If you, like many others, want to rent out a room or your entire house for a weekend or other limited period of time, here is a short list of some things to keep in mind:
- Government rules — Check with your local governments (town, city, county and/or state) regarding any zoning or other rules that apply to short-term rentals. In particular, pay attention to any restrictions on length of time, number of guests and any sales or other taxes you may owe for what is essentially a commercial use of your home. You may also need to get a business license and should consider establishing a legal business entity. Check with your accountant.
- Deed restrictions — If your property is part of a homeowners association, check to make sure your rental would not violate any deed restrictions or organization rules. Such violations could result in hefty fines, assessments or liens.
- Insurance — Consider carrying liability insurance that would cover you in the case of an injury or other claim against you by or related to your guests and their activities. And, remember, renting part or all of your home will most likely invalidate your existing homeowner’s insurance policy.
- Online services — If you use an online service (such as Airbnb, Vrbo, etc.) and that service claims they provide liability insurance, carefully check that coverage to make sure you are fully covered in the case of either claims or catastrophic fire or other kind of damage to your home that may not be covered by your existing insurance coverage. Also, each service has slightly different rules, so read that fine print!
- Background checks — Most online booking services perform only limited identity or background and/or credit checks and provide only limited liability coverage. This is perhaps one of the greatest areas of risk for homeowners, so consider requiring your own additional check on potential guests; however, be aware that people may be reluctant to give you their Social Security numbers.
- Tax Implications—Be aware that renting your home, even for short periods, could affect your property tax and income tax status or both. Check with your accountant to make sure the income you might gain is sufficient to offset any new tax liability and that you would not violate any of your real estate investment regulations.
