12 Sep How to Negotiate Your Airbnb Rental Agreement with Landlords
For most of us, finding a permissible unit to host on Airbnb will be the hardest hurdle as it requires a ton of time and careful vetting.
Recently, one of my readers emailed me to tell me that his unit got shut down only after 2 months in business.
Because he didn’t tell his landlord and they found out.
From that email exchange, I knew that my next post will be about my past experiences negotiating with landlords.
In this blog post, I will cover the conventional tactics as well as the unconventional tactics. One of the most common negotiation tactics is to offer profit-sharing. But this should really be your last resort.
In my e-course, I teach students how to find landlords that are willingly for you to sublease. Please note that these are only negotiation tactics and aren’t necessary if you know how to pitch landlords with a value proposition. You can find templates on my blog if you want to get serious. However, my e-course will include 10+ templates, which include how to pitch to a landlord, sublease contract clause, and many more.
Do you want a professional pitch deck that was designed specifically to help you persuade landlords? Check it out here.
Before Airbnb Rental Agreement Negotiation
The right thing to do is to have a conversation about it with your landlord. It is most common for first-time Airbnb hosts to skip this step, but flying under the radar does not give you peace of mind. I know I sleep better at night when I know my landlord has got my back.
I can tell you that from my own operating experiences, my margins vary from month to month. This variance depends on a few things: the length of stay, seasonality, ADR, and occupancy rate.
Here is a list of conventional research I’d do prior to talking to your landlord:
- Is the building of the Home Owners Association( HOA)
- Determine how much more you can pay and are willing
Unconventional homework: social clues that you’ve discovered about them
- Determine your landlord’s living situation
- Is your landlord relaxed about guests policy
- Do they have multiple buildings
- Are they tech-savvy
- Are they new to being a landlord
The conventional homework is straightforward. You’ll need to discover the maximum amount of rent, security deposit or a rev-share model that you can do. This plan is the script that you should stick to when you’re negotiating.
The unconventional homework helps you build a psychological and social profile of your landlord. These clues will help you see the bigger picture and increase your chances of getting your landlord’s approval.
Determine your landlord’s living situation
If the landlord lives off-site and far, then the chances of you getting caught by a routine visit are low. However, if he lives in the unit next to yours, then the chance of you getting caught is high.
Is your landlord relaxed about Guest Policy?
This question will give you a good understanding of seeing what kind of stickler he is for rules. If he’s a stickler for rules, then a conversation is necessary.
Do they have multiple buildings?
The more buildings they have, the less chance of you being in the spotlight. If this was a newly purchased and only building, then a conversation is necessary.
Are they tech-savvy?
Ask them how they’d like to get paid. Do they still want you to write them a check every month, or is there an online portal that you can pay monthly. This question gives you exposure to the breadth of their openness by seeing how tech-savvy they are.
Are they new to being a landlord?
Newer landlords tend to be less risky, in my opinion. They do not want the necessary headaches that could potentially come with short-term stays. If they’re more seasoned, then your likelihood of getting approval will be higher.
How to Start the Conversation and Negotiate
There are a couple of different ways to bring up this conversation with your landlord.
Here’s a quick way to help you. You can personalize the message so it doesn’t come off as insincere.
“Hi, Mr. Landlord,
I’ve recently been introduced to Airbnb when I went on my trip to Paris. It’s an amazing service.
I was wondering if you had an opinion about Airbnb?”
By simply asking their opinion, you don’t prime them for confrontation and you open up a conversation simply pertaining to what they KNOW about Airbnb.
Once you’ve established what they know then it is a much easier time at explaining it to them and handle their objections. I have listed the top 3 most common objections below and how to handle them.
In order to understand the point of view that they’re coming from, you first have to put yourself in their shoes. Most landlords will have these 3 main concerns: 1) the type of guests, 2) property insurance, and 3) laws.
Objection: The Types of Guests
A landlord will typically go through a thorough vetting process. In this case, he’s probably concerned about the clientele that you bring on to the premise. Will they have the same rigorous vetting process as a regular long-term rental application? They want to make sure your guests are not criminals. In other words, how will they know if their property is not being used as a meth lab or even a drug-induced orgy? Obviously, 99.9% of the people that use Airbnb are not like that, but these worst case scenarios need to be handled in your negotiation process, just in case.
Overcoming this objection: you can tell them that the guests are carefully pre-screened by you and Airbnb. You should also mention to them that most guests are there to either take a vacation and/or on business trips. These guests are low-risks and tend to have no problems. If still doesn’t work, sweeten up the deal by offering to only host to certain groups of people like business travelers or a family taking a vacation.
Check out our Sublease Agreement Template. This template was written by a real estate professional and it’s got everything you need to legally sublease.
Objection: Property Insurance
Landlords are required to have homeowners insurance. However, homeowner insurance does not and will deny the validity of the policy if they found the property was rented out as a business and Airbnb is a business. In other words, there will be no financial protection for your landlord if one of your guests burned down the building.
Overcoming this objection: tell them about the $1,000,000 Host Guarantee. Simultaneous, you can offer to buy additional vacation rental insurance. If that doesn’t work, amend your contact and offer to cover certain damages. If still doesn’t work, sweeten up the offer by increasing your security deposit.
Check out this article on STR insurances.
While most cities are still trying to figure out what to do with short-term rentals, some cities already have laws in place. I always do my due diligence before deciding to host in a particular city.
Overcoming this objection: let them know that your city is permissible to do short-term rentals and there are no legal repercussions. This objection is probably the easiest to handle because you have already done your due diligence in evaluating if a city is profitable and legal or not.
Check out this article on how to do legal research.
Make sure to practice your response a couple of times in front of the mirror and you’ll be good to go!
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