I’ve now completed 1.5 evictions on medium term rentals, and I’m not changing a thing

[Julie Gates]

Medium term rentals are the new darling of short term rentals. As a large chunk of the American workforce can now work from anywhere, investors are scrambling to provide great places for these digital nomads to explore a new city. As a property manager in Savannah, GA who has been hosting these guests for longer than 7 years, I’ve spoken publicly many times on the lack of concern about guests becoming squatters. Guests are paying for an entire month up front, not an easy task. Guests are rarely coming to party. They are working or they are retirees looking to have some fun. For years paying the bill wasn’t an issue.

However, as inventory has ballooned, prices have decreased. The increased frequency of these longer stays has brought with it increased issues. One of the biggest concerns for both the owner and the property manager like myself, is getting paid.

Many guests book for much longer than 30 nights. A travel nurse, for example, would typically stay 90 nights on a single contract. It is a great advantage to the guest and also the host to split the stay into several payments. Guests rarely have the entire amount ready to put down. Also, the home owner most likely has a mortgage and receiving a large amount of cash and then not spending it for 3 months can be more challenging than you’d think. I’ve been in this situation and with a growing portfolio and expenses, it’s hard to put money aside for two mortgage payments.

At Sid Was Here, my management company, we’ve always offered to let guests pay into the future for longer stays. This is very non traditional in the short term rental space, as all stays are paid in advance. The host knows they will get paid. Airbnb was the first of the OTA’s (Outside Travel Agents) to offer payments into the future for guests. This ballooned the amount of guests booking longer stays on their platform, and pushed them into being an industry leader in the medium term rental space.

My company has had a few struggles with payments, both with direct bookings and also for guests staying through AirBNB. When you have an AirBNB guest who hasn’t paid, you wake up one morning to a terrible message saying that AirBNB has failed to capture payment from guest Mr. X. They will continue trying to reach the guest for payment, but the host now has the right to cancel the stay without penalty and may remove the guest from the home. This is a nice way of saying, “Good morning, Julie. We tried, but you’re on your own with this Mr. X.” Thanks, AirBNB! These are dark moments for hosts and property managers alike. In AirBNB’s defense, I also get the same drop in blood pressure when someone on my team tells me that a direct booking guest, Mr. X’s card was declined and he is now late on a payment for his medium term rental. At the end of the day, the problems are the same, just on different platforms. If you think that bad guests are only on one platform, you are dead wrong and that’s the truth.

Enter in the evictions. I want to say truthfully that these are extremely rare. We have hosted thousands of medium term rental guests and we have completed the eviction on all of 1 guest. That statistic isn’t bad in my opinion. The second one that I would call half of an eviction was a guest who kept blowing us off on making the payment that was getting later by the day. I was having nightmares about calling the owner. No one wants to hear this and I don’t want him to ever think that we haven’t done everything in our power to get the money out of the guest. In Georgia, we send what’s called a Quit or Pay notice of eviction. This is an official letter that the eviction process has begun and they need to either pay or leave the property. This happens on day 7 after the payment is due, and notifies the guest that we will be filing an eviction in the court system on day 30. Our best leverage is that this will place the word eviction onto their credit history, which is huge as you can imagine. The second time around, the Quit or Pay notice worked and the guest was able to produce a credit card that would take the payment. The first guest that I mentioned went through the full eviction process and left before being removed by the sheriff.

Since I’m telling stories here, I’ll also tell you that I am one of the rare hosts who has successfully evicted a short term rental guest as well. We had a guest stay for a few nights, then cancel the stay early through AirBNB. For short term rental booking that is cancelled early, the guest is to leave on the day of cancellation and the host will not get paid for any additional nights. In this case, the guest refused to leave. He had some colorful language and quite a few magical reasons that he didn’t have to leave. I knew the law and used it to my advantage. A short term rental is technically a hotel and falls under hotel laws. I called the City of Savannah Police Department and explained who I was. I told them that I had a guest in a licensed short term rental who was refusing to leave. Two deputies were there within 30 minutes and removed the guest for me. I had a front row seat to some drama and learned a few new words that day, but the guest was removed with no damage to the home. The best thing that I did that day was let the officers do their job and they came through for me beautifully. I showed them all paperwork and explained the situation and they took it from there. Was it fun? Absolutely not. Did I get a great story out of it? Unequivocally yes.

These situations weren’t fun, but keep in mind that I have successfully hosted thousands of guests in these homes with great success. Like the review system that we all despise, most guests are great and you’ll never hear about them. It’s only the crazy ones that make for great stories. Short term and medium term rentals have been a huge part of my portfolio growth and I have no intention of stopping my work in this space, despite these situations. Real estate is a business and bad things are going to happen when you are going big. Put your head down and get through them. Know that people like me will be here to support you on platforms like Bigger Pockets whenever you do hit an issue like these.

[Jennifer Roberts]

Wow! This was a great summary and an eye opener. I have friends who have LTR/STR and MTR is where I live. To date the MTRs have been lovely and work as hard as I do! No parties, no shenanigans. I've hesitated on LTR for some of the reasons you mentioned and will keep this all in mind moving forward. Thank you for the education - jr

[Julie Gates]

MTR's are a GREAT rental strategy. Every time I do a speaking engagement, everyone asks about evictions. It's time to talk about them, sadly.

[Sandro Figueroa]

Wow, very well done and thanks for sharing! I always had mixed feelings about Savannah but it still interests me very much. I'm a local GA investor and have of course been there before. I can tell why it is so popular. 

[Rick Baggenstoss]

Guests can become tenants pretty easily. In Georgia, it's relatively quick to evict, but you've lost substantial income before its over.  I can make the numbers on a good property turn bad for a year or more due to the loss of rents, if they can't be recovered. 

Substantial deposits (2- 3 months rent) and thorough vetting are the best ways to mitigate.  

[Bonnie Low]

I think the fear of evictions is especially acute for those transitioning from the STR space. I hear this even in popular podcasts like Thanks for Visiting where they recently have been interviewing very seasoned, successful MTR hosts and keep asking 'but what about the risk of squatters??' as if it's more of a risk in midterms than in short terms. I think the risk is similar and probably even less likely with midterms, particularly since you should always have a lease agreement for your midterm rentals whereas people rarely do this for short terms. I think your numbers put it in perspective: thousands of guests, 1.5 evictions. The risk is there. But do you due diligence, protect yourself and be prepared in case it happens. Thanks for this excellent write up, Julie, and for shedding light on a very important subject!

[Michael Smythe]

Our standard lease is 27 pages long.

We shortened to 6 pages for STR and MTR rentals only.

Have had to evict a couple of tenants in Michigan and the leases were needed. 

[V.G Jason]

The amount of evictions matter, but it's more important when and why. 

If it's recent, this is more than telling. 

[Leon Lee]

We've been seeing a rise in iffy inquiries for mid-term stays lately. It's pretty clear that many of these folks are in a bind, probably due to recent layoffs or the economic downturn. They seem to be looking for a place urgently, possibly after a recent move.