Tuesday, December 22, 2015

Airbnb can be great for travelers, but a disaster for landlords

Have you ever used Airbnb? It’s the online service that helps you find lodging in rooms, entire homes, and even castles and igloos around the world.

It sounds like a great deal for families who want to travel, but can’t afford to buy every meal out and pay for two hotel rooms. I know my nephew and five of his friends rented a three-bedroom apartment in NY for a fraction of what a moderate-priced hotel would have cost.

Just for a comparison I could relate to, I found a room in my area of Palm Beach County through Airbnb for two people 5 minutes from the beach and 1 minute from the golf course for $142 a night in February (the height of the tourist season). A top-rated hotel on the beach will cost at least twice that amount.  

If you’re thinking of converting an empty property into a vacation rental to pick up extra money, better do your homework. Municipalities are cracking down on landlords who do exactly that. San Francisco, for one, is seeking civil penalties of up to $20 per day for Planning Code violations; up to $2,500 for each unlawful business act; disgorgement of illegally obtained profits; and attorney’s fees.

I’m going to assume that if you, as a smart landlord, have turned your properties into short-term rentals you’ve abided by the laws in your area.   

But what if your tenant snubs his nose at the law and turns your home into a vacation rental?

First off, neighbors and HOAs might have a problem with random people coming and going with their luggage at all hours. Drug dealings, prostitution? Imaginations can run wild. Copies of keys floating around could cause security concerns in an apartment building, too.

Then there is the issue of extra wear and tear on your property.

Suppose you discover your tenant is subletting, and you kick him out? I read about a landlord who evicted a tenant for renting a room to an Airbnb guest for 30 days. The tenant left, but the Airbnb guest wouldn’t budge until his 30 days was up because he wasn’t part of the lease. Imagine moving back into your home and having a new roommate!

An even worse situation is going on in New York where a tenant has amassed $250,000 in fines for illegally turning her apartment into a hotel. The landlord is getting hit with fines, too … $61,000 at the last count. 

Although I don’t put much faith in leases, make sure they include no-sublet clauses in case you end up in court. Also, in the rental application ask how many people will occupy the home, and put that in the lease, too. And on your monthly inspection if it looks as though more people are living there than agreed, immediately remind the tenant of the violation in writing.

For more ideas on how to better manage your rental properties, order a copy of my latest book, What You Must Know BEFORE Becoming a Greedy Landlord

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