Understanding short-term rentalsMany people who own a second home or vacation property generate income by renting out their home when they’re away. Because short-term rentals are most often used by people on vacation, stays might vary from a few nights to several weeks; some are leased for as long as a month. Anything under six months is generally considered a short-term rental. Over the last 10 years, the use of shared economy brands like VRBO, HomeAway and Airbnb has exploded. Staying in short-term rentals is so common that many companies allow employees to expense their stays just like a hotel room.Homeowners choose a short-term rental strategy for income potential, marketing automation (through sites like Airbnb), overall flexibility and tax benefits. Short-term rental requires less commitment than a long-term lease and tenant, and works well if the homeowner wants to enjoy the home themselves. That said, short-term rentals do have drawbacks. Owners are responsible for cleaning, coordination and maintenance to keep the property in guest-ready condition. Seasonality can also play a part in whether a rental will be in demand — meaning owners might have to give up personal stays during the most popular times of the year. Local restrictions are another critical consideration. Each city or county defines what qualifies as a short-term rental property, and the fees are hefty for homeowners who rent under the radar. Owners should verify local regulations, zoning, taxes and licensing before leasing their property.Example: John lives in Austin, Texas, and rents out a garage apartment during South by Southwest, a festival that fills the city’s hotel rooms. His property is registered and licensed with the city to allow stays under 30 days in length.
TakeawaysTo have a short-term rental, owners need to:
- Research local regulations and restrictions
- Ensure property zoning allows short-term rentals
- Register for appropriate licenses through the city
- Prepare for additional taxes