YOU will be left holding the bag.  In fact, if anything goes wrong that's bad enough to make him run, YOU will be left holding the bag.

Personally, I prefer to control my risk by.... being in control of it.

Yes sir this is your property, if you wanted to Airbnb do it yourself. The liability would be too much for me personally. I have found people on youtube trying this and taking control and explaining how they are getting rich off other people's properties and not owning them. Airbnb is a little more extensive than a long term rental. You have to be in a great location and you must furnish the apartment etc.