I used to be shy at parties, not knowing how to get a conversation started. But now I have a magic topic: “short-term rental.” When people discover that my husband and I rent out our home to help pay for trips to places like New York, Istanbul, Paris, Mexico, and Montreal, they invariably want to know more. Here are some quick answers to some of their frequently asked questions.
Disclaimer: Although the information about in this post is accurate factual as far as I know, it’s only an overview. In particular, the laws, regulations, rules, and taxes related to short-term rentals can be very complicated. Everyone’s situation is different, so I strongly recommend that you consult professionals such as attorneys and tax advisers.
Is it safe to rent my home to strangers?
Yes, and no. There are no guarantees. But we’ve never had more than minor problems. That’s because we make an effort to get to know the people we’re renting to. We talk to them on the phone or via Skype. We look them up on the Internet and ask for documents such as driver’s licenses or passports to prove they are who they say they are. We ask for references. We also trust our intuition: if something seems wrong, it might very well be wrong, and we’d rather lose the rental than risk serious problems.
Why would someone want to rent my home?
It depends partly on what type of home you have and where you live. If your home is near the beach, the lake, or the ski slopes, you’ll be more likely to attract vacationers. In a major city, you might attract a lot of tourists from other countries. In our suburban area, we’ve had tourists who wanted to “live like a local”; people who were visiting family, attending a wedding or other special event, or in the process of relocating; locals whose homes were being renovated; and more.
Is it okay for me to rent out my home? How do I check?
We live in a private home in a residential suburban area. We also have a condo in San Francisco. There are currently no restrictions on renting out our primary residence. But San Francisco is in the process of enacting significant restrictions on short-term rentals; we are also subject to our building’s HOA rules regarding rentals. For that reason, we set a minimum rental period of 30 days, so our condo won’t be subject to short-term rental regulations.
If you belong to an HOA, live in a Coop building, or are a tenant yourself, you might not be allowed to rent out your home. Your city, town, or even state might have enacted legislation that impacts your ability to do a short-term rental. Check your HOA or Coop documents or your lease, and do a search for short-term rental regulations or laws that might affect you.
How much time and work does the short-term rental process take?
Setting up and managing a short-term rental isn’t something you can do overnight. It takes a lot of time to get started – educate yourself about laws and regulations that might apply, research short-term rental sites, and create a great home listing that helps make your home stand out from the competition. It takes time to respond to inquiries, screen guests, and finalize arrangements. And it takes more time to get your home ready for guests and set up a system to take care of things while you’re away.
Before starting on the process, make sure you can find the time to do it right—rushing is likely to cause problems that will take you even more time.
Which short-term rental listing site should I use?
Which listing site is best for you depends primarily on your answers to two questions:
- Whether you want to pay an upfront fee for the listing or list for free and pay a percentage of the rental amount to the listing site
- How important it is for you to communicate directly with guests before they book
“Free” listing sites such as Airbnb don’t ask for money up front, but they also block direct communication with guests until after the booking has been made and paid for. As I said above, our primary way of keeping our rentals safe is to communicate with guests before booking.
“Subscription” sites charge an annual fee for the listing, but they allow you and guests to communicate freely at any stage of the process. Until recently, we used VRBO for that very reason. Now that VRBO is phasing out subscriptions, we’re searching for alternatives such as Tripz and Home Escape, new sites that let us remain in control from start to finish. We also list on Sabbatical Homes, which reaches a smaller, but more targeted audience of academics and professionals, and we use Craigslist very, very carefully.
How do I know how much rent to charge?
This one is easy. Do a web search to get the answers to these questions:
- What are the per-night, per-week, or per-month rates for similar short-term rentals in your area?
- What are local hotel rates in your area
To make your short-term rental competitive, keep your rates to the average for your area.
What’s the best way for guests to pay the rent? When should they pay it?
You might have no choice about how and when the rent is paid. Many listing sites, including Airbnb and VRBO, collect the rent from guests and deduct fees before passing it on to you. We collect rent directly, using PayPal when possible. When we accept a check, we wait to return the signed agreement until the check clears. You can also use wire transfers, although they usually come with hefty fees.
Airbnb collects the full amount of the rent when the booking is made, but doesn’t pass it on to you until 24 hours after guests check in. Other listing sites with online payments have similar policies. We ask guests to pay the full amount of the rent at least 30 days before they arrive.
Do I have to declare the income on my tax return?
Yes. If you rent out your home or second home for more than 14 days a month, you’ll pay taxes on the rent you receive. You’ll also be eligible for certain deductions, so keep careful records and check with your tax preparer.
Do I need to do a credit check and draw up a lease?
We don’t do credit checks because our guests pay the entire rent 2-4 weeks before they arrive, although some short-term rental owners use credit checks as a tool for screening. But we always use a written agreement that spells out the key terms, including the specific dates of the rental, the amounts of the deposit and rent, when the rent is due, the number of people who stay in the home, and some important rules, such as no smoking and respect for the neighbors.
What other questions do you have about hosting a short-term rental? Ask them in the comments or on our Facebook page. We’ll try to answer them in Part 2 of the Short-Term Rental FAQs, coming soon.