With the rapid rise of vacation rentals in recent years, many people are considering starting one as a business. While an increasing number of hosts are utilizing vacant houses or spare rooms in their own homes, others wonder, “Is it even possible to run a vacation rental in a leased property?” In this article, we’ll explain everything you need to know about operating a vacation rental in a rented property, along with key points to keep in mind.

Running a Vacation Rental in a Leased Property Is Possible

Indeed, operating a vacation rental in a rented property is possible, depending on the property. However, there are several important points to keep in mind even when it’s permitted.

1. Consent from the Landlord and Sublessor Is Essential

To start a vacation rental, you need to file a notification with, or obtain permission from, your local municipality. For a simple lodging business license, municipal approval is required; for a Special Zone Vacation Rental, municipal certification is needed; and for operations under the Private Lodging Business Act, a simple notification is sufficient to begin.

However, if the lease agreement prohibits subletting, you must obtain the landlord’s permission beforehand in order to operate a vacation rental in a leased property. In addition, when filing your notification with the municipality, you’ll be required to submit documentation confirming that subletting is permitted—so it’s essential to avoid operating without proper consent.

Running a vacation rental without authorization is treated as “unauthorized subletting” and can lead to serious problems.

2. Unauthorized Subletting Risks Contract Termination

If you begin operating a vacation rental without the landlord’s permission, it will be treated as unauthorized subletting—a breach of contract that could result in termination of your lease agreement.

In general, lease agreements specify that the property’s intended use is “residential,” so running a lodging business without permission constitutes a contract violation. To avoid this situation, choose a property where subletting is explicitly allowed. There are even property search sites dedicated to sublettable properties, so if your goal is to run a vacation rental, it’s worth using one of these.

3. Unauthorized Subletting Could Lead to Liability for Damages

If you start a vacation rental without permission and it’s deemed unauthorized subletting, the landlord may issue a warning demanding that you stop operations. If you ignore this warning and continue operating, you could face not only contract termination but also eviction and a claim for damages.

To avoid these risks, it’s essential to carefully review the terms of your lease agreement beforehand and, if necessary, negotiate with the landlord to have permission explicitly added in writing.

Benefits of Running a Vacation Rental in a Leased Property

There are, of course, many advantages to operating a vacation rental in a leased property.

Higher Profitability Than Residential Rentals

Under the Private Lodging Business Act, operation is limited to 180 days per year—but even within that limit, a high occupancy rate can generate substantial income. Furthermore, under a Special Zone Vacation Rental or simple lodging business license, there’s no limit on the number of operating days, opening the door to even greater profits.

You could also operate as a vacation rental for the allotted 180 days and then switch to a monthly or weekly rental for the remainder of the year—boosting profitability through creative management. The ability to increase your returns with a bit of ingenuity is one of the real appeals of running a vacation rental in a leased property.

Even “Stigmatized” Properties Can Generate Profit

Just as with hotels and traditional inns, there’s no legal obligation to disclose a property’s history as a “stigmatized property” (one with a death or other incident on record) when operating a vacation rental. This means that properties which are difficult to monetize on the regular real estate market due to their history can still generate income when converted into vacation rentals.

That said, if a lease agreement is required for a Special Zone Vacation Rental, a disclosure obligation may apply in certain cases—so if such an obligation arises, be sure to disclose the property’s history accordingly.

Key Points to Watch When Operating a Vacation Rental in a Leased Property

Let’s take a look at the key points to keep in mind to avoid trouble when running a vacation rental in a leased property.

Check the Condominium Management Rules (For Condo Units) 

If you’re renting a condominium unit, be sure to check the building’s management rules in addition to your lease agreement. Violating these rules can lead to action from the management association or disputes with neighboring residents.

Because condominiums are home to a diverse mix of residents, management rules are designed to ensure everyone can live comfortably. When operating a vacation rental, be sure to follow these rules carefully so as not to cause inconvenience to those around you.

Additionally, when creating house rules for your guests, aligning them with the condominium’s management rules and usage regulations will help ensure smoother operation.

Review the Lease Agreement

Be sure to carefully review your lease agreement as well. If it prohibits vacation rental use, you won’t be able to operate one. Running a vacation rental requires the property owner’s permission, and when obtaining that permission, you should have them provide a document that explicitly states “vacation rental operation is permitted.”

Putting this agreement in writing makes it much easier to handle any disputes that may arise later. Additionally, even if subletting is already permitted under the contract, clearly communicating your intent to operate a vacation rental to the owner can help you avoid unnecessary trouble down the road.

Tips for Successfully Running a Vacation Rental in a Leased Property

Even after launching your vacation rental business, you may run into obstacles like “the occupancy rate just isn’t rising the way I’d hoped.” Here are some key tips for boosting profitability and running a successful operation.

Target Areas with High Demand

Tourists tend to prefer locations with good accessibility. Properties near tourist attractions or major train stations are naturally a smart choice. Being close to sightseeing spots increases convenience for tourists, while proximity to major stations makes the property easy to use for a wide range of guests, including business travelers—both of which can help boost your occupancy rate.

Target Areas with Less Competition

Popular areas inevitably come with fierce competition, so it may be worth targeting slightly farther-flung locations that still offer convenient access. For example, areas within a 30-minute direct commute (no transfers required) from a major terminal station can be a great opportunity. It’s also worth researching the number of nearby properties and their booking rates, then offering a unique service in an area with less competition.

Build Good Relationships with Neighbors

Complaints from neighboring residents are more common than you might expect. Issues like improper garbage disposal or late-night noise from guests can easily escalate into real problems. Responding quickly and courteously is key to earning your neighbors’ understanding and preventing trouble before it starts. Be sure to thoroughly communicate your house rules, especially to international guests who may be accustomed to different everyday customs.

Tailor Your Amenities and Marketing to Your Target Guests

Choose your interior design and amenities with a clearly defined target guest in mind.

For example, families appreciate a well-equipped kitchen, while international travelers consider reliable internet access essential. If you’re targeting a younger crowd, an Instagram-worthy interior and a smart TV with streaming service access can make a big difference. By tailoring your amenities to your target guests’ needs, you can provide a truly comfortable stay.

In Conclusion

Operating a vacation rental in a leased property always requires permission to sublet. Operating without the owner’s consent can lead to penalties or even termination of your lease, so be sure to check everything thoroughly beforehand. Understanding the different types of vacation rental operations and their regulations, and confirming that your desired property is suitable for this purpose, is the first step toward success.

The vacation rental business is expected to remain in high demand going forward. If you’re interested, why not consider giving it a try? At Stay Buddy, we offer comprehensive support covering everything from vacation rental operation and permit applications to guest acquisition.

If you have any questions about vacation rentals, please don’t hesitate to reach out to us!