It’s midsummer in Southern California — boom time for local real estate agents who serve celebrities, Saudi royals, off-season sports stars and others in the short-term, tall-order luxury rental niche.
It’s a slice of business that carries the reputation of being a big moneymaker and a source of major headaches. Veterans confirm that luxe short-term leases can charge double or triple what long-term ones do.
Just don’t call it easy money, said Patrick Michael, founder and CEO of Global Estate Group, the parent company of LA Estate Rentals, one of the sector’s major players.
“Commissions are higher because there is so much more to deal with — property management, concierge client experience,” Michael said. “You’re converting homes to five-star hotel experiences. It’s a full-time job where you’re at these clients’ beck and call.”
Many deep-pocketed tourists choose to rent houses on vacation because they are often traveling with big families and retinues of chefs, butlers, security guards and nannies. Others prefer the privacy of a house to a crowded hotel lobby.
There are a handful of companies devoted to this business. Some of Los Angeles’ top real estate agents work side hustles, renting out mansions and villas for one to six months in enclaves such as Beverly Hills, Malibu and the Hollywood Hills. Upscale homes can command monthly rents from $15,000 to more than $700,000, according to some agents.
Sotheby’s International Realty has many short-term rentals in Los Angeles, according to Kamini Lane, the brokerage president, who’s based in Beverly Hills. “Malibu stands out as the hottest market right now,” she said.
As of mid-June, there were 73 homes available for short-term leases in the beachside town, Lane said, with nothing for less than $30,000 a month.
There are shorter options, too. LA Estate Rentals represents properties that charge anywhere from $3,000 to $5,000 a night. The priciest of the ultra-luxe short-term rentals can go for $25,000 a night, Michael said.
The luxe short-term rental business has been popular for decades, but it got a boost during the pandemic and the surge has continued, Michael said.
He and his staff of 18, plus 30 sales and leasing agents, exclusively represent 65 properties in the L.A. area, which Michael estimates as having $30 million in gross annual rental income.
“Wealthy people don’t want to sacrifice their lifestyle,” he said. “During the pandemic, they wanted the luxury of traveling in isolation to different cities.”
Michael started his luxe rental business just before the Great Recession, and found himself coming to the rescue of developers unable to sell spec houses in a down economy. Today, spec developers don’t consider renting to be a last resort, he said.
“Every week we get three to four offers,” he said. “We’re very selective of who we talk to.”
While some spec developers rent homes before a sale offer comes in, other homeowners rent out luxury properties just so they don’t fall into disrepair, said Lawrence Taylor, founder of Christina, a Malibu-based real estate investment firm.
“I had these two beach houses that were just 17 doors away from each other,” Taylor said. “One of them was sitting there unoccupied, like a Ferrari that is just sitting unused. The home deteriorated simply from lack of use. Short-term rentals provide the impetus for us to maintain the property.”
It’s also gaining wider acceptance among owners of luxe properties, said Compass’ Aaron Kirman, one of Los Angeles’ top residential brokers, who advises clients spending long trips abroad to rent out their houses.
“A lot of my wealthy clients are embracing this business,” he said. “They will lease to the ‘right’ individual.”
But that doesn’t mean supply can keep up with demand.
“At the super high end, there is a struggle to find inventory,” Kirman added. “There are more clients than houses.”
While there’s glamour that comes with working luxe estates, there are also headaches, according to Compass agent Lee Mintz. Tenants looking for short-term rentals expect agents also to work as their concierges, Mintz said, helping to rent performance cars, book reservations at exclusive restaurants and find tutors for their children.
“I get calls in the middle of the night. ‘Lee, there’s a 7-foot snake in front of my house. What do I do?’” she remembers one panicked client asking her. “Lee, my girlfriend is vandalizing the house. Can you come over and change the locks?” another asked. Mintz advised both clients to call 911.
As with any rental business, returning rented property without a scratch is crucial. Agents have to painstakingly document every possible flaw before a renter moves in and when they leave. Any argument over who is responsible for damage is a potential lawsuit.
Coldwell Banker’s Jade Mills shared a cautionary tale of two men she rented a house to in Beverly Hills.
“We were really fooled,” she said. “They said they had no pets, but they had two very large golden retrievers. They moved in two other people who they said were office staff. There were five or six people and two pets living there for a year. And they pretty much destroyed the house.”
Michael said renters also have to be wary.
“It’s buyer beware — a bunch of houses are posted on a site, and it becomes a bait and switch,” he said. “A person running the site will say that a house is not available and bring them to another home.”
Santa Monica, Malibu and Los Angeles have instituted guidelines for short-term rentals, or “home sharing” in the parlance of some planning departments. Rules in L.A. call for owners to collect occupancy taxes of 14 percent on short-term stays.
In May, the Los Angeles City Council heard a report that possibly one-third of short-term rentals are unpermitted, and directed the city’s Planning Department to study the issue and advise on ways to make unpermitted short-term rentals follow the law.
But the headaches can be worth it to agents, especially if a short-term stay lays the groundwork for a sale, said Mintz.
In 2020, a client rented a house for $40,000 a month in the Hollywood Hills. In October, he bought the home for $9.3 million, then bought the house next door because he didn’t want to share his driveway, she said.
That same year, Mintz sold Los Angeles Rams cornerback Jalen Ramsey a $10 million house in Hidden Hills after she helped him lease a home in Encino for $15,000 a month.
“They come — they test-drive the area,” she said. “They see if they like it, then they buy.”