With a hot short term rental market instead of selling a home to purchase a new home people are now considering converting their first home into a rental property. The increase of short term rentals ranging from a one week rental to a month long rental makes it very appealing for new multi-home owners to enter the rental marketplace. Additionally landlords and property managers who have been in the long term rental market for a long time are now changing to accommodate the growing short term vacation rental market. The reason is clear, revenues per week are much higher for short term rentals compared to long term rentals. Concentrating on short term rentals in a hot market is a smart idea but only if short term renters go through the same tenant screening process as long term renters.
From the Wall Street Journal (wsj.com; Mar. 17, 16):
The robust monthly market has encouraged landlords who used to rent long term to concentrate on short-term rentals. wsj.com/articles/malibus-summer-rental-market-booms-1458223281
Even if the location of the rental property isn’t in the most ideal rental market, it only takes a surplus of potential renters combined with a shortage of rental units to create a viable rental market. However, renting out a property for short term rental should not be taken blindly or lightly. Many times new landlords or property managers without much experience with short term rentals have the tendency to skip the tenant screening process simply because it is a short term rental. This is a big mistake and an oversight that could be a financial disaster or create a situation where a property is destroyed rendering it unrentable until a full renovation is made. It may seem like easy money on the surface but short term renters pose just as great of a risk as long term renters, perhaps even larger.
Enter risk mitigation the key to successful rental relationships either short term or long term. The best method of mitigating risk is to perform thorough tenant background checks on all potential renters. Understanding the past behavior of a rental applicant is critical in determining viability as a good tenant.
From realestate.usnews.com (Feb. 24, 16)
It’s important to screen tenants, collect a damage deposit and have a strong rental agreement in place, as well as the proper insurance, to protect your home from damage. realestate.usnews.com/real-estate/articles/what-to-know-before-renting-out-your-vacation-home/
The most important background reports to obtain during the tenant evaluation process is credit report, eviction records report, criminal background checks and reference checks. A credit report will reveal the financial ability of a prospective tenant to pay the rent while an eviction search will discover if the applicant has ever been evicted from a previous property (this report alone can single handedly disqualify a rental applicant). A criminal background check will search court records and show any felony convictions, sex offender records and sometimes misdemeanors and traffic infractions. The use of criminal history information for tenant screening purposes has been changing but legally at some point in the tenant screening process it is allowed usually going back around 7 years. Finally conducting personal and professional reference checks on a potential tenant will reveal personality, trust worthiness and professional relationships.
To learn more about how the hot vacation rental market is prompting new home owners to rent out their old homes for short periods of time and why previous long term rental properties are being converted to short term rentals along with why thorough tenant background checks should still be performed on short term potential renters read recent TenantScreeningUSA.com press release: {Insert June TSUSA Press Release Link}