Asking for Forgiveness Rather Than Permission
Last weekend Levi’s Stadium was the host for over 60,000 Super Bowl fans as the Denver Broncos played the Carolina Panthers. As San Francisco and Santa Clara prepared for the event, the Bay Area short-term rental market did too.
Many of you are probably familiar with and/or use AirBnb, HomeAway, VRBO, and other sites for rentals when you travel. The sites provide a means to rent and rent out extra space, whether an apartment for a night, a castle for a week, or a villa for a month.
The concept of short-term rentals itself is not novel. Property owners and leasees, both of whom have usage rights, throughout history have sought to monetize unused space by renting it out. The same is true for daily rentals or partial rentals. However, prior to the commercialization of sites like AirBnb, we would have referred to it as a “hotel.” These new sites, which are extremely user friendly and offer a variety of options to meet your needs, have caused a lot of the interest in the short-term rental space (in addition to the fact that Beyoncé rented out one house for $10K+ a night during the Super Bowl weekend).
Short-term rentals are different than long-term rentals, however, and so it is important to ensure that you are in compliance with any governing leases, contracts, or other rules and regulations. For example, condos generally have Covenants, Conditions & Restrictions (CC&Rs) as part of the Homeowner’s Association (HOA). Different cities also have different rental laws, so it is important to check the jurisdiction of your property (i.e., San Francisco landlords are required to register with the City if they rent all or part of their residence for periods of less than 30 nights). This was a source of recent debate and publicity with the proposal of Proposition F on the ballot, which would have restricted all such private rentals to 75 nights per year and imposed provisions designed to ensure such private rentals were paying hotel taxes and following city code.
Just as an FYI, it’s interesting to note that for many hosts on these short-term rental sites, this is their full-time job. In San Francisco last year, more than 300 "full-time" hosts raked in $44 million, or 22% of all AirBnb revenue made in the city.
The subject of short-term rentals can be discussed in great detail, but at a high level, before you think about renting out your spare room – make sure you know the steps you need to take to ensure a successful rental! Although, I will say, as someone with a background in real estate finance, if you are willing to put in the effort to run a first-class operation, the monthly profit when compared to long-term rentals can be quite appealing.
Here are two to hopefully inspire those who are on the fence:
$899 a month tent in Mountain View
$22 a night van in New York
If you ever have any questions at all, please do not hesitate to reach out. At MinnGo, we realize that real estate is not something our clients think about everyday. Lucky for you, that is what we live and breath.
Until next time.