(RE/MAX Blog)- Once upon a time, the idea of renting out your home to a stranger while you left for vacation was considered quite odd.
Enter changing consumer attitudes, the "sharing economy" and online services such as Airbnb, FlipKey (owned by TripAdvisor) and VRBO (owned by HomeAway, which is now owned by Expedia).
Today, renting a room in your house (or the entire house) to unknown travelers isn't an outlandish concept. Short-term rentals provide an income opportunity for owners and a unique way for visitors to experience a city. What better way to get the local experience than staying with – or renting from – locals?
If you think you're up to being a host of a short-term rental, here are three things to keep in mind.
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.
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:
1. You rent it out for fewer than 15 days a year AND
2. 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).
Still unclear about the taxes on your short-term rental? Forbes and TurboTax provide some more information, or you may want to consult with a tax professional.
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.
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