SOUTH AFRICA: Rent Out Your House Or Room?

Airbnb has caused a massive disruption in the hotel industry, which is losing customers to individuals who are prepared to rent out their homes to holiday-makers at a fraction of the cost of a hotel room.

The Airbnb website allows hosts to list their residential accommodation (from the entire property to a spare room) and homeowners are finding it a great way to supplement their income.

Even property investors who would have rented out their investment property on a longer-term basis are finding it more lucrative to rent out on a short-term basis to holiday-makers.

Ros lives in Johannesburg and has used Airbnb to rent out her spare room, which includes a private bathroom and reasonable use of the kitchen and internet. As Ros travels frequently for work, she also makes her apartment available during those periods.

“I price my place quite low because of its location, which means you have to have a rental car to get around,” says Ros.

She adds that when she is home and will be sharing her home with a guest, she specifies a maximum stay of a week. If she is away and rents out the apartment (except for her bedroom, which she locks up), she specifies a minimum stay for ease of admin.

“I don’t offer breakfast, toiletries or anything else, but I’ve stayed in places that do,” says Ros, who uses Airbnb for her own travel.

Francois Louwrens, who owns three holiday properties in Blouberg, Cape Town, has found that his occupancy has increased since he started using Airbnb to advertise his properties. Over the past six months, the apartments have been booked for 23.5 days a month – rising to 28/29 days during peak season.

Rob Mcquillan, who manages Louwrens’ three properties, says most of their Airbnb bookings come from overseas guests because they are more familiar with the website. The upside for Mcquillan is that overseas guests are a lot easier to deal with than locals.

A quick review of the properties available on Airbnb shows that a well-positioned property in Gauteng – either near the airport, a business centre or in a trendy area like Melville – can charge between R293 and R426 a night for an en suite bedroom. Even if you are just renting out for 10 days a month, that can come to an extra several thousand rands each month.

Do you have what it takes?

You are more of a hotel concierge than a landlord, so you need to be good with people and be prepared to deal with difficult guests.

You have to be nearby as this is a service-oriented business – it is not as passive as renting out a unit long term and hiring a rental agency.

Be clear about what you are offering – is it a spare room in your home where guests will feel they are crashing over with friends, or a five-star hotel experience?

For example, in one review the guests commented on how the owner would pop over each morning with hot croissants and freshly squeezed orange juice. Great for repeat business if you can manage it, but not for an owner who has to rush off to work every morning and barely has time to make their own breakfast.

Even if you can’t do the hot croissants in the morning, make sure you offer basic food on arrival such as milk, bread and coffee. You will get better reviews, which means more business.

Your room must offer what people are able to find in a hotel, such as an ironing board, coffee maker, hairdryer, full-length mirror and towels.

The risks

Remember, if you are renting out a room on your premises, you are letting a stranger into your home. If you are renting out an entire property, you also stand the risk of damage or even theft.

By and large, negative incidents appear to be few and far between, but you still want to take precautions. Check the potential client for past reviews and also request a copy of their ID or passport and make sure you pack away all your personal belongings.

“You just have to be sensible and gauge from your correspondence with the prospective guest, as well as from their reviews from other hosts.

“I’ve hosted single men, single women and couples,” says Ros, who has only accepted 15 of the 62 requests she has received through Airbnb.

While you can do your homework to vet your guests, you also need to make sure you have the right insurance in place.

While the Airbnb platform does offer its host a Host Guarantee of $1 million (R13 million) to pay for damages (excluding cash and securities, pets, personal liability and shared or common areas), this option is not yet available to South African homeowners.

However, even if it was available, the Airbnb website clearly states: “The Host Guarantee is not insurance and should not be considered as a replacement or stand-in for homeowners’ or renters’ insurance.”

Firstly, you need to check with your insurer that you are covered. Christelle Fourie, chief executive officer at MUA Insurance Acceptances, says not all insurance policies are created equal and many exclusions might apply when renting out a property.

Fourie points out that not only is there the risk of financial loss faced by homeowners if property is damaged or stolen, there are significant liability issues if a guest is injured on the property and the owner is proven to be at fault for failing to secure the property.

Fourie says, in most cases, as long as the homeowner is still the main occupant of the home, and only rents the property out on an ad hoc basis, the liability cover in the homeowner’s policy should pay out for a claim.

However, if the home is mainly being rented out to guests, the insurance provider will perceive this as a commercial risk and require a commercial property insurance policy to be taken out. When it’s time to claim, the insurance policy is unlikely to pay out if the appropriate cover was not taken out.

Another major problem for homeowners renting out their property is that most homeowners’ insurance policies will require visible and forcible entry to pay out for any theft while guests are renting the home.

Fourie advises having a written and signed agreement with the lessee so they are made aware that they will be held liable for any stolen or damaged items if there are no signs of forced entry. Some policies offer cover for the personal belongings of guests, which is a good idea as the homeowner does not want to be held liable for stolen or damaged belongings in the event of a burglary or a disaster like a fire.

She says another important consideration for owners is to look at the alarm warranty of the insurance policy if foreign guests are renting the home.

“Often, foreigners do not understand risks in South Africa and might not set the alarm, even when instructed to do so. If there is a claim and it is discovered that the alarm was not set, the insurance policy won’t pay out unless there is a special arrangement with the insurance provider.

“You can easily contact your broker and specifically ask to waive the alarm warranty.”

Fourie recommends preparing a detailed digital “welcome pack”, which is emailed to guests before they arrive at the property.

“This pack can include information such as directions to the property, security tips, key emergency contacts, how the alarm works and the importance of setting the alarm.

“It is also a nice gesture to recommend some local attractions and restaurants,” she says.

TIP: If you are renting your apartment, check if you are prevented from subletting. If you are, it will be illegal to rent out a room on Airbnb.