How to get your Landlord to approve an Airbnb – Airbnb Arbitrage Intro

This is hands down, the number one question I get asked a lot. It makes sense too because there is a lot of money to be made with Airbnb Arbitrage. That is, renting a place from a landlord and then listing it on Airbnb.

This place would make an amazing Airbnb! How do I ask the landlord for permission to Airbnb it?

This question seems so daunting at first but once we discuss all of the benefits your new landlord will see, I bet we can make it an easy sell!

Doing it the proper way

While this is a really serious conversation to have… If you want to be successful, you are going to have to start having this conversation. Renting a place and Airbnb’ing it without asking is super risky and can lead to a whole world of pain.

First, you may be thinking:

  • Why would anyone let me do this?
  • What is in it for them?
  • Should I really ask?
  • Is this a big deal?

These questions are really common and are the main reasons people rent out spaces on Airbnb WITHOUT telling the landlord. (That’s NOT a smart thing to do.)

Renting under the radar may work for a little while, but it will eventually blow up and turn into a huge mess.

Getting evicted, losing rent, and getting stuck with furniture that only goes with the theme of the place you got kicked out of is just not a good look financially.

The ironic thing is that many hosts go about it this way, without ever asking their landlord and never finding out that their landlord may have been open to the idea all along! You will never know until you ask!

Once they find out about your Airbnb idea by catching you in the act, you have destroyed any trust your relationship ever had and they will not be willing to work with you at that point.

Approaching the landlord after being caught is going to result in a very low chance of getting approval.

So that means, I guess… We should do it the right way!

Let’s get on to getting your Airbnb Landlord-Approved!

Getting into the mindset of an Airbnb landlord

The only way you will stand a chance of getting approval from a landlord will be by understanding the position they are coming from. What are their wants and needs? What are their fears? How can we solve all of these issues?

We need to clearly understand how a landlord will uniquely see Airbnb.
Also, why are they choosing not to Airbnb the place themselves? Sometimes asking yourself this question will give you a lot of insight.

Imagine you are in their situation and think about what things are influencing their decisions. How do they see their properties?

If you don’t have much experience with rental properties, let’s go over the basics.

Risks of rental properties

Long-term rental properties are seen as:

(1 to 3+ year contracts) are low-risk but have a decent income.

While some landlords are making huge returns off of their properties, others are just making a little income on the side. One thing that is super consistent though: Long-term rentals are seen as low-risk.

In contrast, Short-term rental properties are seen as:

(1 night to 59 day stays) are high-risk but have a high income.

Most are expected to return large profits because of the associated risk and work involved. Landlords are not interested in getting paid a moderate amount of money for a higher risk and workload. This is the hurdle you must overcome, by offsetting their risk and guaranteeing they won’t need to do any more work than normal.

Rental property example

Let’s pretend you are a landlord for a second. You just bought a property and put a lot of time and money into remodeling it. You’ve just signed a 1-year lease with a new tenant.

It doesn’t matter if you are a great landlord, go out of your way to help your tenants, or you just see it as an investment that you set and forget… It will still make you the same amount of money every month for the duration of the lease.

Due to this, most landlords see any above-and-beyond time, energy, or money invested as a waste. The property will earn you a fixed amount regardless of whatever extra you put in. This is one major issue you will have, you have to convince the landlord that they will not have to do anything extra because you want to Airbnb their property.

The worst case scenario a landlord can face is losing a tenant or finding their property damaged. Tenants are replaceable and insurance can cover the property damage. Those 2 problems have been mitigated, that’s your main risks covered.

At the end of the day though, you are still the property owner. Now lets imagine a prospective tenant approaches you and asks if they can have strangers coming and going in and out of your space for their own profit…

Your low-risk property with a decent income just became a high-risk property with a decent income.

Airbnb Risks for Landlords

You may be asking yourself, how is Airbnb “high-risk” for landlords? Well, you may not see it as “high-risk” but it is definitely “riskier” for a few reasons.

  • Airbnb does verify their guests to some extent but problem guests slip through the cracks. These problem guests cause property damage, annoy the neighbors, or steal things.
  • Many cities also don’t allow Airbnb and if you are caught, they will fine you for operating as a short-term rental.

The biggest issue is:

  • Landlords have to have homeowners insurance, in case anything happens to their property.

Homeowners insurance has a clause that will be used to automatically deny ANY claims if they find out you are operating the space as a business. and yes, Airbnb is a business.

Worse than that though, they could cancel the landlord’s insurance policy entirely. This could alert the mortgage servicer and possibly get their mortgage loan called. I promise, your new landlord does not want to lose their property to the bank.

I say all of this just to emphasize, they are taking on all of this extra potential risk with no potential upside. It just doesn’t make sense to them.

Due to this, very few landlords would be ok with you renting out their place on Airbnb without getting something in return.

How to frame the conversation

Now that we understand what landlords care about when it comes to Airbnb… Let’s talk about how the conversation should flow.

Getting a yes will require you to be prepared to properly address the income-to-risk problem that they are going to have. That doesn’t exactly mean you will have to pay more in rent, but a lot of the time, that’s all it will take!

Evaluate the situation

Before entering into the conversation, you need to step back and look at the situation:

  • Does this landlord even know what Airbnb is?
  • Is the market hot? Do they have a ton of applicants?
  • Are you in an area with rent control?
  • How many properties does this landlord have?
  • Is this a shared space or a multi-family unit? How will the other tenants react?

What does a strong position look like?

A strong position would have some of the following factors:

  • Is the landlord comfortable with you?
  • Is the landlord already familiar with Airbnb?
  • Does the landlord only have a few properties?
  • The worse the rental market, the better for you.

What will it take to get a yes?

Being in a strong position will mean that you don’t have to work very hard for a yes. You may not even need to adjust the rent amount, maybe they already thought they were getting top dollar and it’s worth it for the extra risk.

In a weak position though, it may take a lot to get that yes. You may have to pay extra in rent and also sell your heart out while being very creative and flexible.

Consider what you can offer

With the above considerations in mind, we need to see what we can offer to our prospective landlord. Here is a list of things you can offer if the landlord allows you to Airbnb their property.

Income offerings

On the income side of things, we have a few different things we can offer. Not all of these have to actually cost you more money, some just have to do with when you make payments.

  • We can offer longer lease terms (2 years instead of 1)
  • We can offer to pay more, either a flat rate or a percentage of our Airbnb earnings.
  • We can offer to pre-pay some or all of our rent upfront.

Risk offerings

Thanks to Airbnb, we actually have a good bit of risk mitigation solutions that we can offer to our new prospective landlord.

  • We can explain Airbnb’s Aircover, which is a $1,000,000 liability insurance policy
  • We could also offer to carry your own vacation rental insurance policy ($100-$200 per month usually)
  • We can also offer to only rent at certain times or to certain groups. (No parties, for example)
  • We can offer to only rent private rooms and that you will be there while the guests stay.
  • We can offer to amend the lease agreement to cover additional damages. (You will fix the small things the landlord would normally fix)
  • We can increase the size of our security deposit

This list is not everything that can be offered but it is a great starting point. I’ve seen a lot of people respond positively to these offerings in the past.

These are definitely things that landlords care about. As a landlord myself, these are some of the reasons I have chosen to Airbnb my new purchases instead of turning them into long-term rentals.

Before you go into the conversation, make sure you are 100% sure about what you can offer them and have worked into your numbers on how much it will cost you to offer each of these items.

Let’s start that conversation about Airbnb

If you think you have all of your options figured out, it’s time to speak to the landlord directly.

I would start a simple dialog with them instead of trying to treat it like a business pitch.

If you keep it simple, the landlord will better understand what you are asking and be more receptive to listening to your eventual pitch.

Try sending them an email that says something like this:

Hey Mr. Landlord,
I recently stayed in an Airbnb and it was an amazing experience.
Have you thought about turning your space into an Airbnb?

Here we are simply asking for their opinion on Airbnb. We haven’t primed them for confrontation and this conversation should lead to what they know about Airbnb.

This will allow you to get a baseline for what they know about Airbnb as well as how they feel about the platform as a whole.

Once you have this knowledge, it will be much easier to explain the benefits of the platform to them and dispel any myths or bad experiences they may personally have had with Airbnb.

During this conversation I would attempt to hit on two main points:

  1. You are looking into opportunities, but absolutely want their permission before doing anything.
  2. Inform them that you know there are additional risks involved and how you will help mitigate those risks while also rewarding them for taking on those additional risks.

Once you get the conversation flowing, you can start using the compromises we talked about previously.

Property manager in the way?

Here is another popular situation… The property is listed for rent by the landlord’s real estate agent.

Instead of trying to go around their agent, we can go through that agent. This will require a little bit of finesse but can have great results too!

When talking to the agent, keep in mind that he just wants to place a tenant. He probably has heard of Airbnb and you may have to do less explaining.

What the agent most likely won’t know are the benefits to the landlord for letting you Airbnb their property, you definitely want to share these with the agent.

After that, by offering a little additional rent and explaining the other benefits, you can most likely convince the agent to go back to the landlord and pitch your proposal.

With a bit of luck, you end up with a new Airbnb without ever having to speak to the landlord!

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