As it is the case with any type of real estate agreement, a short term rental contract must contain several legally-binding terms. The agreement needs to cover both landlord rights and tenant rights and it should outline essential details about the occupancy and the local laws that regulate it. In this blog, we will go over the 10 things that you should include in a short term rental agreement.
An Overview of Short Term Rentals
As the name suggests, short term rentals are investment properties that are rented out for a short period of time. This type of rental property has emerged as a cheaper alternative to hotels and has quickly become the go-to option for vacationers across the globe. Here are some of the benefits of owning a vacation rental.
- Their rental rate is substantially higher than long term rentals. As a consequence, the rental income that you can generate from a vacation rental investment will dwarf any other type of real estate investment.
- Since the investment property is not tied to a long-term contract, you will be able to use it as a second home from time to time.
- Unlike long term rentals, you can maintain short term rentals on a regular basis as tenant turnover is more frequent.
Before delving into the details of the short term rental agreement, let’s look at a few tips on how to rent out a vacation home.
1- Check Local Laws
The first thing that real estate investors have to make sure of is whether or not short term rentals are legal in your area. It’s important to note that laws vary widely from one jurisdiction to another with some taking a more laissez-faire approach to short term rentals while others preferring to outright prohibit them.
2- Do a Proper Assessment of Your Liability
Short term rentals come with several potential liabilities. The lack of an LLC means that the property owner is liable for any incident that might occur in the investment property. This is why it’s essential to consult a legal expert before creating a short term rental agreement. Moreover, a professional will be able to advise you on matters relating to tenant misconduct, namely acts of stealing and damage to rental property.
3- Tenant Screening Should Be as Thorough as Possible
One of the mistakes that inexperienced real estate investors make is speeding through the tenant screening process. Needless to say, neglecting to properly vet tenants can result in a lot of headaches. To make things easier for you, opt for listing websites that allow for a direct line of communication between the tenant and the landlord.
After making sure that everything is in order, the next step is to establish a vacation rental agreement with the tenant. Let’s take a closer look at the main components of a short term rental agreement.
The 10 Essential Things to Include in a Short Term Rental Agreement
“What do I put in a short term rental agreement?” As a rental property owner, this is one of the first questions that you should be asking. Generally speaking, property owners are afforded some latitude when it comes to determining the components of the short term rental agreement. However, some key elements should be present in every contract.
1- Details of the Rental Property
The first thing that a short term rental agreement should contain is a clear description of the property. This section must outline everything that is inside your income property. Moreover, the language you use here should be simple and straightforward, leaving no room for ambiguity or misconception.
2- Information About the Tenant
The short term rental agreement should feature some essential information about the tenant. This includes his/her full name, current home address, and phone number. You can also add the day on which the lease will take effect in this section.
3- The Period of the Tenancy
This is an extremely important element of the contract. The period of the tenancy stretches from the date that the tenant enters the rental property to the date of his/her departure. Consequently, not specifying this in the short term rental agreement can lead to some serious legal repercussions for the property owner.
4- Payment Details
In this section, everything that relates to payment has to be outlined. This includes the agreed-upon amount of rent, the date on which it should be paid, and the period of grace.
5- The Security Deposit
A security deposit is an insurance measure that helps protect the vacation rental owner in case the tenant causes severe damage to the property. The homeowner returns the deposit back to the tenant upon the expiry of the agreement. Before deciding on an amount for the security deposit, make sure that it is in line with what’s being charged in your area.
6- Tenant Obligations
Tenant obligations should be defined in the short term rental agreement. This includes maintaining the property in a good condition and adhering to the terms of payment.
7- Cancellation Terms
This section should explain how to manage the cancellation of the agreement. Most landlords require a written cancellation request from the tenant.
This is where the landlord expands on the amenities that are available in the rental property. Everything from furniture and blankets to air conditioning and TV should be specified here.
9- Extra Clauses
You can include extra clauses that limit what the tenant can do with your investment property. A good example of this is a clause that prohibits pets from entering the premises.
10- Signature Space
No contract is complete without the signature of both parties. Make sure to create a signature space at the bottom of the agreement.
A Clarification About the Airbnb Rental Agreement
If you’re planning on listing your rental property on Airbnb, then you should know that establishing a short term rental agreement is highly advisable. While the platform itself doesn’t require them, having an agreement in place provides you with extra protection against a wide array of potential issues. Make sure to mention in the description of your listing that signing the agreement is obligatory for all renters.
The Bottom Line
A short term rental agreement is one of the few things that you should never neglect. As a matter of fact, a well laid out contract is the only way to enforce the terms of the agreement and ensure that your rights are protected.
To learn about various aspects of managing rental properties, check out other articles from Mashvisor’s blog. We cover everything from finding the ideal investments to maximizing the income of properties. Click here to check out what Mashvisor has to offer.