As a short-term rental property owner, your guests won’t be staying as long as those of a traditional landlord’s tenants. But that doesn’t mean your property is at less risk of damage from unruly guests or mishaps. In fact, given the high rate of guest turnover, you may be at even greater risk.
Fortunately, Airbnb allows property owners to require and collect security deposits. This article will briefly cover the different ways Airbnb handles security deposits and the pros and cons of each.
There are three scenarios for security deposits when offering a property for rent:
Airbnb determines when this security deposit type is applied, and the decision is based on the property’s features and the timing of the reservation.
In an Airbnb-required security deposit, Airbnb places an authorization hold on the guest’s payment method for the security deposit amount. The guest isn’t actually charged for the money in advance like in a normal security deposit. No money changes hands. Rather, the security deposit amount is just unavailable for them to use during the duration of their stay.
For example, a guest might be paying with a credit card that has a $3000 limit. If the security deposit is $500, the guest’s credit card’s limit will be $2,500 until the hold on the card ends.
In the event of a claim, it will be handled according to Airbnb’s Host Guarantee Terms and Conditions. You as the property owner must make a claim within 14 days of the guest’s checkout or before the next guest checks in.
If the claim is approved, then part of or the entire security deposit amount is charged to the guest’s payment method.
A host-required security deposit functions differently than that of an Airbnb-required security deposit in several ways.
First, you as the host or property owner are the one who decides whether or not a security deposit is required. You also set the deposit amount, which is normally between $100 and $5,000 USD depending on the property and the booking arrangements.
Second, instead of placing a hold on the guest’s payment method, the guests are simply charged the appropriate partial or full deposit amount when the host makes a claim and the claim is approved. Since you don’t get the money in advance, this is not so much a “deposit” in the regular sense as a “penalty charge” for damaging your property.
The third (and the most important) difference is that guests have the option of rejecting the host’s claim request.
Whenever you as the host makes a claim, guests have 72 hours to either accept or decline the payment request. If the request is accepted, the money goes to Airbnb first for them to process the payment, which can take anywhere from 5 to 7 business days.
If the request is denied, then you will have to involve Airbnb. Airbnb will have a Support Ambassador reach out to the guest and determine whether or not the deposit request should be enforced. If it’s a yes, then Airbnb will do the collecting for you.
If your payment request is denied a second time, then Airbnb will consider the matter closed and no further action will typically be taken by Airbnb.
As you can imagine, this is not the ideal arrangement to have if you have an uncooperative unethical guest. Because the money is not in your hands at the beginning of the rental period, there is less incentive for the guest to behave appropriately during their stay (which defeats the purpose of a security deposit).
This brings us to our third option.
There is still a way that property owners can collect security deposits in the traditional manner of paying the deposit in advance of their stay. And that’s with an “offline security deposit.” Here, a guest pays the fee in advance directly to the property manager using the chosen payment method as part of the booking process. This fee can sometimes be listed under “extra charges.” If there are no security incidents, the fee is refunded in full by the property manager once the stay is over.
Many property owners don’t know taking offline security deposits is allowed. In fact, Airbnb’s official guide to security deposits actively discourages guests from paying property owners directly.
But Airbnb allows exceptions if you’re one of the following:
A software-connected host is a host that uses vacation rental software like Uplisting to connect with Airbnb’s system.
As explained by Airbnb’s offline fee guide:
These (offline) fees are collected directly from guests using a separate payment method outside of Airbnb. Fees are normally collected before a guest’s stay, at check-in, or within 48 hours of checkout.
This option offers the best protection for property owners as it functions the most similarly to the traditional security deposit arrangement.
There are a few ways that Airbnb lets you handle security deposits, each with their own levels of convenience and risk.
Uplisting allows you to connect to the Airbnb platform quickly, so that you can conveniently set up security deposits for your property no matter which option you choose. In addition to security deposits, Uplisting can help you set up eSign rental agreements, automate guest messaging, and even manage cleaning schedules.
Sign up for a free trial if you’d like to see how Uplisting handles offline security deposits work on Airbnb.
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