An advertisement to rent a Boston condominium for a vacation rental never shows photos of the front of the building: it’s a mystery. The precise location of the building also is undisclosed: it’s an enigma. Who owns the condo is a riddle.
If Boston has a black market for real estate, this could be it.
Every property management company I spoke with told me such rentals, the three- to five-day kind, even the less than 30-day kind, wouldn’t be allowed in any of the associations they manage. Such rental restrictions have condominium owners looking for short-term profits switching to stealth mode. And despite the somewhat clandestine nature of these business dealings, Hub condominium vacation rentals seem to be popping up everywhere. A quick survey of three of the largest websites (Homeaway.com, VRBO.com and Airbnb.com) revealed advertisements for condos of various sizes in Back Bay, Beacon Hill, the South End, North End, Brookline, Cambridge and Jamaica Plain, as well as a host of other locales.
So that group you saw in front of your condominium building, luggage in tow, asking folks to let them in the building or fumbling with a lock box out front, might just be any one of Boston’s 12 million annual visitors who decided to forego large hotel bills and little hotel rooms, and instead rent out a Boston condo for their brief visit.
According to Steve Vigneau, a property manager with Modica Assoc. in Boston, these type of rentals create security issues for the other occupants of the building and could adversely affect financing for buyers. At times, short-term renters also create noise problems. Vigneau is aware of at least one situation where a condo was rented out to people who were having a party.
Modica manages properties for many Boston condo associations and is trying to resolve matters in at least four condominiums where it seems apparent that short-term rentals were occurring. One association levied a heavy fine against an owner who violated the association’s rental policies in this manner and, according to Vigneau, the owner is considering engaging legal counsel as a defense. When other owners are confronted about renting their condo for short-term stays, they often deny it, asserting they had just let their friends stay in their condominium for a few days.
A Lucrative Practice
Why do owners disregard the associations rules and regulations to rent short-term? Vigneau said that “as long as there is money to be made and people can somehow get away with it, they are going to do it.” A review of the rates paid for short term revealed it to be one of the most lucrative uses of residential real estate. A featured “one-plus bedroom” in Copley Square advertised on VRBO.com goes for $389 a night and requires a five-night minimum. So, if the Copley Square vacation rental maintained an 80 percent occupancy rate, the annual gross revenue derived from its 700 square feet of living space would be $113,588. Incredible! A similar one-bedroom in the same building renting for $2,700 would gross about one fourth of the short-term rental. As you undoubtedly know, $113K in revenue is not what you would expect from a small investment; it’s what you would expect from a full-time job.
Action Vest, a management company in Brighton, recently sent letters to owners of one association calling short-term rentals a dangerous practice and communicating that owners who violated the master deed’s one-year rental policy would be fined $1,000.
Condo owners who are short-term renters also seem to take good care of their guests. In fact, the management team of Marriott Hotels would be envious of many of the airbnb reviews I read. Reviewers of a Boston two-bedroom condo advertised at $450 night cooed about the condo, its location and the fact that the owner give them cookies and a bottle of wine upon meeting. Another review of a Boston condo, described as a two-bedroom loft in the Leather District, calling the experience “amazing in every way.”
Even though every management company I talked to was against allowing vacation rentals, I wondered if allowing such rentals it might be a way to add value to Boston condominiums and their owners. Certainly, four times the rent is better for any investor. Additionally, there are a host of demographics that short-term rentals would benefit, such as owners who keep a pied-de-terre in the city or who have the condo as a second home. Perhaps, a condo surcharge benefiting the association could be added to each rental? Based on the incredible rent condo owners can get by doing short-term rentals, I’m guessing the issue won’t be going away fast.
David Bates is a broker with William Raveis Real Estate and author of The Bates Real Estate Blog, www.BatesRealEstateReport.com, and a recently published e-book, “Context: Nine Key Condo Markets, 2.0.”
