Tenants Who Air BnB Apartment Units

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Tenants Who Air BnB Apartment Units

Gerrit Bruni
Investor · Milwaukee, WI · Member since 2016 · 9 posts · 5 votes

Hello! I recently purchased a 6 unit apartment building and have tenants who do Air BnB in half the units. My question for everyone here, how do you base rent for tenants who utilize the unit for their Air BnB? I'm new to this concept and want to charge a fair price for this but also cover my risk. 

Side question: do you allow tenants to do this on your property?

Thank you so much for your input!
-Gerrit

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Justin Hoggatt
Investor · Morrison, CO · Member since 2015 · 221 posts · 177 votes
5y

@Gerrit Bruni, Are you saying people are renting from the property owner (now you in this case), and then using it to sublease the unit (AirBNB)?  Is this allowed?  Both by lease and by the city?  If it's allowed, then why not make the whole property an AirBNB and you do it?  I wouldn't allow tenants to do that.  It's in my lease and mentioned multiple times when going over the lease that they are the ones that we're renting to and they can not sublet or sublease any part of the property.

If you're allowed to AirBNB the property out, then that should be a big gain for you instead of the tenants making that extra money off renting the unit and using it to AirBNB.

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  • Justin Hoggatt
    Investor · Morrison, CO · Member since 2015 · 221 posts · 177 votes
    5y

    @Gerrit Bruni, Are you saying people are renting from the property owner (now you in this case), and then using it to sublease the unit (AirBNB)?  Is this allowed?  Both by lease and by the city?  If it's allowed, then why not make the whole property an AirBNB and you do it?  I wouldn't allow tenants to do that.  It's in my lease and mentioned multiple times when going over the lease that they are the ones that we're renting to and they can not sublet or sublease any part of the property.

    If you're allowed to AirBNB the property out, then that should be a big gain for you instead of the tenants making that extra money off renting the unit and using it to AirBNB.

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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    5y

    Hey @Gerrit Bruni. The arbitrage model is talked about on this forum pretty much every day. A couple of questions:

    Did they tell you there were subleasing the units? Is it in their lease contract? Have you seen the listings?

    If you didn't setup the leases for STR's at all, I would do that right away. If they are renting the units as AirBNB and you didn't specific specifically call it out in the lease, you might have some recourse to cancel the lease and renegotiate it.

    I would charge above market rates for each unit that is being used as a STR. I would look hard at a 20% premium for that.

    Also, you need to find out right now what insurance they are carrying. If they don't have proper STR insurance and a decent umbrella, you might be at risk in case of an accident.

    2Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    If they think they can do it why dont you? It changes your insurance liabilities as you're using the place for commercial use rather than residential long term tenants but you have a higher upside. Alternatively you can basically partner with these tennats who want to sublease and give them a minimum rental amount and/or a percentage of gross rental income from their income because it'll be more water/sewer and wear and tear for you. That way, you have assure rental price but get the upside of profitability.  

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  • Tyler Bushey
    Investor · Biddeford, ME · Member since 2017 · 282 posts · 180 votes
    5y

    I have a tenant I rent a duplex to who uses the property for airbnb.  He pays me market rent and is responsible for any damage caused by his tenants and also minor maintenance.  The units have heat pumps and the tenant pays electric which makes my cash flow great and I have no maintenance calls.

    1Reply
  • Tony Gorokhovsky
    Real Estate Investor · Brooklyn, NY · Member since 2017 · 65 posts · 39 votes
    5y

    @Gerrit Bruni

    Here's what I would do.... I'd find their listing on Airbnb and see how it's performing. If it's doing well I would not extend their lease and do it myself. You'll make double on a STR vs LTR if the Airbnb is successful.

    3Reply
  • Anthony KingPro Member
    Investor · Charlotte, NC · Member since 2020 · 239 posts · 247 votes
    5y

    @Gerrit Bruni in addition to what everyone else said about terminating their lease and starting your own AirBnB, have you considered how the other 3 long term renters feel about new random people walking through their home every night? With that said, I'd initiate a takeover of the business that they've made using your asset, and then be very clear in future leases about your stance on subleasing/subletting.

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