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

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

Kim Hopkins
Investor · Member since 2018 · 260 posts · 74 votes

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: 

  1. 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. 
  2. 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. 
  3. 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 

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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
Originally posted by @Kim Hopkins:

@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. 

 He is telling you how to break the law and avoid getting caught. I will just comment as a moderators, we ask people in the forums to not recommend illegal activity to others. Breaking the law is not creative or good business practice.

I would not be afraid to offer short term rental options, say 30-90 days, but I would do full tenant screening and have them sign a lease. Do not use platforms like AirBNB without having your own lease with the tenant. If you rent to someone with good credit, I wouldn't worry so much about eviction down the road. People with good credit do everything they can to pay their bills. Of course California is tenant friendly. The absolute worst nightmare eviction stories I have hears are all from California. You can expect eviction bans continued under Biden presidency, so just make sure you are renting to solid people with solid jobs.

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  • Kim Hopkins
    OP
    Investor · Member since 2018 · 260 posts · 74 votes
    6y

    Two more questions - where do people go to do direct bookings? Also, does anyone have experience with corporate rentals? That would definitely help with minimizing tenant defaults. 

    1Reply
  • Wayne Lee
    Real Estate Broker · LA, CA · Member since 2020 · 7 posts · 1 vote
    6y

    Curious why are you only interested in short term rentals? Why not engage in a longer one year lease? 

    0Reply
  • Melody R.
    Real Estate Agent · Los Angeles · Member since 2018 · 80 posts · 75 votes
    6y

    In my career, I’ve encountered three professional squatters -and all within a 2 month period- you are absolutely correct, they do exist. I know their M.O. now which is one of the reasons I have a below average delinquency rate.

    You’re wise to be vigilant, during this time, squatters do take advantage.

    Like you, we wanted the flexiblity to return to our house but we found the current climate just too unpredictable to stay with short term (Airbnb). Our next best option was finding a MTM tenant who was flexible and had another place to go if we decided we wanted to live in our house again.

    You can also explore leasing by referrals only. Tap into your network and see if anyone needs temporary housing for themselves or family, instead of renting to complete strangers. I’ve actually noticed an uptick in people posting in some of the community groups I’m apart of on Facebook. We all are familiar with one another so it’s a less risky way to go.

    Best wishes, Kim!

    1Reply
  • Jon Schwartz
    Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
    6y
    Originally posted by @Kim Hopkins:

    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. 

    Yeah, but on the flip side...

     Somebody who rents a furnished home for, say, three months isn't a typical renter. What are the chances that this person is going to decide that it's their best interest to stay past three months while not paying any rent?

    Plus, how long until this moratorium is lifted? Maybe you'll book a nine-month stay, and the moratorium will be lifted before then.

    Best,

    Jon

    0Reply
  • Rik Patel
    Real Estate Agent · Miami, FL · Member since 2018 · 132 posts · 25 votes
    6y

    @Kim Hopkins What area is your property in?

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Kim Hopkins:

    @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. 

     He is telling you how to break the law and avoid getting caught. I will just comment as a moderators, we ask people in the forums to not recommend illegal activity to others. Breaking the law is not creative or good business practice.

    I would not be afraid to offer short term rental options, say 30-90 days, but I would do full tenant screening and have them sign a lease. Do not use platforms like AirBNB without having your own lease with the tenant. If you rent to someone with good credit, I wouldn't worry so much about eviction down the road. People with good credit do everything they can to pay their bills. Of course California is tenant friendly. The absolute worst nightmare eviction stories I have hears are all from California. You can expect eviction bans continued under Biden presidency, so just make sure you are renting to solid people with solid jobs.

    4Reply
  • Sarah BlessePro Member
    Property Manager · Fresno, CA · Member since 2017 · 41 posts · 26 votes
    6y

    @Kim Hopkins

    I do long term Airbnb stays with the guest house on my property and it works great! I’ve had 298 out of the last 365 nights booked. My best advice is to be VERY picky about who you choose (ie. no one allowed without prior reviews). That’s the beauty of Airbnb is you can read how they treated other places in the past. I only open up 90 days at a time so I don’t get people booking so far out and I never accept payment off the app. I always do everything through Airbnb. For pricing, I do avg nightly pricing for short term in my area and then offer a 15-20% discount for monthly stays. Hope this helps!

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Sarah Blesse:

    @Kim Hopkins

    I do long term Airbnb stays with the guest house on my property and it works great! I’ve had 298 out of the last 365 nights booked. My best advice is to be VERY picky about who you choose (ie. no one allowed without prior reviews). That’s the beauty of Airbnb is you can read how they treated other places in the past. I only open up 90 days at a time so I don’t get people booking so far out and I never accept payment off the app. I always do everything through Airbnb. For pricing, I do avg nightly pricing for short term in my area and then offer a 15-20% discount for monthly stays. Hope this helps!

     If you are doing long term rental, I would recommend having the guest sign a rental agreement and make sure you independently review their photo ID. This is pretty common. AirBNB reviews are pretty worthless. Most hosts give good reviews regardless of condition. They are using credit cards to pay AirBNB, so if someone decided to dispute the charges, you are out the money. Without a written agreement, you have no legal recourse to collect money from the guest. It sounds like you have gotten lucky so far, I would be more cautious going forward.

    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    6y

    @Kim Hopkins, there is a rather famous AirBnB case (I think in San Francisco) where the renter booked a 30 day stay, established "residency" and then refused to leave. CA has very tenant-friendly laws, and since he had been in the property for more than 30 days, was entitled to the process for removal like any other tenant - which can take a very long time during normal circumstances. 

    [email protected]Podcast Guest on Show #261
    BiggerPockets
    1Reply
  • Kim Hopkins
    OP
    Investor · Member since 2018 · 260 posts · 74 votes
    6y

    Thank you everyone. And for the new replies from @Mindy Jensen , @Joe Splitrock, @Sarah Blesse, @Jon Schwartz, @Melody R.. 

    It sounds like it is just not worth the risk to do business in California. Ironic, because I could have rented the house at a lower rate than the mortgage would cost to someone who buys it new (thanks to appreciation) so their unfriendly laws are contributing to lack of affordable housing. And now I also have to sell my house. 

    Thank you everyone for the very helpful insights! 

    0Reply
  • Nadia O.
    Member since 2020 · 82 posts · 100 votes
    6y

    @Sofia Sharkey you have your point. i believe airbnb holds a pending charge on credit card for security deposit. Even if the renter still has to approve the charge, wouldn't it still weed out the bad seeds? unless the renter knows airbnb laws inside out, how would he/she knows if airbnb will not enforce their own rules? also there are reviews posted from previous bookings. i'm just suggesting i think airbnb or similar sites can be a good start for receiving bookings without screening individual renters. if the renter has no reviews, then @Kim Hopkins should do a credit check on the person.

    0Reply
  • Nadia O.
    Member since 2020 · 82 posts · 100 votes
    6y

    @Kim Hopkins i was an airbnb host for 2 years, i never encountered any problems. try it & do it for fun since you mentioned that your mortgage is pretty affordable. Their reviews are not worthless! Hostesses need those 5 star reviews. So do the renters for their future bookings! And It looks like @Sarah Blesse isn't the only one doing well using airbnb ;)

    in fact, im looking to purchase another property for my next airbnb STR

    1Reply
  • Sean Gribbons
    Flipper/Rehabber · Denver, CO · Member since 2015 · 134 posts · 61 votes
    6y

    Sounds super sketchy. I'm not sure how you NY and LA investors are staying afloat. People are leaving in hoards and I can go rent a 3 million dollar penthouse in LA or NY not pay my seconds months rent and likely get to live there for 9-12 months before anything even goes into court. 


    Why risk this and then pay the gov massive taxes for no help? I would just say be super careful. If its me I'd throw a for sale sign in the yard and find another market that provides some security and stability.

    Just my two cents good luck.  

    0Reply
  • Account Closed
    Flipper/Rehabber · San Francisco, CA · Member since 2017 · 176 posts · 70 votes
    6y

    @Kim Hopkins

    We do some property management for STR's and we also do 30 day or more rentals in the Bay Area. Our units are usually priced higher than market rate rent (which has gone done by 20-30% in the Bay). We command higher rents because our units are a lot nicer and they are designed. As long as we are higher than market rate rent, tenants tend to not stay too long (1-6 months). If they would like to stay longer, that's more money for the owner. Cha Ching

    We also have month to month private room rentals. These tenants never stay super long (1-3 months).

    Our best property has private bathrooms for each bedroom and we rent it out to corporate companies. They like the private bathrooms because of privacy and having both genders at the home.

    Generally, we do screen all prospective tenants and have them sign a local lease agreement.

    Evictions are possible in CA depending on what city you are in. I just evicted a tenant in my flip about 2 months ago (this was in Stanislaus county). Read the laws on the governors website about it and also talk to an eviction service.

    We don’t see any problems with month to month rentals at this time.

    0Reply
  • Kim Hopkins
    OP
    Investor · Member since 2018 · 260 posts · 74 votes
    6y

    Thank you @Sean Gribbons, I agree with you completely. We would NEVER invest in California. The only reason we own this property is because it was our home and the only reason we want to keep it is so we can easily visit our friends and walk to our favorite restaurants and parks. I hear you though. We are one of those droves that left. 

    1Reply
  • Kim Hopkins
    OP
    Investor · Member since 2018 · 260 posts · 74 votes
    6y

    Hi @Gi'angelo Bautista this is very interesting. I actually didn't know there were professional eviction services! That sounds like something very good to know. 

    For your houses (not private rooms) that you're renting for 30+ days, could you possibly give me a specific list of what you do to screen tenants? Also, do you market entirely through AirBnB and if not, what outlets do you use to market he homes? 

    Thank you much

    0Reply
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