Owning an Airbnb rental property is a great way to invest in real estate. However, short-term rental property management can be a headache, especially in situations when you have to resort to the Airbnb damage policy to ask for compensation.
In this blog, I will talk about managing an Airbnb rental property, its challenges, the Airbnb damage policy, security deposits, and the different ways you can protect yourself when dealing with Airbnb damage policy and aspects related to it.
Airbnb Property Management
Managing a short-term rental Airbnb can be very challenging, and it’s nothing like managing a long-term traditional rental.
When managing an Airbnb property, you will often find yourself in situations where your guests have caused small or significant damages to your property.
In situations like these, when dealing with a traditional rental, the lease agreement will most likely include such cases and a security deposit usually covers the repairs or compensation costs.
However, Airbnb rentals are different since the guest’s stay will be much shorter; and in many cases, they will be sharing the same living space with you during their stay. This also means that they will be using your house and your stuff, which are clearly your responsibility.
If you’re renting out through Airbnb, they have their own Airbnb damage policy and options for security deposits, but the Airbnb damage compensation options are considered somewhat limited, especially for smaller-sized properties.
For that reason, it’s important for every landlord to have a clear understanding of the Airbnb damage policy and how to take advantage of it, or to find other ways to insure themselves if the Airbnb policy doesn’t cover their unique circumstances.
Airbnb Damage Policy – Security Deposit
The first part that I want to talk about when it comes to Airbnb damage policy is their options when it comes to security deposits.
A security deposit is typically an amount of money that a tenant pays upfront to cover for any damages that they may cause during their stay. This amount is usually given back to the tenant once their contract ends if it hasn’t been used.
When talking about damages to the property, these could include any type of damage that justifies asking for compensation. So, it could be permanent damage, like a broken wall or a burnt carpet, or it could be loss of items, like glasses getting broken for example.
However, when renting through Airbnb, guests are not typically required to leave a security deposit unless the host specifically requests it or if the property has certain characteristics.
So, let’s talk more about the different types of security deposits that are used by Airbnb.
Types of Security Deposits
There are two types of security deposits at Airbnb:
- Airbnb-required security deposit
This type of security deposit only applies to certain types of properties and depends on the property’s features and seasonality instead of the guest’s details.
You can visit Airbnb’s website to see if this type of security deposit applies to your property or not. If it does, this means that your guests will always be required to leave a security deposit before staying at your house.
The amount of security deposits of this type is determined by Airbnb.
- Host-required security deposit
If you’re a host of an Airbnb property you can simply choose to require your guests to leave a security deposit to cover the cost of any damages they may cause.
This, however, will affect your occupancy rate as some guests might find it off-putting or might not afford to leave a security deposit, meaning fewer people will be interested in renting your Airbnb property.
The amount of security deposits of this type is determined by you as the host.
Read: 8 Best Cities for Airbnb Investment in 2021
How Does Airbnb’s Security Deposit Work?
In both cases, when using Airbnb damage policy to request a security deposit, the way it works is different than in a traditional rental.
In a traditional rental, the tenant will either pay the security deposit in cash upfront, or the money will be deposited in a shared account that the host can access when necessary.
With Airbnb security deposits, however, the guest won’t have to pay the money upfront.
Instead, Airbnb places an authorization hold for the amount of security deposit on the guest’s credit card a couple of days before the guest’s check-in. But, while the guest won’t be charged for that amount, they also won’t be able to access this amount until it’s released or until it is claimed as damage compensation by the host.
This brings us to the next topic, which is how to get your Airbnb damage claim in the case of Airbnb guest accidental damage.
Airbnb Security Deposit Claim
So, does Airbnb cover damages? Yes, it does. But you’ll need to follow specific steps within a specific period of time and provide a substantial amount of evidence before you can get your Airbnb claim for damage compensation.
The first thing you need to know here is that you only have up to 14 days (or until a new guest checks in) after the guest checks out to submit your damage dispute report or Airbnb security deposit claim.
To start off, you need to follow these steps:
1- Login to your Airbnb account.
2- Go to the “Resolution Center”.
3- Choose the booking that you’d like to collect the security deposit for.
4- Open the “Select a reason” menu and choose the “Request compensation for damages” option.
5- Click “Continue” to continue to the next step of the process where you can enter all the required details about the damages and associated costs.
In the last step, you will be required to submit a substantial amount of information about the incident, the damages, the damaged items, and the cost of the damages.
For this reason, it’s highly advised to obtain all the required information beforehand. This includes:
- A document detailing all the information that you have gathered as soon as you become aware of the damages: this includes detailed photos and/or videos of the incident or the damaged item or part of the property, notes detailing everything that you know about the incident, the person who first noticed the damages, and the time it happened.
- Cost estimation of the repairs or replacements: this includes invoices or online links to replacement items and their prices, and estimates from contractors and other experts.
- Try contacting the guest and coming to an agreement: before resorting to the Airbnb damage policy procedures, you should always try to solve the matter with the guest first. Simply contact the guest and inform them about the damages that they have caused and ask for appropriate compensation. Make sure to message them through Airbnb and not any other form of communication as your messages can be used as proof if you end up resorting to Airbnb to solve the dispute.
If you’re not able to come to an agreement with the guest, and you have gathered the required information, you can go ahead and continue with your Airbnb security deposit claim request.
Your guest will have 72 hours to respond. If the guest accepts it, Airbnb will release your money within 5-7 days.
However, if the guest doesn’t accept or doesn’t respond to the request, then it’s time to escalate the case and contact Airbnb through the Airbnb Resolution Center.
Learn: Airbnb Calculator: The Ultimate Real Estate Investing Tool
Airbnb Damage Policy – No Security Deposit
What happens if a guest damages your Airbnb property but they hadn’t paid a security deposit?
In this case, you might think that you’ve run out of options that are offered by Airbnb.
However, part of the Airbnb Damage Policy includes an Airbnb’s Host Guarantee, which enables you to request Airbnb’s direct involvement in helping you get your compensation from the guest.
Of course, as mentioned above, it’s best to always try to resolve the matter directly with the guest. Only resort to the Airbnb Damage Policy process if you’re unable to reach an agreement with your guest or if they’re not responsive.
However, if you decide to request reimbursement under the Airbnb Host Guarantee, these are the steps that you will need to take:
- Follow the procedures indicated in Airbnb’s Resolution Center for requesting reimbursement from Airbnb.
- Submit the Host Guarantee Payment Request Form, which will require you to also provide all evidence that you’ve collected (as mentioned earlier in this blog).
- Similar to the Security Deposit Claim Request, you will have 14 days to file the claim (or until a new guest checks-in).
- You will be contacted by an Airbnb specialist who will help you in resolving the matter and guide you through the process.
It’s important to note, however, that the Airbnb Host Guarantee’s coverage is limited. Make sure to check the Terms and Conditions to see if it applies to your situation. But be mindful that this process doesn’t guarantee that you will be compensated, and several hosts have complained in the past about the challenges that they’ve faced during this process and its results.
Best Damage Policy: Protect Yourself
As you can see, the Airbnb Damage Policy can be limited depending on your unique situation, and the options that they provide will not always ensure you against any financial costs that might incur due to guests damaging your property.
For this reason, it’s best to always wear additional protective layers to shield yourself against these damages and the financial losses that they cause.
Nowadays, and as investors have gained a better understanding of the Airbnb and short-term rentals market, it became known that dealing with Airbnb guest accidental damage can make up a big chunk of the property’s running costs on the long term, and protecting yourself against it can significantly improve your property’s profitability.
So, most investors use the following methods to minimize their financial losses in the long run while also reducing the stress caused by having to deal with guests ruining your property.
Request Security Deposit
Simply put, if you’re not satisfied with the Airbnb Damage Policy, then you should create your own!
While it’s not the norm for short-term rentals to have a tenant agreement, similar to those in traditional rentals, it doesn’t mean that you can’t use one.
Nowadays, you can find readily available online short-term rental agreements that include terms for security deposits.
And while this will lead to some people turning away from your property, as more people start to use these agreements, they will become a standard for short-term and Airbnb rentals and guests will simply have to agree to them.
Use Vacation Rental Insurance
While a security deposit can protect you against damages that your guests might cause to the property, there are many scenarios where damages are caused that cannot be covered by a security deposit or Airbnb damage policy.
For that reason, it’s always advised to use insurance to protect yourself. Always.
Read: Choosing the Right Home Insurance Policy for Rental Properties
Despite there being few options when it comes to insurances covering short-term rentals, you should always look for any available options and use the best that’s available.
There are a couple of types of insurances that you should consider:
- Host Protection Insurance: this covers situations where a guest might suffer from an injury during their stay at your property.
- Vacation Rental Insurance: this insurance covers situations where damages are caused to your property by external forces (not by the guest) as well as loss of income due to vacancy.
While these types of insurance can be costly, they are well worth the cost and will actually save you money in the long run (assuming that your property is performing well regardless).
If you’re looking for providers that specialize in vacation rental insurance, you can check out Slice, InsurStays, and Velocity Risk Underwriters to see if they cover your area.
Verify Your Guests
Another way to protect yourself against damages caused by guests is to simply be pickier about your guests.
This seems obvious, but many hosts don’t bother doing a background check on their guests or checking their past records as guests. Additionally, Airbnb doesn’t require guests to verify their identity in most cases.
Verifying your guests might take extra time and require more management, but it will be much less stressful for you to host guests that you’ve verified.
You can also request your guests to send you a copy of their ID to verify their identity before hosting them to avoid any unwanted scenarios.
So, now what?
Now that you know the limitations of the Airbnb damage policy, their options when it comes to security deposits, and the ways you can protect yourself against property damages caused by guests, perhaps you’re thinking about buying a new property to rent out through Airbnb for some extra profit?
If that’s the case, then make sure to check out Mashvisor, a platform that was designed to help Airbnb investors find the best Airbnb rentals to invest in, offering you a wide selection of tools such as a heat map, property finder, and property calculator that all include each property’s Airbnb cap rates and cash on cash returns.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.