Could Short-Term Rentals Be Hurting Property Management Companies?

Short-term rental companies, such as Airbnb or VRBO, can expose conventional property management companies to a new risk. The rise in short-term rentals has been attributed for the impact on rental availability, a rise in rental rates, and diminished demand for traditional property management companies. Property management companies work primarily with long-term rentals and larger commercial properties such as apartment complexes. In contrast, short-term rental sites allow property owners to rent a room or the home by the night without paying higher fees for professional management services.

However, services such as Airbnb do not carry any liability and serves only as an escrow service between the actual property renter and potential guests. Guests rate properties based off of their experience, while property owners/renters rate their guests according to how well they respect the space. Aside from this personally vetted rating system, guests have no other qualifications to meet. Short-term rentals provide homeowners with a theoretically simple way making an extra income. However, they do not provide physical services that will allow you to limit liability and stay in control of your property.

Regardless of the pros and cons, short-term rentals have affected long-term rentals and property management companies as an increasing number of property owners seek out a quicker, simpler, and cheaper way to make money of their home. Listings through short-term rental sites, while profitable, do not provide the benefits found through an established property management company.

Short-Term Rental “Guests” Are Unapproved Tenants

Through a property management company, each potential tenant is carefully screened to evaluate the likelihood that they, among other things, will take good care of the rental and respect the other tenants. Short-term rental companies, like Airbnb or VRBO, create a higher risk of introducing unapproved, temporary tenants into the mix.

Airbnb doesn’t screen the guests that use their service. No background checks are done, and nobody evaluates their credit. Key preventative measures to protect your property do not apply with the introduction of short-term rentals. For example, you could be renting to guests with a history of theft. This not only puts your personal property at risk but the property and safety of the building’s other tenants as well.

Short-term rental guests are statistically more likely to damage property simply because they use your home as a place to stay rather than the place where they live. With approved tenants, you at least have an idea of their rental history and whether or not they’ve caused problems in the past. A qualified renter has also put down a damage deposit. Airbnb guests have no such incentive to respect the property. All that they risk is getting a lower “guest” rating in the Airbnb rating system.

Airbnb Renters May End Up Owing Backed Taxes

Depending on your local government, short-term rentals may put your renters in violation of its tax laws. Airbnb has been a controversial topic in many major US cities. Renters who have run into the most problems are in cities like San Francisco and New York. The laws in these areas consider short-term rentals to be hotels and are therefore subject to the same tax requirements.

Ironically it’s been Airbnb’s hometown that has put up the most resistance. Since 2015, San Francisco has issued over $1 million in fines to short-term renters who had failed to conform to the tighter legislation. San Francisco Airbnb renters must now obtain a business license and pay a registration fee of $250 every two years. Renters are also limited to renting only one property and for a total of no more than three months out of the year. While $1 million in fines sounds like a lot, it’s estimated that more than 70{ec1d25302c0c3e829886c092caa623e779a888dbf9e1057900a08c9ab9a85bb1} of active Airbnb renters in the city have so far avoided adhering to the new laws.

What Property Management Companies Can Do Limit The Liability Associated With Short-Term Rental Companies

With the rise in short-term rentals, many landlords and property management companies have also run into issues with approved tenants renting out their rental. In order to avoid such problems, make it evident in the verbiage of your lease agreement that subleasing of any kind is not allowed. Go into as much detail as you can when defining what “subleasing” means. This could be described as allowing close friends to use the apartment even for a night while renters are out of town. After all, as a property manager, there’s no way to confirm that a short-term rental agreement isn’t going on in this scenario.

Benefit Of Property Management Over Short-Term Rentals

Short-term rental companies, such as Airbnb, have proven to be a huge asset for travelers looking for affordable and unique accommodations. However, these same companies have also introduced new challenges for conventional property management companies. While short-term rentals through Airbnb or VRBO provide a theoretically simple way to make some money, they cannot provide the long-term benefits of an established property management company. A property management company has the knowledge and experience needed to provide you the necessary level of liability along with the effective supervision of tenants and property conditions while ensuring a profit. Many property management companies will also offer a possibility for a short-term rental plan if situations require in order to maintain maximum occupancy.

For more detailed information about the advantages of entrusting your property to an experienced property management company, contact our team at All Property Services today.