Though lucrative, there are insurance, security and maintenance implications when you engage short-term rentals on your investment property. It is also important to be aware some tenants are illegally sub-letting properties for a profit. Here is what you need to know when using sites like Airbnb and Stayz.
Maria Carlino is The Agency’s National Director Property Management, with decades of experience under her belt. Maria and her team work closely with landlords to manage their investments through the changing property landscape. This includes the rise of short-term holiday rentals on sites like Airbnb and Stayz.
While Airbnb and other service providers can offer a lucrative income stream, things like insurance and maintenance can be affected. You should prepare for this in advance.
Here are Maria Carlino’s top 5 tips to landlords surrounding Airbnbing or holiday-letting properties, including monitoring tenants attempting to profit from short-term leases without permission.
Maria Carlino, National Director Property Management, The Agency
1. Increased maintenance
It is not uncommon for Airbnb, Stayz or other short-term guests to put the maximum amount of people into a property to reduce costs. The other intention may be to source a venue for an event, such as a hens’ weekend. Both scenarios increase wear and tear throughout the property, particularly floors such as scratched floorboards and stains on carpets.
“The average rental property, as a rule of thumb, requires painting every 3 to 5 years. If you are short-term subleasing it wouldn’t be unreasonable to say you will need to plan a more aggressive schedule to refresh and up-keep the property’s appeal,” Maria Carlino says.
“This also applies to carpet cleaning, sanding/polishing floorboards and gardens etc. The maintenance will increase.”
2. Higher utility bills
Along with high wear and tear, comes higher utility bills and these are at the owner’s expense. Lucy Waugh, New Business Partner with The Agency, explains.
“With an increased amount of people in a property comes an increased amount of expense for the landlord, including higher electricity, gas, water and pool costs. These are not covered by the tenant. Whereas in a long-term lease, these costs are absorbed by the occupant.”
3. Backchecking of tenants
When diligent agents recommend a tenant to a landlord, they have been vetted through a careful process. This includes, but is not limited to, employment reference checks, previous rental reference checks and financial security checks.
“Generally, the agent will have met the applicant to get a feel for the type of tenant they will be. They can then confidently recommend them (or not) to landlords,” Lucy Waugh says. “With sites like Airbnb and Stayz, the main reassurance you have is the rating applicants are given by other hosts.”
4. Insurance compliance
According to Sharon Fox-Slater, Executive General Manager at RentCover, if an owner decides to rent their property full-time using a holiday rental site, they need to be aware a standard landlord policy will not cover them, as they are renting the property on a short-term basis. A policy such as RentCover Short Term will provide cover for this situation, but it will not apply if a tenant engages Airbnb or another short-term rental website.
“If a tenant of a property decides to rent the property out using Airbnb for example, there may not be any cover under a landlord policy, as it would be considered a sub-letting situation,” Sharon Fox-Slater explains. “However, if the tenant did this without the landlord’s knowledge, then a good landlord’s policy should respond on the basis that the situation was not disclosed to the owner.”
Tenants are not allowed to sub-let or transfer part of the premises or the whole tenancy without a landlord’s permission. Despite this, across Australia our individual state legislation pertaining to the Residential Tenancy Act, have no clear legislation regarding the topic of sites like Airbnb and/or profiting from a subleasing arrangement.
Given the ambiguity, Maria Carlino and her team have factored in terms to protect their landlord clients.
“At The Agency we have considered all unforeseen situations that may arise. To protect our owners we have an additional clause, which we place into all of our leases, to protect our owners and their properties and keeps their insurance policy intact,” Maria Carlino explains.
5. Tenant management
High-end properties can do particularly well on sites like Airbnb or Stayz, which is why it can be an appealing option for landlords. The facilities offered at high-end properties and attractive locations, can fetch premium rates. But this also means tenants may use it as a way of making a profit.
“Our leasing agents and business development managers are constantly scanning realestate.com.au, Domain, Stayz, Airbnb and other short-term rental sites,” Lucy Waugh says.
“We recently advised a former client that her tenant, who leases the property for $10,000 per week, had advertised it on a short-term rental site,” Lucy Waugh continues. “It was easy to pick up as the person listed had a zero response rate time and no other rentals available. Generally, if an agent is assigned to look after short-term letting they will be ‘star rated’ with a 100% response rate and numerous properties listed.”
Property managers should conduct routine inspections within the first three months of a property being leased. A good property manager will pick up if there are any issues in the property and if the tenant is subletting. For example: Is the person on the lease available for the inspection? Does it appear there are more than the agreed amount of people living in the property? Does the property look “lived in” or does it present like a display home?
“Our team is trained to identify the giveaway signs of short-term rentals, such as four sets of matching plates and sets of cutlery, or single beds even though no children are supposed to be staying in the property,” Maria Carlino says.
While short-term leases can be very successful, it is important to obtain advice from an experienced property manager. Our team is on hand to partner with you in your property management and provide ongoing guidance and support.
By Jacqui Thompson