Should You Allow Tenants to Sublet on Airbnb in Austin, Texas?

Are your tenants requesting permission to rent a spare room on Airbnb to earn more income? Is your tenant subletting your property behind your back?

If you’re still on the fence about allowing your tenants to sublet on Airbnb, here are some pros and cons to consider.

1. Con: You’ll need to get a license for your tenants to rent on Airbnb

Airbnb rentals are considered short-term rentals (STRs). The city of Austin, Texas requires a license for all short-term rentals. The application fee for a license is $572 and is non-refundable. If you don’t pass the city’s inspection, you won’t get your money back.

Getting a short-term rental license in Austin is easy. However, your tenants might not follow all the rules. On top of getting a license, STR landlords in Austin are required to pay a 9% quarterly hotel tax to the city. This doesn’t sound so bad. Taxes are a way of life. What’s one more tax?

The situation becomes a problem when you realize you’ll be held responsible for unpaid taxes if your tenant doesn’t pay them. As the property owner, all taxes are your responsibility. You can create a contract with your tenant, but you’ll just complicate your entire relationship.

If you allow your tenant to rent a spare room on Airbnb, even under a contract, that’s one more agreement you’ll need to manage. To make sure they’re paying all the proper taxes, you’ll have to keep up with their listings and track how much money they’re generating.

If you don’t want to manage your tenant’s Airbnb rentals, don’t allow them to sublet. If you don’t mind doing the work, it’s risky, but not impossible to make it work.

2. Pro: Airbnb could bring you rental income

There’s one fantastic benefit to allowing your tenants to sublet on Airbnb: it’s a good way to generate rental income during the COVID-19 pandemic.

If you’re one of the unfortunate Austin landlords with tenants who aren’t paying rent, allowing them to sublet on Airbnb could be a great solution. Even though the CDCs eviction moratorium has ended, some tenants are still not paying rent. By allowing your tenant to sublet on Airbnb, you could share the profits and use the income to cover their rent.

You might be wondering if it’s easier to just find a tenant who can pay rent. That’s always an option, but many landlords are struggling to find new tenants who can pay rent. Unemployment rates are sky-high, and it’s getting harder to find people who are employed.

While the Austin rental market is hot and rents are up 25%, experts predict it won’t last long. We’re just starting to see the impact of the mass layoffs and evictions. You might not need extra income right now, but if you do in the future, Airbnb could be a solution.

3. Con: You’ll want to add STR coverage to your homeowner’s insurance policy

Does your homeowner’s insurance policy already cover short-term rentals? If not, you’ll need to add STR coverage to your existing policy. This is a requirement for all STRs in Austin, and there’s no way around this.

For most homeowners, adding STR coverage will cost less than $200 per year. However, the cost will depend on your home, your location, and your current policy.

It’s not a big deal to add STR coverage to your policy, but if you feel like it’s too much work just to let your tenant make money off of your property, skip it.

4. Pro: Your tenants will be happy

Tenants are always happy when they get what they want. The question is whether or not you want to make an effort to make them happy. If you have a great relationship with your tenant and you know they’re responsible, allow them to sublet on Airbnb.

5. Con: You’ll need to get a Certificate of Occupancy

All short-term rentals, including hotels and motels, are required to obtain a Certificate of Occupancy (CO). This certification verifies that your property is safe for renters.

Getting a Certificate of Occupancy usually takes a few weeks. First, the city of Austin will need to analyze your property survey on file. Then, the city will send an inspector to your home to make sure your property meets city requirements for STRs.

Inspections are where some people might get disappointed. If you fail the inspection, you’ll be given a list of what needs to change. However, some of those changes might be too much. It really depends on your property. If your home is in good shape, you should pass with flying colors.

6. Pro: your tenant will have to take better care of your property

When a tenant sublets on Airbnb, they’ll have to take great care of your property, perhaps even better care than if they weren’t subletting. The reason for this is because Airbnb guests will be critical in their review of the listing. If anything isn’t perfect, they’ll likely be vocal about all of it.

Of course, this doesn’t mean your tenant will take better care of your property. However, they will if they’re serious about running an Airbnb business.

7. Con: Your risk of property damage will increase

Anytime you add strangers to your home, your risk of property damage increases. Multiplied by many strangers over a long period of time and the potential for damage will be high.

If you allow your tenant to sublet on Airbnb, make sure you have plenty of coverage under your homeowner’s insurance policy.

Are you overwhelmed with managing your properties? Green Residential can help

If you’re overwhelmed with your landlord responsibilities and you’d like some help, we can help. Our property management team has decades of experience helping landlords fill their vacancies with trustworthy, reliable tenants.

Don’t feel pressured into allowing a tenant to sublet on Airbnb just to generate rent money. When you work with our Austin property management company team, we’ll find reliable tenants for your Austin property.

Don’t sacrifice your good business sense just to get rent. We’ll make sure you get rent in full and on time. Contact us today to learn more about how we can help.