I’ve recently been asked by a number of people if I thought it was a good idea to rent their home through a national website to earn some additional cash. After all, what could possibly go wrong?
Aside from your house being trashed while you’re away, here are three things to keep in mind if you are considering renting out your house on a short-term basis.
The rise in popularity of Airbnb and other sites hasn’t been without its controversy. There are concerns that short-term rentals threaten the jobs of hotel workers, and that a short-term rental doesn’t have to pass the same certifications and inspections of regular hotels. Finally, many investors are buying properties with the intent of renting them out, which takes housing off the market in areas with already limited inventory (check out this article from The Los Angeles Times to learn more).
Some cities have enacted restrictions against short-term rentals. You may need to register and get a permit or a license – or you may not be able to host at all. Check with your local government to make sure you understand the laws.
You don’t need to report the money earned from the short-term rental of your home if you meet both of these requirements:
A. You rent it out for fewer than 15 days a year AND
B. You live in it for more than 14 days or more than 10 percent of the total days you rent it out during the year (this determines if the property is seen as a residence or a rental property by the IRS).
3. Additional Costs
Renting out your home could mean an extra insurance bill. Check with your insurance agent to learn what your current policy covers regarding short-term renters. They may recommend increasing coverage. Airbnb does provide free primary liability coverage for up to $1,000,000 per occurrence, and many of the other sites have partnerships that make it easy to take out additional coverage, if needed.
In addition to insurance, you’ll have to pay a percentage of the rental income to the website: Airbnb and FlipKey both charge a 3% host service fee, VRBO has an option to pay-per-booking or an annual subscription fee. *
Before you decide to rent out your house, know what you are getting in to.
All the best!