Did you know that short-term leases are a viable way to increase profit margins on your multifamily property? These arrangements provide individuals and families who have been displaced from their homes with a temporary place to stay, while also offering professionals a home-away-from-home while out of town on business.
These are just two examples of the beneficial uses of short-term rentals. Just like in any industry, however, there are individuals and companies conducting questionable short-term rental transactions. This seems to be giving a bad wrap to a reputable practice. This is why it’s important to shed some light on the major differences between what these individuals and companies are doing and those who are going by the books.
In case you’re wondering, a short-term rental agreement is exactly like what it sounds: an agreement or contract on a rental property for a short period of time.
New York is one example of a city where short-term rental agreements have been under the microscope for at least the last year. So, we’ll use it as the example in this case.
There are tenants as well as property management companies that are basically “leasing” units on a nightly or weekly basis. The tenants that are doing so are actually renting out their own home, which they themselves lease, to perfect strangers in order to make some extra cash. The companies that are doing this are also doing so for the money, of course, because they can charge a very pretty penny to the NYC visitors that get to stay in places such as a loft in SOHO.
The problems, of course, are deep and wide. When a tenant is renting out his or her apartment to another individual, the likelihood the third-party renter has been through a screening process is very low. So, there are all kinds of potential problems with theft, damage and other lease-breaking issues.
There is also the very big problem to neighbors in the building, who are being subjected to these third-party tenants. You can pretty well bet they didn’t sign on to have transient renters living right next door, changing on a regular basis.
Because of this problem, the city of New York has made it illegal to have a short-term rental agreement. The “catch,” however, is that short-term rental in this case is defined as “less than 30 days.” An agreement over 30 days basically gets around the idea of “transient” tenants while still allowing for the needs of business travelers and the like to be met.
So, while it’s necessary to always check the stipulations laid forth in local legislation, short-term rentals are still a very viable way to leverage available properties. It is simply advised that all property owners and managers meet the minimum rental period requirement and include restrictions in all lease contracts on subletting.