Airbnb and your Rental Agreement

Posted by Bob Walsh
Bob Walsh

Airbnb's an excellent way for people to make additional money, but you need a plan to get your landlord onboard too. Don't worry, we have a solution for you...

Hey renters, are you looking at Airbnb as a side gig? If you're among the hundred million or so Americans - mostly urban dwellers in apartments and other multifamily housing - Airbnb Guest hosting is an attractive, profitable side gig — one of the best side gigs out there.

How much can you make? Clicking an Airbnb ad for Hosts on Google gives you an estimate based on what other Airbnb hosts are making in the area for a typical stay: In San Francisco, if you're averaging 15 nights a month and host your entire apartment, you may be looking at nearly $4,000 a month in Airbnb revenue. That's a substantial amount of money if your living situation works for Airbnb Hosting!

But there's a catch and it's probably already buried in your rental or lease agreement. Most rental agreements prohibit subletting your apartment either to a subtenant roommate or as a short-term, Airbnb-like rental. If you start Airbnb hosting hoping to slip under your landlord's radar, you can get slammed with a 3 day "fix or quit" eviction notice at any time.

William Gradin, who lives in the trendy Castro District in San Francisco, got one such eviction notice before he had his first Airbnb Guest. "The landlord saw the listing and immediately sent me an eviction notice," he said. "It was a three-day notice put on my door for illegal hoteling."

Leases, Lawyers and Landlords

When you rent an apartment, be it a 1 bedroom "granny unit" behind the landlord's house or on the 17th floor of a Cathedral Heights highrise, you enter into a contract with your landlord. That agreement spells out what each party gets, (you - a place to live, them — your money), what each party can't do (you - remodel the apartment, them — come into you place unannounced). It also spells out in most cases that you cannot sublet your apartment be it for a month or a single night.

You first step to Airbnb Hosting happiness is hauling out your rental agreement and checking it for a clause preventing you from subletting without your landlord's prior agreement. If by some good fortune there's no such clause (check it carefully), and no clause prohibiting you from short term rentals, that's good. But most rental agreements do have a no-subletting clause.

Unfortunately, even if your rental agreement is silent on the subject of subletting some or all of your apartment, short-term rentals are not necessarily the same thing as subletting to a roommate. Short-term rentals can be prohibited outright, or they can be covered by the general restrictions on the renter's behavior such as the number of people who can occupy the dwelling or by restricting running a home business.

So now you get the heart of the issue: what's the best way to get your landlord to want to say yes to you doing Airbnb?

Start by looking at this negotiation from their side: You want their permission to bring in people who aren't on the lease, that your landlord has no way of vetting or even knowing. That means additional wear and tear on the premises, and increases the landlords liability as these people come and go. You make all the money; your landlord has all the risk.

Also keep in mind that people who go into the landlording business tend to be risk-adverse: they'd rather accept a steady

small profit with low risks rather than make some high-risk, high- reward kind of bet with their money.

With the above in mind, here's a seven step DIY approach to getting your landlord to agree to letting you Airbnb some or all of your apartment.

Step 1: Consider your bargaining position. Have you been a good tenant? Is the rent paid on time? Have you been there a while (several years)? Have you talked to your landlord before and have those interactions been good? What's the current rental market like?

Step 2: Plan on getting an agreement - in writing - before you start Hosting. Hoping that the landlord doesn't find out is not a strategy. For one thing, your neighbors are likely to notice and bring your new Airbnb status to your neighbors attention. For another, you want to build on the trust the landlord has in you to Do the Right Thing, not squander that trust at the start of your negotiating.

Step 3: Decide on what you're prepared to offer in return. If your relationship with your landlord is extremely positive, perhaps you don't have to offer anything in return for their permission. More likely, you'll need to pay them something. If you haven't done the numbers on your Airbnb Hosting, do so now so you can determine what will and won't work when it comes to making a deal with your landlord.

One further suggestion re what you offer your landlord. From their point of view, increasing your rent by some amount is the easiest way for them to get their cut: you already write a monthly check or ok a monthly direct deposit.

Unfortunately, paying your landlord a fixed amount on top of your rent is rarely in your best interests:

Whether you have Airbnb Guests in a given month, you now have a not insignificant fixed cost in your life, When you first start Hosting, you really have no idea what the best price to charge Guests and how much you'll actually make doing Airbnb. And if you decide to stop doing Airbnb for a while or permanently, getting your landlord to agree to a rent decrease is going to be hard.

Your best approach is taking on the work of providing your landlord with a fixed percentage of what you make through Airbnb. So if you take a month off, you're not paying for a consideration you're not using. It will entail more work on your part (or not, see below), but it could be the difference between being a successful Airbnb Host and ending up in a bad situation.

Step 4: Pitch it as a test. After all, you've never listed this particular apartment on Airbnb and you don't know from your own experience if having to deal with the realities of successful Airbnb hosting are worth it to you. So it's a test, for some period of months.

Step 5: Definitely mention Airbnb's protections for landlords. There's Airbnb's $1,000,000 Host Guarantee that protects you and your landlord for damage to the unit or to your possessions and Airbnb's $1,000,000 Host Protection Insurance that covers you and your landlord from personal injury or property damage claims. They are part of being a Airbnb Host and explicitly cover your landlord as well. (Whether you need additional insurance, or whether your renter's insurance make a difference is a whole 'nother topic - "Is Airbnb's insurance enough to fully protect me".

Step 6: Write or email your first offer and get your landlord talking. You can assume your landlord - whether they're an older person who owns 1 apartment - yours, or a large property management company with hundreds or thousands of properties is good at negotiating. Whatever you suggest in your first letter is going to be assumed by them to be a first offer. How much should that offer be? Figure 85% of what your max offer might be. If they go for it, great. If they counter with a higher offer, you have some room to work with before the price of their permission is too high.

Step 7: If your landlord does not slam the door on the idea outright, congratulations! You're negotiating. Your landlord may want more money, restrictions on the number of people who you'll Airbnb a month or some other consideration. Share with them at this point your thinking about exactly how Airbnb your place, the number of days a month, the House Rules you plan to set you'll have in effect and any other concerns.

Your goal is getting an addendum to your rental agreement that specifically allow Airbnb Hosting. Your landlord's goal is bluntly going to be getting a share of that revenue and reducing their risks and additional headaches. There is a happy meeting place in the middle.

A better approach with Letulet

While the seven step approach outlined above can work, we at Letulet have crafted a better approach. Our software can help you negotiate, build and monitor an agreement with your landlord.

First, our software makes a first offer to your landlord of a revenue sharing agreement in exchange to agreeing to let you sublet. With Letulet, we track your Airbnb earnings as payment is made, and automatically deduct from your bank account the agreed-to landlord percentage, which we then deposit in the landlord's account.

By proposing a revenue sharing agreement and monitoring Airbnb's actual payments to you we answer three of the biggest problems for both you and your landlord.

By basing the agreement on a percentage of actual revenue instead of a rent increase, you only pay out exactly what you should from revenue that has already hit your account. By being a trusted third party for both tenants and landlords, Letulet confirms the exact amount each payment should be. And by direct depositing the exact percentage you and your landlord agree to, neither of you have to do the messy manual steps of calculating each payment, let alone sending your landlord a paper check they then need to deposit:Letulet does it all for both of you.

Letulet also takes care of two common landlord objections to Airbnb hosting: limits to the number of guests at any one time and defining House Rules the Guest must agree to that cover both your interests and your landlord's interests. With Letulet, you can craft the exact House Rules you need.

Defining up-front House Rules is a key method of setting the right expectations for your Guests. From the prospective guest's point of view, House Rules can answer any number of important questions up front concerning use of an apartment's shared amenities such as a pool, what limitations apply -- or don't apply -- to Guest's pets, and what limitations you and your landlord set on parties.

By making your landlord a "satisfied silent partner" in your Airbnb hosting and giving them a dashboard of your hosting activity, you build trust with your landlord.

Furthermore, Letulet speaks "landlord" and can fully address any concerns your landlord has about liability, insurance or other "landlordy" topics. 

Think of Letulet as the liaison between you and your landlord so you can just focus on being a great host.

The bottom line

Becoming an Airbnb Host can be one of the most lucrative side gigs you can take on, if you do the prep work of securing your landlord's blessing. Either you need to do the additional work to present this as an opportunity to your landlord, or you can have Letulet do it for you and manage the bookkeeping that keeps your landlord on board with your Airbnb Hosting.

Topics: Renter


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