Did you know that short-term leases are a viable way to increase profit margins on your multi-family property? These arrangements provide individuals and families who have been displaced from their homes with a temporary place to stay, while providing professionals with a home away from home when out of town on business.
These are just two examples of the beneficial uses of short-term rentals. However, as in any industry, there are individuals and companies who engage in dodgy short-term rental transactions. This seems to give a bad envelope to a reputable practice. This is why it is important to shed light on the major differences between what these individuals and companies do and those who follow the books.
In case you were wondering, a short-term rental agreement looks exactly like what it means: an agreement or contract on a rental property for a short period of time.
New York is an example of a city where short-term rental contracts have come under scrutiny for at least the past year. So we will use it as an example in this case.
There are tenants as well as property management companies that basically “rent” units by the night or week. Renters who do this are actually renting their own homes, which they are renting out themselves, to complete strangers in order to earn a little extra cash. The companies that do this are also doing it for the money, of course, as they can charge a pretty penny for New York visitors staying in places like a loft in SOHO.
The problems, of course, are deep and wide. When a tenant rents their apartment to another person, the probability that the third party tenant has gone through a selection process is very low. So there are all sorts of potential issues of theft, damage, and other lease-breaking issues.
There is also the very big problem of the neighbors of the building, who are subject to these third-party tenants. You can pretty much bet they haven’t signed up to have transient tenants living next door, changing regularly.
Because of this problem, New York City has made short-term rental contracts illegal. The “catch”, however, is that short-term rental in this case is defined as “less than 30 days”. A 30-day agreement essentially circumvents the idea of ”transitional” renters while allowing the needs of business travelers and others to be accommodated.
So, while it is necessary to always check the stipulations of local legislation, short-term rental remains a very viable way to take advantage of available properties. It is simply advised that all landlords and property managers adhere to the minimum rental period requirement and include restrictions in all rental agreements on subletting.