Due to the current state of the economy, renting properties on short-term rental sites such as Airbnb is becoming more popular than ever. If you are thinking about joining the bandwagon, read on. In this article we talk about the Airbnb subletting restrictions to watch out for and how to get around it.
Subletting on Airbnb in layman's terms means taking a property on long term rent or lease (via sub-lease agreements) and letting it out short term on vacation rental sites such as Airbnb. To learn more about it check out our article on Airbnb rental arbitrage.
On the surface, it may look too good to be true but is completely legal. And, if done right can lead to making millions of dollars without owning a single property, like Sean Rakidzich, a successful Airbnb operator and super host.
The key to getting a subletting agreement right is the terms in which you sign. To put it simply, if you sign a lease agreement as an individual, you put a name on who will stay in that property during the agreed period. Therefore, you cannot sublet it to anyone else as per the agreement.
However, if instead you form an LLC (Limited Liability Corporation) it allows you to sublet the property in Airbnb or other vacation rental site simply for the reason that a company cannot sleep in the bed or reside in a place. Therefore, by signing in as an LLC you don’t specify or single out an individual who will use the property, it gives you the freedom to sublet the property to others without having to make any changes in the initial rent or lease agreement.
No business comes without its fair share of risks. Just like with any other business, there are things that any host must look into when subletting a property on Airbnb. Below is a list of things to watch out for when subletting.
Once you’ve found yourself the “ideal” property for the business model in your mind, you’ll still have to convince the actual owner of the property you plan to sublet. While you may find someone who will back your vision, that is very rare.
Among the many reasons why you could go wrong when convincing your landlord, two key reasons are, the traditional mindset of the owner, or, he might take up your idea and use it effectively, putting you on the lookout for a new property while adding one more competitor to the market.
Some buildings require short-term rentals to have background research of guests done for safety reasons. This could have you buried under paperwork if you have new guests checking in every few days, the way out would be to incentivize guests to book for longer periods.
A good segment of guests to consider is international travelers, if you are considering this option check out our blog article on the same.
However, in some buildings, after they have done good business with you for a while, they let you off the hook about the paperwork and you’ll be free to change your business model to allow short stays as well.
While these laws are not solely for properties that are being sublet, it is important to bear these in mind before signing the lease agreement. For example, some cities and countries require hosts to get special permission from the state or government officials before listing a short-term rental. If your city of choice has special regulations and taxes in place for this business model it might not be the right fit.
Among the many reasons how rental arbitrage can go wrong, if you have done your research right, it is the best way to get into the short-term rental business without digging too deep into your pockets.
It is not risk-free but as long as you keep the property owner in the know, and maintain a good lineup of guests coming your way not only in numbers but in quality, where they don’t cause much damage or disturbance around the property you are good to go. And once you have got the hang of the business, nothing should stop you from diversifying and adding more properties to your portfolio, it is a sure-fire way to make your mark in the vacation rental market!