My rentals are short term, it seems thought that not many people go that route. Do any of you have short term rentals?
Talk to Furnishedowner on here. She has short term rentals.
Thanks so much Justin!
Probably not what you had in mind, but…
I had a client (airline pilot) that would purchase houses near airports in airline hub cities and rent out furnished rooms to the crews that had regular routes layovers that city. Typical leases were 3-6 months because the crews would change routes. Cheaper for the crewmembers than hotels, and more comfortable.
Personally I thought it was a great idea.
Along the same lines as that…
My cousin is a truck driver. A couple years ago, his company changed his hub to another state. Rather than moving his family to another state, he rented a house with a few other truck drivers in that other state. Same principle…cheaper and bigger than a hotel room.
Currently we cater to short term contract workers. Our studios are fully furnished with utilities included.
I’m giving it a try for the first time.
Every time I have a vacancy, I’ve got a bunch of applicants who are just moving into the area. I know darn good and well that they are looking for a cheap place to light until they find the place they want. Their idea is that it is cheaper than a hotel or vacation rental, and my point of view is that I don’t want to clean up and re-rent after 30 days.
So the last vacancy, I put it on Craigslist as a short term “moving” rental. The phone rang off the hook. Got it rented right away for a couple hundred dollars more than it would normally rent for.
I’ll have to be re-renting again soon, but I am getting a bunch more money to compensate me.
The new tenant is looking for a place to buy, so I might have her for 3 months or so. She has to find a place and get it through escrow before she moves out.
I’d like to know how much do you charge for deposits? How are you compensated for cleanup when they leave? Do you provide all utilities? How do you advertise your short term rentals? What time limit do you give them for notifying you if their stay will be longer or shorter? Do you take it out of their deposit if they only let you know 1 day before they leave? Do you accept credit cards? If so, do you charge a fee for accepting them? Thanks so much for all of your help!
glass,
I will try to answer all your questions.
We have only “short-term” rentals. Actually they are extended stay, corporate, fully-furnished rentals. The minimal rental period is 30 days. Any less that that we have to pay gross receipts tax of 7.125% to the state. Check your local laws on gross receipts and lodging tax (hotel taxes) as those can really come back to bite you if you violate them.
We have been doing this now for almost 10 years. We have had as many as 47 units, some leased and most owned. Now owned, around 25 active furnished homes. Several vacant, unrenovated, waiting.
We take all credit cards including American Express. This is not difficult to do and VERY much worth it. We will call a tenant whose rent is due: “Should we just run that on your card? Good, thanks.” We absorb the credit card fees, which can be up to 3% depending on what kind of card it is. We also have a debit card in the office here and always try to steer tenants to debit card their rent rather than put it on the credit card. The tenant must be physically present to run a debit. A $1950 monthly rent payment can cost us $58.50 or more in credit card fees. It is a cost of doing business.
We get credit card information when they check in–name, billing address, 3-digit code, expiration date. This credit card info is held in lieu of a deposit, just like the hotels do. We do not run the card for the deposit unless the tenant wants it done or they look or sound a little sketchy.
We also accept Corporate Letters of Responsibility in place of a deposit. We prefer those, as do many travel worker companies. It saves office staff hours on all sides. Then we don’t have to mail refunds and receipts.
We do not charge for normal cleaning. We give tenants a “Move-Out Letter” which tells them what to do–clean oven, microwave, refrigerator, etc.
We pay all utilities including free long-distance telephone and high speed wireless internet, extended digital cable and all other utilities.
We advertise via our website, VRBO, the Chamber of Commerce, printed postcards, framed advertisements in the baggage area of our airport, relocation and real estate magazines and our local newspaper. We do not do all of that at one time, but we are always testing to see what works. What works best? The search net on the internet that gets a traveler to your website or telephone.
Tenants need to give us a two-week move-out notice. They must stay for a minimum of 30 days. If they move before then, we charge them gross receipts tax. If they move suddenly, we try to get the 2-weeks rent if we can.
I love talking about my business, so just bring on your questions. I view furnished rentals as an undiscovered gold mine in many areas.
Furnishedowner
This is great info. Hope I’m not asking too many questions. One problem we’ve had is a tenant checked in we placed her credit card on file. I ran it just to see if it was active. She stayed for a month. On the day that she moved out I discovered that she and her family vandalized the place. Bed broken, urine in the loveseat we had to throw out of course and much more! She wouldn’t answer my calls and when I went to charge her card it declined! What can you do to be sure that these things don’t happen? And what’s worse I did’t get a deposit. We were left replacing all of the damaged items and repairs. I would like to take her to small claims court but wondering if it’s even worth it!
My question is who was the tenant? Was she an unemployed local person who just needed a place to crash? We turn those down all the time.
I want a tenant who would otherwise be at the Hampton, Marriott, or Holiday Inn here at our town. Our phones show caller ID, and if the prospective guest is calling from the cheapest motels we really question them: “Are you new in town? Here for a job or vacation? How long have you been here?”
We look at their clothes, shoes, vehicle and yes, their teeth. I want a working or upper middle class tenant.
We do occasionally get a difficult tenant. We have only once had damage to the level that you describe, and those people are now in jail. We have never done an eviction in 10 years, either.
I would just clean that unit, replace the stuff with some nice new yard sale furniture and move on. Write off the damages in your taxes as a loss, if you can do that. Don’t waste valuable happy working time pursuing a deadbeat.
Good luck, and watch your locals.
Furnishedowner
Thank you for taking the time answering my questions. This is GREAT info. I also posted another question “How flexible should I be with this tenant?” Just wondering how would you handle her? It’s amazing how little information is out there regarding short term rentals.
Just a few more questions when you have the time:
- How many days do you consider it late rent?
- Do you charge a late fee?
- How did you get into leasing your rentals (the one you don’t own?) How did you approach the owner for this kind of set up?
- Do you stage the apartments yourself using your furniture or do you charge the homeowner?
- How do you screen your tenants and do you charge application fees?
Your advice regarding staying away from locals is right on! These are the people that we seem to have the most problems out of. I will take your advice and just deal with contractors etc.
THanks so much, I am grateful for all of your help!
“In the event rent is not paid within five (5) days after the due date, Tenant agrees to pay a late charge of $25.00 and an additional $5.00 per day after the fifth day. Tenant further agrees to pay $25.00 for each dishonored bank check.”
That is from our Lease Rental Agreements that were drawn up by an attorney. Late fees allowed differ state to state. Check your landlord/tenant laws in your state.
How to approach owners about leasing their rentals? They actually started coming to us. We had to tell them that “No, we do not do property management. But we can lease your house and then sublease it.”
We only leased ONE unfurnished house during a time of extremely high demand. Thereafter, we leased fully-furnished homes and gave the homeowners a list of items needed. The ideal house is leased out by the children when Grandma has to move in with them or go to a Nursing Home. Grandma is then not stressed by selling off her family home. The adult children are very grateful to have someone dealing with all facets of home maintenance other than major repairs.
Beware…it is a lot of work to lease a home and you have less control than with your owned units. Now you are dealing with an owner AND with a tenant. Owner: “I don’t see why we have to replace the cardboard in the garage window. It has been fine that way for years.” “Why do we need to buy a toaster? We have always used only the broiler oven for toast, that should be good enough for the tenants.”
Those petty complaints are right out of my memory bank from dealing with owners. Make sure you get enough revenue from that whole scenario. There is a reason that Resort Leasing Offices charge 50% to the owners for that service. You need to keep really good expense records to make sure you are not just churning money but that you are getting compensated. Owners will grossly underestimate the amount of work you are doing.
We did not charge the owners for staging, we rented furnished homes and then asked them to supply what we thought was necessary–“We will need a masculine recliner in front of the TV, and some more area rugs to help protect your carpet.”
We screen by evaluating the person’s reason for wanting to rent from us. Corporations, ok. Traveling workers, ok. Snowbirds, ok. We do not charge application fees and have never run a credit report. We function way more like a hotel in that manner.
Our tenants need to have teeth, a credit card, driver’s license, job, vehicle, and they cannot reek of smoke and alcohol. They also better have 2 weeks worth of rent. Pet owners are responsible and we welcome them. They know how to take care of something other than themselves.
Furnishedowner
glass,
If you are still working with the tenant who caused damage I would say don’t be flexible. Instead, tell her “This is just not working out for me. There is too much damage to my unit and you are in violation of your rental agreement. You need to be out in 3 days. I won’t be needing any more rent from you. Please use it for your new place.”
Don’t be dragged down by a bad situation. A bad tenant usually just gets worse. GET RID OF HER AND MOVE ON. You are being manipulated. Remember who is the tail and who is the dog.
Furnishedowner
Wow Furnishedowner, LOTS of info to take in! Your business sounds great! I would love to do what you are doing in such a large scale. Right now we only have 3 units and are working on 4, 5 and 6. It’s been a lot of work but I love it and it’s amazing that there isn’t much competition. Thank you so much for your expert advice. I won’t pull your ear any longer but just one more question, do you have to have a license where you live for leasing these houses?
glass,
Are you leasing homes from private owners that you then sublease to short term tenants?
If that is the case, in our state you do not need a license. You can contact your state real estate commissioner to determine what laws govern property management. In our state only a real estate broker can do property management.
We actually had a state tax ruling come down in our favor on this issue. When we were leasing private homes we actually had family and friends stay there sometimes. That certainly helped our case of being simply lease tenants with a contractual right to sublease.
Be careful what you do. We can not do daily/weekly cleaning. That constitutes a service. Services are state gross receipts taxable events. We refer our tenants to a cleaning lady who works for herself and performs that service without involving us.
If you are looking to get more leased homes, take a flyer around to real estate offices. You can also put an inexpensive ad in your weekly free newspaper: “We lease fully-furnished homes…”
Again, don’t sell yourself short. Pay LESS than market rent to that owner because you are providing a much higher than average level of care. You will always be inspecting, checking tenants in and out, etc. You are providing intensive care.
The numbers have to work in your favor or you will burn out. I aim for $300/month profit on each and every home. The average rental owner here aims for $100/month profit.
Some of our homes generated as much as $1,000/month profit when full. Some much less, and some went in the hole. That is why your accounting system is so important. You have to know how to dump the losers.
Good luck and I am happy to answer questions. I am on this site to learn and to share.
Furnishedowner
Furnished owner, how do you handle tenants with excessive utility usage? How do you keep your costs down with lets say the cable company? Are they willing to bundle all of your houses or do you have to have a separate contract for each home?
Also, what kind of insurance do you carry on the home in case of an accident? How do you handle lawn maintenance for all of the homes?
We track utilities, unit by unit, on a monthly expense sheet. That’s how we figured out that studios and 1-bedrooms run almost the same. Two and three-bedrooms run almost the same.
We have a clause in the rental agreement that states something like “Tenant to pay any utility cost above _____”. Usually we write in $400. We did once have a couple who ran the AC with all the doors and windows open. That was when we put in the clause.
I figure it is usually the house–single pane windows, not enough insulation, etc.–that is causing the high utility bill. We also put up notices asking tenants to lower or raise the thermostat if they are at work or out of town. If utilities remain too high, consider getting rid of that property if you can’t fix it easily.
Our cable bill is the highest of all bills. Hotels get to bundle for about $17/room. We get to pay about $150/unit. We have gotten a break from our company, but then we discovered their error in that they were over-charging us. We are negotiating with them now about that. Figuring out cheap cable/dish/TV service is a tough one. Internet and free long distance is rolled onto our cable bill. We have tried every service and the cable company had the best customer service. Tenants can trouble-shoot their own TVs and internet without us having to go there. That has been very valuable for us.
For insurance we have $500,000 liability on each unit. We also have usually $10,000 in personal property on each unit and a rent compensation rider.
We have a yard guy who does all lawns. We have had 5 or 6 different guys now, they bid the job and we try to keep it affordable. We often call when a unit goes vacant so it can be freshly cut before showing.
Furnishedowner
WOW! You need to write a book! I would be the first one to buy it :o) This information is priceless! Sorry for asking so many questions, but you are the first person I’ve been able to talk to that’s doing what I’m doing. We are in the process of building 3 more units (all on the same property) we only have studio apartments. What size fridge do you have in your studios? Do you have a limit as to how many people can occupy the studio? Do you purchase used furniture?
I’m gonna write a book! I like your questions and wish I had had someone to ask back when I started this business. I have a few chapters done but I need to put in the time to do it. Maybe I can ask you to review a copy when I get it done?
I would put in a regular, but small cubic foot refrigerator. Not a mini-hotel frig, but a standard looking one that can freeze ice cream. There are some Korean -made refrigerators that are smallish and very nice. Try a “scratch 'n dent” store, or ask at your appliance dealer if they have any cosmetically damaged frig’s. You want your studio customer to feel he is in a home, not a hotel room. Give him amenities. Give him a real home.
I would allow the number of people that the place can sleep. Two can fit in a studio as long as they are on the same work/sleep schedule. We have bent this rule many times for visitors, children, etc. It’s more about the quality (middle working class) of the tenant rather than the number.
I love used furniture. Older wood furniture is the best. Look for dove-tailed dresser drawers. Drawer sliders are easily repaired and replaced. Ace Hardware has great help and an amazing assortment of furniture repair parts.
It is easy to sand a dresser top and slap on some glossy new urethane stain.
Replace old brass or corroded handles with new for a whole rejuvenated look.
Hardware is VERY IMPORTANT. Anything your hands touch should feel nice. That is hardware, faucets, silverware, etc.
I could write a lot about furniture. Buy only chairs suitable for 250-300 lb. person. No antique petite chairs. People are getting bigger and heavier. You don’t want to get sued.
Furnishedowner