Are your Tenants Cashing-In?
Tenants all across the country are cashing in on their landlord’s property. Are yours?
With the advent of websites and short stay rental services like AirBnb, FlipKey, HomeAway, RoomOrama, VRBO, and others, tenants are finding it easy to rent a spare room or even the entire apartment without their landlords knowledge.
A brazen few are even renting tents or campers in the back yard. Some are even staying in the tent and renting the main property.
These websites allow people to rent out rooms, homes, or apartments without a license and skip out on paying taxes to the city or state. They make it very easy to manage and book short term guests.
Conversely many tenants are being pushed out so landlords can cash in on the short stay housing industry. Why rent an apartment for $1200 a month When you can rent it for $120 a night or $700 a week.
Some landlords have converted entire buildings into short stay hotels.
Rentals in markets with housing shortages, close to resort areas, near professional sports venues, colleges, and other highly traveled locations are in especially high demand and could produce premium revenue for your tenant or you.
Some area governments (like The City of Myrtle Beach and Horry County SC) are monitoring these sites and stepping up code enforcement activity to collect license fees and taxes. Guess who they are going after? Not the tenants, the owners! You could be on the hook for fines and penalties if your tenant is illegally renting your property.
A Queens landlord had his 3 bedroom $2500 a month apartment converted into 10 small bedrooms by his tenant who rented them out for $35 a night ($350/day).
Chirs Dannen rented rooms in his Brooklyn apartment for over a year before his land lord caught on. After making a gross profit of $20,000 he was finally served with a restraining order. His landlord, seeing the revenue potential, then converted his property management office into a suite of AirBNB rooms listed for $169 per night.
So what can you do to protect yourself or to cash-in?
To find out if your property is being rented on the sly, visit the short stay and bed-n-breakfast sites and search for your rental address You can also set up a Google alert for your address which will email you if that address pops up anywhere on the Internet.
Check these sites to see if short stay rentals are popular in your area and get an idea of how much income your property could generate.
Include clauses in your lease to prohibit unauthorized sub-rentals
- Tenants can not have roommates (or paying guests) without written approval.
- Tenants can not operate any type of business.
- Tenants can not violate any local or state ordinances.
Landlords and property managers should discuss restrictions against sub-rentals with their tenants and get them to sign a no sub-rental lease addendum.
If you are a tenant and want to subsidize your income or offset your rent expense, make sure you work something out with your landlord first.
If you feel you have a desirable property, offer your landlord a cut in exchange for being the “on-site manager”. Being there to keep an eye on things is a big deal. People have thrown wild parties and used overnight and short stay rentals for other nefarious activities.
Regardless of whether you are a tenant or a landlord, you must comply with all local and state licensing and other housing rental laws and pay appropriate taxes.
The short term rental market is big business and is here to stay.
Links & Resources
Do you need professional, cost effective property management? Visit Childs Real Estate Property Management