Rentrepreneur - A new type of investing

Have a think about how you'd feel about it if it were your property and your tenant moved people in without clearing it with you. I wouldn't be expecting anything less than fury and a very messy outcome.

 

He found a condo building in a good location (major city of SEA country) that was popular and close to amenities like Circle K, restaurants, transport, supermarket. He bought 4 studios (27m2 each) and set them up for Airbnb. It went well so he approached other owners in the building to sublet their properties. They agreed after seeing how well he looked after his own and also employed a lady to clean and change linen. He pays them about 10% higher than market rate which helped sway them. You should give it a go and write a book about it. Then profit again.

 

Ok but I would make it more about them Abrose
The bit about you and added to your portfolio needs to go it does not belong in a sales letter.

My suggestion:
House for lease at $ 400 per week, contact owner or agent by phone and say. Hi I have clients are ready to lease your property and I'm offering you $420 a week are you interested? Yes

When can I see the property please?

Put in an application form and at this point disclose that you will be taking on a lease and subleasing it to your clients this sounds far less threatening and increases your chances of getting it through.

Also you've had a couple of commitments and yeses from your questions above so the client will be far more flexible after they meet you.

Use the phone where possible.

Hope that helps

 

I'd be wanting more than an extra 20 bucks a week as the owner for the risk and wear and tear over and above the number of persons stipulated in the lease.. I see a huge can of worms with insurers on both sides when an air bnb patron cuts keys and then returns some time down the track to either steal or offend in some other way. Of course this can occur with full time rentals as well however having more (different persons) as visitors/residents invites all sorts of problems and increases their likelihood. Most hotel rooms at least these days can electronically key a room.

Collaborative and sharing economies will only grow as people realise they don't need to own cars or real estate when they can rent it for brief periods. There may be a stage (hopefully soon) where the risk mitigation of carrying on enterprise such as this is underwritten properly by insurers. At present I reckon this area is very grey................

 

couldnt think of a messier, riskier or unpredicatable way to make a profit

subletting has been around for ever and I even thought about doing it, but decided against it in about 15 seconds,

that is unless airbnb creates a place where non payments, thefts, damage, no shows are absolutely minimised

 

The onus is on the landlord or pm to ensure that insurance is appropriate not in the tenant to prove that your insurance is ok - how could they possibly know this anyway.

The post is about the merits of a business model of subleasing.

 

Thanks Xenia that is good advice

 

That's why I'm giving them the choice by disclosing my intentions prior to entering the arrangement. I agree some people won't be so keen on it but I honestly think there is greater incentive to maintain the property at a higher standard when subleasing through AirBnB rather than a long term tenant

 

I wonder if EBM RentCoverShortTerm would suit a situations like this

http://www.rentcover.com.au/products/

 

I'd tell you to bugger off.
You might keep it in better condition, but the other 99 people with a similar intention won't.

Just can't take those odds. I would contemplate if a premium was provided... Like double the rent. To put things in perspective, I would happily drop $20-$50 to get a better tenant.

However if the house was run down, then I would probably have no issues, but definitely not a house that is less than 5 years or recently (properly) renovated

 

On the flip side more transient accommodation may lead to a greater risk of damage due to lack of responsibility from no financial commitment such as a bond from a permanent rental. You might be a diligent and well intended head tenant however we take enough risks as residential landlords with the tenants themselves let alone guests uninvited by the landlord and beyond their control.

Ambrose, do you own any investment properties? If so, would you (or do you) allow a tenant on a residential lease covered by residential tenancies act(s) to undertake commercial endeavours. Your transparency in seeking permission from landlords is sound and respectful, however I doubt you'd get too many takers. I for one wouldn't allow it and echo my insurance reservations posted earlier. As a commercial initiative, definitely an idea outside of the box and a little left field. May take a while to catch on and might indeed become popular in the future, however my question remains, would you allow it in your own investments?

 

Ignoring the risk side of things, you would expect much higher wear and tear on the property.

 

AirBnB guests pay no bond but can be screened at length prior to accepting a booking. Again you need to consider the Host Insurance Protection policy in this case. The number of property damage incidents worldwide is ridiculously low. AirBnB guests must protect their reputation on the site in order to keep using the service. Since the property is not directly owned by myself I could enforce even greater conditions upon accepting bookings, for example minimum amount of reviews and overall rating. I do not own investment properties due to lack of capital hence I am looking at intuitive ways of entering the market. There is industry backed data that can identify where people are specifically targeting these type of rent/sublease scenarios - here in Australia! If I owned an investment property would I allow someone else to do this? Heck no! But not because I am concerned about issues surrounding property damage or lack of insurance protection. I would not be allowing it because I would be doing it myself!

 

I asked my colleague who is the state manager of EBM to comment on topic, I'll let you know what he comes back with. Insurance is the biggest problem here. You say you're covered by the AirBNB policy, but that doesn't cover the landlord. He's not covered and it may in fact void his policy.

Other problems are:
- Lease specifically says no subletting, so you will get evicted if found out
- If you disclose it up front, landlord will just reject you as an applicant. Even offering extra rent doesn't counter the below.
- Higher wear and tear on fittings and fixtures due to higher turnover of occupants
- Strata property bylaws may say no short term lets
- You say you don't have capital to buy your own property but fully furnishing (including linen etc too) it is about the same cost
- Who is going to pay the electricity / water / internet bills / cleaning / laundry? Does Air BNB really pay enough to cover these and your lease on the property?
- If the property was suitable location / style, why wouldn't they do it themselves?

There's just way too many obstacles here I'm sorry.

Money is far too easy to make via legitimate means than to mess around with the small margin the above might make, if you manage to secure any leases at all.

 

LOL. The insurers' lawyers would see you coming from a mile away and have a field day. I would be getting something in writing on letterhead that confirms that 'host' includes the person or persons on the lease that are subletting the property to AirBnB clients. If you get that, I've got a handful of magic beans to sell you.

The bolded part makes this post irrelevant, not to mention the fact that some guy making a statement about his confidence in believing something of which he is not legally sure of is laughable.

 

A mate of mine does something similar - he manages around 30 short stay properties, advertising on airbnb & stayz. He looks after everything, except for elec & water bills.

Returns from short stay are between 50% and 120% higher than long term rentals. He charges ~14% commission so the owner gets 86% of gross rental income.

Why would an owner choose your option of 5% above long term rental, when he can choose to receive up to 100% above it ?

 

Why would an owner choose your option of 5% above long term rental?
1. There is added risk in terms of vacancy compared with the security of a long term tenant. The owner may not want that added risk but be willing to allow a host to undertake this risk for an increased level of income (i.e. 5%). I just through 5% out there anyway, it is not a hard and fast figure non-negotiable
2. Cannot be bothered with having to manage short term bookings

 

Yes please let me know what he says...
Of course there are obstacles! Its risk for reward!
The standard residency tenancy agreement does have this clause, but it can be removed based on negotiations with the landlord. The landlord might not choose to enforce this and rather offer a stern warning, at which point you commence breaking the lease if it is no longer affordable. This is discounting the fact that you have actually disclosed your intentions to the landlord at the time of the agreement.
Strata property bylaws are unique to each property and rarely enforced. This is discounting the fact that you could be leasing a property i.e. house, where no strata bylaws apply
Electricity/ Water/ Internet / Etc - paid by host. Yes it does. My numbers indicate the margin is more than adequate to cover these expenses in the areas I am targeting
I just answered the last question in previous post
And I'm sorry but I don't agree with any part of your last comment re making money and small margins...