I often get inquiries from landlords as to whether renting out their home as a furnished corporate rental or through Airbnb makes sense. Typically this is driven by the potential for a higher profit. Sometimes the question can be prompted by a more practical problem – for example an owner may be moving out of their home temporarily for a posting or similar and don’t want to move their furniture in and out of the property.
Lets deal with long-term corporate rentals first. Some corporate rentals aren’t that different from a regular residential rental. You would sign a lease with the entity paying – being that an embassy (not uncommon in Northern Virginia) or a corporation. Your lease would be just like any other lease except it would be the company responsible and not the tenant. As the lease is with an entity other than the tenant your ability to obtain a rental history, do a credit check or to pursue a tenant for damages are limited. You can often get great long term tenants in these situation but each situation is different. You want to do your due diligence to make sure you don‘t get into a situation where the corporation starts to switch out tenants on a short term basis.
Which brings us to short-term corporate rentals. They may sound great in many cases – above market rent, long overall lease term and a corporation with deep pockets as the tenant. So, you may have an overall long-term lease with the corporation – but the people that will stay in the home could be changing often (hence, the “short-term” refers to the shorter lengths a specific tenant stays there.) With this type of rental you will have limited control of who and how many people stay at the property as long as it is within the parameters of the lease.While you likely will receive the rental income on time (and may get a long-term overall contract), the wear and tear on the home will be significant and the potential for conflicts with neighbors will be greater.
The type of home and community will impact what type of leasing will be preferred, possible, practical and legal. In a condominium community the typical minimum lease length is 6 months and homes in condominiums or homeowner associations cannot typically be used for “transient use”. So, even though your lease may be longer than 6 months and with a company, the occupants will change frequently and the use would likely be deemed a transient use. The higher the turnover, the greater potential for issues.
Another popular option is Airbnb. This would be similar to a short-term corporate rental – but in this case you wouldn’t have a long-term lease to potentially use as a defense if you get into conflict with neighbors or homeowner associations. While you may get away with using Airbnb to rent out part of your home (a couch or a room while you are still living there) renting out the whole home consistently and repeatedly will likely get you into trouble with neighbors, condominium associations and local jurisdiction. Even if you don’t have an issue with that, the short term nature of Airbnb will demand a great deal of work on your part. There will be turnover cost between each teant and the tenants will expect the furniture to remain in good condition and will also expect things like dish soap, toilet paper, plates and cutlery etc. Between each tenant you will have to make sure all that is clean and in good order and make necessary repairs etc. If you have a company do the management and leasing you could end up making LESS money on a short term rental.
We have had many clients wanting to do short term corporate rentals or Airbnb. It is often caused by the current rent not covering the cost and an owner looking for a way to turn a bad situation into a better one. After discussing the pros and cons the owner usually end up scrapping the idea due to the extra management, leasing, legality and turnover costs associated with it.
Do you know what Fairfax County says about Airbnb?
“Short-term property rental has become increasingly popular. Websites like www.airbnb.com encourage people to earn extra money by sharing their homes with travelers. Airbnb encourages “responsible hosting,” which includes complying with local laws and regulations.
The Fairfax County Zoning Ordinance governs how County residents may use their properties. The Zoning Ordinance prohibits most property owners from serving as Airbnb hosts because nothing in the Zoning Ordinance permits renting dwellings or rooms in dwellings for short periods of time without approval of a special exception by the Board of Supervisors to make a home a bed and breakfast.”
More at: http://www.fairfaxcounty.gov/code/property/property-rental.htm
