Venice, alone, has 1137 Units Available on AirBnB
The concept is simple. You are living in a home with three bedrooms and most of the time, two of those are empty. If you live in Los Angeles, you might be able to turn those two bedrooms into $2000 a month or more in rent. You simply turn your home into a bed and breakfast. And, regardless of the name, you don’t even have to offer breakfast.
100’s of homeowners and apartment dwellers have done just that in Southern California. According to a just released study, there are now 1137 rooms available in Venice alone with another 773 in Santa Monica. Should you rent out the extra bedroom in your home? Bigger question: Should you buy a residential property with the intention of turning it into a short term rental property using AirBnB and other similar online sharing sites?
First, keep in mind that renting out your space will be a business. It is a very easy business to enter, but it has all the other aspects of being in business:
- You need to advertise and promote your space
- You need to keep records for taxes
- You will be paying taxes, which may mean quarterly estimate filings
- You will have costs for repairs, upgrades, more water, electricity, toilet paper
- Some of your clients will be fun and some will be not so great
- You will need to give excellent customer service to all clients so you get good reviews
- You will spend precious time. This may or may not be an issue for you
- You will need to be careful who you rent to
- There may be legal and licensing issues in your neighborhood and/or city
Some of these issue become even more complicated when you are not living in the property you are listing. Some become less complicated. The taxes, legal issues, and management of who you rent to all become more complicated. Maybe foremost among these are the legal questions.
Some cities have laws that restrict or completely prohibit short term rentals. Other cities charge a hotel tax on short term rentals, even for your bedroom. Many cities, such as Los Angeles, are currently not enforcing these rules, because they don’t have the staff to take care of 1000’s of homeowners, apartment dwellers, and others who are renting out a small space. But that doesn’t mean that they won’t become more aggressive in the future, especially with regard to properties where the owner is not living on the premises. San Francisco, where AirBnB got started, has divided their laws regarding short term rentals into traditional BnB, where the owners are present, and those where the owner is absent.
With regard to the laws in your area, you can usually do an internet search and find the answer. More complicated may be the rules in your neighborhood or on your apartment lease. Some homes, condos and lofts are covered by homeowner agreements commonly called CC&R’s. These agreements are designed to keep your neighbor from painting his house neon green or parking rusting cars in the driveway. Some of these homeowner agreements may have rules against short term rentals, or the homeowners association may decide to add new rules. If you are thinking of buying residential property that is covered by a CC&R, you would be wise to review the current bylaws and be prepared to be active on the board to keep your right to rent out rooms.
Many AirBnB hosts are renting out apartments or homes for the sole reason of renting rooms or the whole unit on sharing sites. Others who are currently tenants and living in the unit are doing so, also. Your lease may give you some direction on this, but many leases do not. Either way, your landlord may decide that they are not happy with all the guests, and you could lose your rental.
If you decide to risk homeowner’s associations, city laws, and the landlord’s wrath, there are things you may want to think about:
- Be very careful who you accept as guests
- Let the guests know when they arrive to be good citizens and mindful of your tentative situation
- Don’t bug your landlord to make repairs that your guests have caused
- Carefully consider telling neighbors what you are doing. Some you may want to tell. Others, maybe not!
If you should choose to purchase some type of residential property for use as an AirBnB, and you need help with the mortgage, call Bill Rayman at 424-354-5325.