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Can You Airbnb a Rental?

Many investors opt to Airbnb a rental to optimize the travel platform to generate extra cash, but make sure you are legally in the clear before hosting.

[Updated: Mar 03, 2021 ] Dec 25, 2019 by Carole VanSickle Ellis
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Just over 12 years ago, two roommates with three air mattresses rented out floor space in their San Francisco apartment in order to make the monthly rent. That concept evolved into the tech "unicorn" Airbnb. Today, Airbnb is worth about $38 billion, and more than 150 million people use the website to book accommodations when they vacation and staycation. In fact, there are entire businesses based on the concept of Airbnb rentals, and the company has changed the face of the vacation rental and short-term rental industries forever.

Shortly after Airbnb began discussions about going public several years ago, a new Airbnb strategy emerged on the short-term rental scene. Would-be Airbnb hosts would simply rent properties in desirable locations using a conventional, long-term lease, then rent those properties out on Airbnb. In many cases, the Airbnb hosts had the right to inhabit the rental property as a resident but did not necessarily have the right to rent out the property as a short-term vacation rental. To get around this issue (and often operating in ignorance of it), these new Airbnb hosts did not disclose their plans to Airbnb the rental units before or after signing the lease.

Despite some initial cloudiness concerning whether or not long-term tenants have the right to Airbnb rental properties, this strategy has been profoundly successful for many real estate investors with enough capital to rent in "hot" locations but without the wherewithal to buy. However, as Airbnb has grown in size and popularity, many landlords are protesting the use of their residential rentals as short-term rentals, and local governments and neighborhood associations are chiming in.

Before you Airbnb a rental yourself, you must do some due diligence on your own. Otherwise, you could not only end up in hot water with your landlord; you could end up on the wrong end of a lawsuit or in a legal tussle with the neighbors as well.

Review the three L's: leases, laws, and local regulations

If you want to Airbnb a rental, the first step is to find out if you are legally permitted to do so. Just a few years ago, most rental contracts did not include specific language dealing with short-term rental options unless the unit in question was already a short-term rental. Today, leasing language is very different. Landlords know if they want to be absolutely sure their tenants cannot lease out the space using a platform like Airbnb, they have to get the terms signed and in writing. Many do so.

In most cases, a residential lease will contain language indicating that you cannot sublet the space without the landlord's prior written consent. This clause is used to prohibit short-term, informal leases created by renters themselves letting the apartment out, bringing in undisclosed roommates, or inviting permanent or semi-permanent guests to stay. These informal arrangements often come with very formal legal consequences for a landlord even if the property owner is not aware of the changed living situation at its outset. In many cases, as most renters know, reliable tenants experience a great deal of leeway when it comes to this clause. However, the verbiage is compelling and can be used as a sort of "fire alarm" to be pulled if necessary.

If your lease contains this type of language, then you must bring your landlord into the conversation and get express, written permission to Airbnb a rental. However, you are not done yet. Read up on local zoning regulations and local laws governing short-term rentals. Your landlord may not mind your renting out the unit for extra cash, but they may not be aware that local laws could prohibit this.

You are responsible for finding out what is and is not allowed in your city. Remember, you could commit the error in good faith, believing you were clear to Airbnb the rental, and still end up facing fines and penalties if you violate local laws or your neighborhood association's covenants concerning short-term rentals.

Airbnb hosting is free, but you still might have to pay to play

Although it costs nothing to become an Airbnb host on the company platform, you will likely have to pay some taxes and registration fees to your state or local governments. Many cities require Airbnb hosts to register their rentals and log the time that guests spend in the residence. In some cities, there are very specific guidelines governing how much time you must spend in the residence and how much time you can rent it out. If you violate these guidelines, you will find yourself and often your landlord in legal trouble.

Another one of the many factors to consider when you are deciding to Airbnb a rental is insurance. While you may have renters insurance and your landlord almost certainly has property insurance of some sort, short-term paying guests may not be covered under either policy. You cannot rely on your personal security deposit to cover potential damages or losses. Your policy will need to include liability that covers potential issues that arise in the home while your guests are in residence both in terms of damage to the property and potential harm to the guests themselves. If you are considering skipping over this important step, think again. There are far too many Airbnb horror stories out there about guests who both deliberately and accidentally caused incredible damage and even harm during their stays for you to overlook this important consideration when starting to Airbnb a rental.

Airbnb a rental the right way

If you are legally clear to Airbnb a rental, then you could be on your way to Airbnb super-hosting. However, making sure you are allowed to rent out your residence in this manner is just the beginning. Successful hosts have revolutionized their financial situations using Airbnb as a launching platform, but they have some important behaviors in common. Here are a few other areas to research:

  • Creating an attractive listing
  • Guest screening and safety
  • Establishing rules for your Airbnb space
  • Setting profitable prices
  • Designing an Airbnb experience
  • Emergency procedures
  • Airbnb experiences
  • Airbnb accessibility
  • Maintenance, improvements, and upgrades

Today, there are more than 7 million Airbnb listings worldwide in more than 100,000 different cities. With so many people loving the Airbnb experience, short-term rental housing is definitely the future for many real estate investors and rental residents.

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