Home News Renting Properties to Ultrawealthy Tenants Isn’t as Glamorous (or Easy) as It Seem

Renting Properties to Ultrawealthy Tenants Isn’t as Glamorous (or Easy) as It Seem

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If you are a landlord, you definitely know all the problems you can have when you rent your property at the median monthly rent in the United States.

Redfin

It will be $ 2,002 in May 2022.

But what about ultra-luxury homes and condos that rent for $ 50,000, $ 100,000, and even $ 130,000 per month?

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Julian Johnston, a real estate broker at the Corcoran Group in Miami Beach, said:

Last year, Johnston, who was rented to a celebrity on behalf of the owner of an 11-bedroom, 15-bath waterfront home on Miami Beach for $ 130,000 a month, recently signed a lease rider stating that. Worked on a contract that must be done. “If you need to go to your home for reasons you don’t talk to or see your tenant.” Another celebrity client wanted to ensure the privacy of their rental home, so Johnston said the paparazzi To avoid taking pictures, I arranged to buy an 8-foot-high potted plant on the balcony of my bedroom along the sea wall, worth $ 20,000. Offshore boat.

“” High-end luxury rentals pose unique challenges to landlords, as tenants are wealthy, often celebrities, and have special requirements.


— Corcoran Group, Julian Johnston

Wealthy people who can afford to rent these properties often have high expectations. Many demand near-concierge-level services from landlords, agents, and real estate managers.

“In your average landlord-renter relationship, the landlord makes most of the conditions and the renter doesn’t say much,” said Los Angeles real estate attorney Zachary D. Shore. .. “But when you enter into these higher priced leases, it is not uncommon for lawyers to negotiate the terms of the lease.”

Elicchilo, a licensed broker and managing partner of the agency’s Boston office, recently hired a Red Sox player, Reese, whose tenant rented a townhouse in Chestnut Hill, a suburb of Boston, for $ 18,000 per month. I worked on it. .. “He was in Florida for spring training and was hoping to arrive at the turnkey property,” he said. “So we installed the shades, connected the internet and cables, and did everything on the front end to make sure the properties were ready.”

Danny Hertzberg, a real estate agent for the Jill Zedder Group at Coldwell Banker Realty in Miami Beach, has also coordinated requests from high net worth tenants. “I often get the first call with a complex request and then connect the tenant to the property manager. The property manager makes all the arrangements for them,” he said. “They expect the refrigerator to be stocked and massage therapists, chefs and drivers to be arranged. They also have the resources for the landlord to deal with the leak faucet at 4am on Sunday morning. I want to know that I have a professional management company that has. ”

According to Hertzberg, many landlords are doing light renovations between tenants, leaving their property untouched.

Leasing high-end rental properties can also be complicated, and tenants require their own provisions that can adversely affect the rights of the owner.

Hertzberg was involved in the sale of a five-bedroom home on Palm Island in Miami Beach, and before signing the listing agreement, the owner rented it to a renowned reggaeton artist for over $ 100,000 per month. .. Tenants have their own security team with multiple security guards in front of and behind the property, and even if Mr. Hertzberg has the right to present the property to potential buyers, the security guards allow them access. It was so protected that it wasn’t. On the premises.

“We lost a lot of buyers because we didn’t try to jump over the hoops,” Hertzberg said. The tenant has only granted access on certain days and for a limited time. The prospective purchaser also had to sign a non-disclosure agreement prohibiting taking pictures.

Eventually, when the resident left the town, the parties were able to negotiate the screening, but access to housing inspections and appraisals was also a nightmare, he said. All inspectors had to be approved by the tenant and were guided around the property with the tenant’s security team.

According to Hertzberg, the house went public for about $ 20 million and eventually sold for about $ 15 million. “The seller left millions of dollars on the table as a result of the tenant,” he added. “He had a big haircut.”

If you are the owner of a luxury property and plan to rent it, here are some things to consider.

Be creative when certifying tenants. The owner of a super-luxury property or its agent must do more than basic credit and background checks for prospective tenants. Some landlords ask for proof of funds, such as bank statements, or personal references from their former neighbors or landlords. Others request a letter of credit or require the tenant to pay 6 months or 1 year in advance. Ethan Assouline, a Compass agent in New York City, does more than that. “If you’re a celebrity, you can also search Google to see if there’s any past trouble or noise issues with due diligence,” he says. “In addition, when we represent the landlord, we often know who the broker is on the other side, the reputation of the broker, and the type of client they are working with.”

Make sure your insurance is sufficient. Luxury property landlords consider ensuring a comprehensive policy to begin when the landlord is sued for a property accident or injury and the fundamental limits of the landlord’s policy are not sufficient to cover the costs. need to do it. According to the Insurance Information Institute, an industry group, all landlords of long-term rental housing over 6 months, regardless of rent level, must have a landlord policy or rental housing policy. The landlord’s policy provides compensation for physical damage to property caused by fire and other casualties, as well as compensation for personal property left by the landlord for use by the renter. It also includes liability insurance if the tenant or guest is injured in the property. Many landlords’ policies also cover loss of rental income if the property cannot be rented during repair due to damage caused by indemnified loss. The landlord’s policy is usually about 25% higher than the standard homeowner’s policy for this additional protection.

Doa occupancy inspection. It’s common to inspect low-priced rentals so that the landlord doesn’t hurt when the renter moves out, but for high-priced rentals, Schorr walks prejudices to protect both. Through is recommended. “Document everything with videos and photos and get the tenant to sign off,” he said. “Then you have a record in the event of a dispute.”

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