3 Reasons Short-Term Rentals May Not Be Right For You
More and more people have come to see the benefits of using their home as short-term rentals. Even renting out a house while on vacation or allowing someone to use a spare room can generate extra income the homeowner needs. There are many services oriented around short-term rentals and there is more information about renting out a house that is being lived in.
However, it may not always be the best option.
Local Laws
With the rise in popularity in short-term rentals, there has also been an increase in complaints and concerns. With more people renting their homes out for a short duration hotel owners are concerned about competition. Workers at these hotels may lose their jobs if short-term rentals become the preferred way to visit an area.
There are new laws being put in place in certain cities. Most short-term rentals need to be registered with the city. The homeowner may have to obtain a license or permit to use their house as a short-term rental. Before spending too much money or effort in getting the house ready for short-term renting check with the local legislature.
Claiming Income on Taxes
Short-term rentals can make claiming taxes a bit more complicated. There is a rule that a short-term renter homeowner does not need to claim income from their rental if they meet two areas of criteria. The home must have been rented for less than fifteen days during the year. Plus the owner has to have lived on the property for more than fourteen days or more than ten percent of the time it was rented.
Higher Expenses
When renting helps the homeowner pay the bills it can be beneficial. However, some homeowners see much higher costs in their bills once they start renting.
For example, if they frequently rent out a section of their home their utility bill may rise drastically. If the amount they are charging is too little this rise in utilities may take up any income they could have gained.
There are also increases in insurance. Checking with insurance agencies on how they handle rental properties is a good first step. The rise in insurance may not be worth the amount of money that could be made from renting out the property.
If using a website or service to find short-term renters a portion of the income must be paid to that website. Many websites charge at least three percent of the income for their services. With all of these added expenses, it can quickly become more expensive to rent that can be made.
As a homeowner considers using their home for a short-term rental they have a lot of options to weigh. Short-term renting is a great avenue to pursue if the family is on vacation often or if there is extra space that is typically never used by the family. However, there are typically increased expenses when short-term renting. The homeowner must claim taxes on the income generated from renting their home and there may be local laws that stop them from renting at all.