Recently you might have heard economists referring to our modern day “gig economy,” a term used to describe the increasing dependence on short term contract and freelance jobs rather than permanent positions. In this growing gig economy, people are looking towards cultivating multiple streams of revenue to safeguard themselves from market or employment fluctuations. With the rise of companies like AirBnB, HomeStay and Vrbo (Vacation Rentals by Owner), homeowners are increasingly turning to the short term rental business to make extra money. While this can be lucrative and even rewarding, there are potential pitfalls to watch out for. Here are 3 things to keep in mind when considering renting your home for short stays.
Legality
Short-term rental law changes rapidly and varies widely across states, counties and cities. Short-term rentals might be restricted to specific zones, like commercial zones, and prohibited from residential zones. Or they might only be permitted in units occupied by the owners while listings for the whole home are banned. In this case, you are often required to maintain residency for a specified number of calendar days a month or year. In addition, if your city considers hosting to be a business, you might be required to obtain a business license along with other permits. Like anything else, do your research on the legality of short-term rentals in your city and neighborhood before anything else. And given that the laws are changing so quickly, it is worth consulting a lawyer specializing in short-term rental law to ensure you are set up correctly.
Taxes
If your neighborhood does permit short-term rentals, it's likely they will require you to register your unit and collect a "hotel tax" that is remitted to the city. AirBnb and similar companies often have agreements in place with cities to do this automatically, but if they don't you are responsible for collecting and remitting the taxes accordingly. Just like with the legality issue, it is likewise worth enlisting the help of a professional when it comes to taxes. Find an accountant familiar with short-term rental tax codes and law who will help ensure you are operating above board and collecting the proper taxes.
Neighbors
Even if your city permits short-term rentals, you should also consider your neighbors when deciding whether or not to list your home. Some neighbors will be averse to the idea of people coming and going from the neighborhood on an ongoing basis. This aversion often is the result of misunderstandings about short-term renters themselves. Many people assume short-term renters are party-animals with little concern for the integrity of the neighborhood. The truth is, many short-term renters are travellers looking for a more intimate travel experience than can be found staying in a hotel. So talk with your neighbors and feel out their comfort level. You could also draft a copy of potential house rules including quiet time hours, a no smoking policy and prohibiting unregistered guests to make your neighbors feel more assured that your guests will not be a nuisance to the neighborhood.
Short-term renting can be a great way to make money, but it’s not always an option. Educate yourself about the ins and outs of short-term rentals in your area so you can make the best possible decision for you and your neighborhood.
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