How to lease and allow tenant (daughter) make money through STRs?

Question

My husband and I are trying to help our daughter earn some money. She has some experience doing Airbnb, so we were thinking to rent one of our properties to her, and then let her fix up and furnish the place for short-term/corporate rentals. I know Airbnb doesn’t require a contract, but what if she were to do a corporate housing rental for a few months or even a year? Would we have to sign a lease with this tenant ourselves, or is this an agreement/contract that she would sign with the corporate housing tenant?

As you can probably tell, we are not very familiar with how short term rentals and subletting works. We’ve always previously banned them in our leases, but this would be a different situation with our daughter, so we just wanted to make sure we’re doing this correctly! We are located in the SF Bay Area (in case that makes any difference).

Thank you for any advice on this.

Amy

Ken Latchers · Answer

Take all the happy or positive a reassuring information about Arbitrage above and then throw them in the trash can. It's the worst idea in short-term rentals ever floated.

people doing Arbitrage are getting hosed  now. They are bailing out and losing whatever they did and men are getting stuck with many leases

2nd and other waves of coronavirus will be coming and will be back into the muck.

if you want to do short term rental, then buy the properties. You want to do long-term rentals, and by the properties. Arbitrage is a bad idea before, and it would be a bad idea going forward.

Brian Garlington · Answer

Are you seriously considering AirBnB after what has just happened?

Interesting.

Marlen Weber · Answer

great information on Arbritrage. Thanks for sharing with us.

Luke Carl · Answer

@Amy Martin first thing I would do is read This Book.

Then I’d read about arbitrage on this forum :)

John Underwood · Answer

So yes you can lease to your daughter with her having the right to sublease.

Its called Arbitrage or a Master lease.

Paul Sandhu · Answer

Corporate housing isn't all that it's worked up to be.  They don't want to deal with little fish.  Now travelling contractors with a per diem, that's a whole new ballgame.  I know this guy making a killing renting his 23 places to traveling refinery contractors.  Welders, pipefitters, boilermakers and other such ruffians.

Joshua Ferrari · Answer

I totally missed the corporate housing portion of your post lol. Again, not an expert in the matter.

With corporate housing, they require pristine real estate & everything must be up to their specification, but it would be guaranteed cashflow. Typically they do pay more than market rate because they require everything fully furnished.

However, with your daughter living there, I'm not entirely sure how that would work. It would definitely be business specific. They could require a certain square footage, a security system, they could require you to be a certain distance from the business, wifi, cable, certain size bed/s, any number of things.

I would suspect they would only go under this contract with the actual property owner/s. They would be taking a risk allowing their employees to stay somewhere that they aren't guaranteed privacy & safety of their employee/s if other tenants live there. (even if it is just your daughter. It's a liability thing from the companies perspective.)

I'd do some more research on it though. Call some local companies that you were considering leasing to and see what their qualifications are. Can't hurt to ask. Best of luck!

Joshua Ferrari · Answer

You can do what's called AirBnB Arbitrage. I'm no expert in the matter, but my understanding of the niche is you lease the home to your daughter on a LTR agreement that allows subletting of the property. (say 1 year) She then turns around and turns the LTR into a STR by furnishing the property and marketing it on AirBnB, VRBO, etc.

For example: Say she owes you $1,500/month in rent for the LTR lease, but she makes $3,000/month in rent from AirBnb. She would then pay you the $1,500 & profit the other $1,500 for that month.

It's a very plausible opportunity for creating some good cash flow, but it's, in essence, creating a job for yourself. Which, if she's in need of one, would be perfect!

Last thing to keep in mind is the current state of the economy. There isn't really anyone traveling right now, nor do I expect there will be in the coming few months. Once this pandemic blows over & the country opens back up, it's going to be a while before people are trusting enough to go on vacations and do some traveling. Especially to more expensive markets like the San Francisco Bay area being that a ton of people are struggling financially right now.

All in all, it's a great opportunity to create some money for some continuous hard work, it can be done easily, & it will be a win-win for you and your daughter, but caution should be exercised while we are moving closer and closer into a recession.

I hope this helps!

How to lease and allow tenant (daughter) make money through STRs?

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