A great way of protecting your vacation rental property is by having a solid short term rental agreement with your confirmed and booked guests.
This way, both you and your guests are protected from any legal inconveniences that could arise from any unforeseen circumstances regarding your short term rental property.
Table of Contents
- Why Do You Need a Short Term Rental Agreement?
- The 10 Essential Things to Include in a Short Term Rental Agreement
- 4 Tips for Succeeding in Hosting a Short Term Rental
As 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. It should outline essential details about the occupancy and the governing local laws.
For this reason, a short term rental agreement is an important document for everyone’s protection, regardless if the property is listed on Airbnb, Vrbo, or other similar platforms. As a rental property owner, you should provide one for your guests. As a guest, you must ask for one from the host or owner.
In this blog, we will go over the 10 things that you should include in a short term rental agreement. We’ll also talk about some other things that will ensure all parties involved achieve an overall positive experience.
Why Do You Need a Short Term Rental Agreement?
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 surpass 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.
Now, just because a short term rental property is a cheaper alternative to a hotel, it doesn’t mean that its operating standards are not up to par with more expensive accommodations. Potential guests still expect a certain level of professionalism even if your short term rental is not as posh as a five-star hotel.
For your protection, as well as theirs, you must have a prepared short term rental agreement to avoid any legal issues in the future.
Here are a few reasons why you need a short term rental agreement:
It Adds Transparency
First, a short term rental agreement promotes greater transparency on your part as a rental property owner. The black-and-white agreement allows you to set expectations for your guests regarding how you run your business and the services you offer. Generally, guests come in with their own standards based on their previous experiences.
A short term rental agreement lets them know what they can expect from you as a host, allowing them to get the most out of their stay.
You and your guests can freely discuss your terms and conditions. In such a way, the risk of running into potential problems and disputes are minimized. A short term rental agreement keeps you and your guests on the same page.
It Leaves Very Little Room for Misunderstanding
Moreover, if you have a well-prepared short term rental agreement available to your guests, you leave very little room for trouble.
If, for some reason, your guests are unsure of some of the things on the agreement, you can discuss it freely and come up with answers and solutions. In the end, clarity is important. Once things are crystal-clear between you and your guests, both of you can proceed with fewer worries about what is required of each other.
Both Parties Are Protected Legally
If you’re familiar with how a lease works, you must know how important it is to prepare a lease contract to protect your rights as a lessee or lessor.
For instance, if you have a property on lease in Florida, under Florida’s state laws, you are obliged as a landlord to provide a safe and habitable living space to your tenants. According to Florida’s laws, the landlord’s obligations may be altered in writing depending on the type of rental unit.
The lease agreement ensures that a Florida landlord and tenant are equally protected and are held responsible for the property. Similarly, as a vacation rental owner, a short term rental agreement between you and your guests will keep you both protected from any legal issue that may arise.
Whether you own a Florida vacation rental or manage one in California, a short term rental agreement will protect you from any unnecessary legal headaches along the way.
A Clarification About the Airbnb Rental Agreement
If you’re planning on listing your rental property on Airbnb, you should know that creating a short term rental agreement is highly advisable.
While Airbnb itself doesn’t require one, putting 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.
Now, whether they agree to it or not is up to them. After all, guests aren’t obligated to sign anything they’re uncomfortable with. You can mutually agree to cancel the reservation in case something untoward happens.
After making sure that everything is in order, the next step is to enter into 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, the above is one of the first questions you should be asking. Generally speaking, property owners are afforded some leeway when it comes to determining the components of the short term rental agreement. However, some key elements should be present in every agreement.
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. It includes their full name, current home address, and contact details. In this section, you can also add the day on which the lease will take effect.
3. Tenancy Period
The period of tenancy is an extremely important element of the contract. The period stretches from the date that the tenant enters the rental property to the date of their departure. Consequently, failure to specify it in the short term rental agreement can lead to serious legal repercussions for the property owner.
4. Payment Details
In this section of the short term rental agreement, everything related to payment must be outlined. It includes the agreed-upon amount of rent, the date on which it should be paid, and the grace period given to guests who might have some cash flow problems.
5. 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 to the tenant upon the expiry of the agreement.
Before deciding on how much to charge for the security deposit and putting it down on the rental agreement, make sure it is in line with the average amount in your area.
6. Tenant Obligations
You need to define the tenants’ obligations in the short term rental agreement, as well. They include keeping 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 vacation rental owners and hosts require a written cancellation request from guests before proceeding.
This part of the agreement is where the owner or host 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 is a clause that prohibits pets from entering the premises (or one that allows them on-site).
10. Signature Space
No contract or agreement is complete without the signature of both parties. Make sure to create a signature space at the bottom of the agreement.
4 Tips for Succeeding in Hosting a Short Term Rental
After discussing all the important things needed in a short term rental agreement, let’s talk about how you can improve your services (and ratings) as a vacation rental owner and host.
Before you even draft an initial rental agreement, you need to do the following first to ensure you get a good start on your rental property business:
1. Analyze Rental Properties Using the Right Tools
Before you even think about drafting a short term rental agreement, you must first ensure that the rental property you’re considering will give you a good return on investment. Each rental market offers something different to investors by way of the cap rate, cash on cash return, monthly rental income, and occupancy rate.
For this reason, a proper investment property analysis should be performed for each potential vacation rental property you find. You can easily do this by using Mashvisor’s property lookup feature.
Mashvisor’s Property Finder uses predictive analytics to show you which properties are lucrative as short term rentals. The tool allows you to search for the best-performing properties in any market of your choice based on revenue, listing price, and occupancy rate. And you can do all of them in a matter of minutes.
Using such a tool not only saves you time and money but also gives you greater chances of investment success. You can easily search for profitable properties and make computations to see whether they match your criteria and investment goals.
Sign up for a 7-day free trial of Mashvisor today to get access to a wide array of tools that will help you become a better short term rental host and real estate investor.
2. Check Local Laws
The first thing that real estate investors need to ensure of is whether or not short term rentals are legal in your preferred area. You can’t write an agreement for a short term rental if it is illegal in the location of your choice.
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 prefer to prohibit them outright.
3. 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. It 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. They are good things to consider when preparing a rental agreement draft before finalizing one.
4. 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 vet tenants properly can result in a lot of headaches.
To make things easier, opt for listing websites that allow for a direct line of communication between the tenant and the landlord.
The Bottom Line
A short term rental agreement is one of the few things you should never neglect. A well-prepared contract is the only way to enforce the terms of the agreement and protect your rights as well as that of your guests.
The success of your vacation rental business as a rental property investor goes beyond just a written contract or agreement. As good as an agreement is, your success as a host largely depends on the rental property itself.
When it comes to finding the most profitable short term (and long term) rental properties anywhere in the US, Mashvisor is your go-to website. It has all the data and tools you need to make wiser and more informed investment decisions.
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.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.