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All You Need to Know About Short-Term Rentals in the US Housing Market

Real estate short-term rentals – Airbnb rentals – have become a popular new source of rental income for homeowners and landlords. They are also beneficial for travelers as they provide an affordable and comfortable alternative to hotels.

Thinking about making money from real estate by renting out your property or an extra room on a short-term basis? Here is all you need to know about real estate short-term rentals.

Some Pros of Short-Term Rentals – Airbnb Rentals

1. Websites such as Airbnb, HomeAway, and Trip Advisor have been in the business for a long time and have an excellent business model to follow. These websites allow real estate investors to take a look at potential tenants’ bank information before deciding if they wish to rent your home, and they handle all issues of payment.

2. Flexibility – Real estate investors choose the days, weeks, or months to rent, so they rent as much or as little as they choose.

3. Brings in extra cash – Some real estate investors take the rental income received from Airbnb rentals and use it to pay their mortgage.

4. Less wear and tear on the property – You can keep up with small repairs before they turn into big problems.

A Few Cons of Short-Term Rentals – Airbnb Rentals

1. Less consistency in rental income – There is a possibility that you may go weeks or months without a short-term renter, as opposed to traditional rentals where you ensure a steady income.

2. More risk involved – There is more likelihood of theft, breakage, or problematic tenants/guests. In addition, people who rent a property for just a short period of time may not treat the space with the necessary care.

3. Takes more effort to manage – Generally, you become the manager responsible for collecting payments, scheduling guests, and doing all the work to bring in renters.

4. More maintenance costs are associated with short-term rentals than with traditional rentals.

Preparing Real Estate Short-Term Rentals – Airbnb Rentals

1. Clean and Fix Any Hazards

Obviously, Airbnb rentals should be clean and in good condition upon your guests’ arrival, particularly the bathrooms and the kitchen. Many Airbnb hosts hire housecleaning services to do a thorough cleaning before guests arrive, while others do it themselves and save the expense.

Additionally, fix anything that may cause an injury the your Airbnb guest; there should be no obvious safety hazards like exposed wiring, for instance. Many Airbnb guests have cleanliness and comfort standards as those found in a hotel.

2. Safeguard Your Valuables

If you’re renting out your property (home or apartment) only short term, you certainly have many valuables you don’t want to lose or have strangers messing with, such as jewelry, financial papers, personal documents, etc. The best way for real estate investors to safeguard their valuables is to screen anyone you rent to; if available, check references and profiles of Airbnb guests.

Another option is to place all such items in a separate locked room, or even place extremely valuable items in a bank safe deposit box.

3. Equip Real Estate Short-Term Rentals for Guests

Airbnb rentals should be equipped to make your guests’ stay as easy and pleasant as possible. This is the way to get good reviews and on sites like Airbnb and VRBO. You should, for example, provide: clean towels and linens, basic toiletries, seasonings and basic food items, cleaning supplies, microwave oven, dishes and silverware, Internet access, first-aid kit, fire extinguisher, etc.

4. Leave Detailed Instructions

When investing in short-term rentals, make sure to fully explain your house rules; the more written instructions you leave for guests, the better. Here are some instructions you should leave:

  • How to operate all electronics like dishwasher, washing machine, stove, heating, and AC, as well as how to access the Internet connection.
  • Provide a list of local grocery stores, gas stations, recommended restaurants, and local emergency numbers.
  • Is smoking allowed?
  • May your guests have parties?
  • If you allow pets, provide specific pet rules.

Finally, be sure to leave your contact information (email and phone) in case tenants need to get in touch with you

Legal Restrictions on Short-Term Rentals – Airbnb Laws and Regulations

Airbnb regulations depend on several factors, such as where short-term rentals are located, what type of home you own, and for how long you rent it out. And if you rent (but don’t own) your home, lease (rental agreement) restrictions are also an issue. Legal restrictions on short-term rentals can be confusing, and not many short-term rentals websites provide help to potential hosts to understand or comply with these laws.

1. Restriction on Real Estate Airbnb Rentals’ Location

Many cities, counties, and municipalities have legal restrictions on short-term rentals which vary from place to place; in some cities, these restrictions are quite severe and make most Airbnb rentals illegal.

For example, in New York City, residential real estate properties located in multiple residential dwelling units (like an apartment building) must be used for “permanent resident purposes”. This means that the property must be occupied by the same person or family for 30 or more consecutive days, and it is illegal to have guests paying for less than 30 days – unless the property is a licensed hotel or other similar business.

Some cities and municipalities, on the other hand, allow Airbnb rentals as long as the property owner is registered with the city, or obtains a license or permit, and pays all related fees and taxes. San Francisco, for instance, allows short-term rentals of up to 90 days per year but limits it to owners who live on their property at least 275 days per year.

2. Lease Restrictions on Renters

If you’re a renter, you need to check your lease or rental agreement before you use your apartment for short-term rentals. Most leases restrict or prohibit short-term rentals or Airbnb rentals before obtaining the landlord’s permission in advance. You will possibly get evicted by the landlord if you violate your lease.

3. Tax Issues With Short-Term Rentals – Airbnb Rentals

Real estate investors can rent out short-term rentals for up to 14 days per year, and all the rental income received is tax-free, no matter how much they earn. However, if Airbnb rentals are rented for over 14 days during the year, real estate investors have to pay income tax on the rental income. They are still allowed to deduct form rental-related expenses but within very strict limits.

4. Insurance on Short-Term Rentals – Airbnb Rentals

If a tenant damages your home or your personal property, the loss may be covered by your:

  • Homeowners’ insurance – Provides coverage and liability insurance if accident occurs on your real estate property.
  • Renters’ insurance – Provides coverage if your personal possessions are destroyed or stolen, and liability protection when someone is hurt in your dwelling.

However, your insurer may refuse to pay you for the loss if your insurance doesn’t cover your short-term rental. A solution emerged when some hosting companies began to offer their own insurance or reimbursement plans.

For example, Airbnb has a “host guarantee” in which the company promises to pay up to $1 million to a host for property damage caused by a renter. Still, real estate investors need to understand that this guarantee is not insurance – it doesn’t cover cash and securities, collectibles, rare artwork, jewelry, pets, or personal liability.

How to Find Local Laws and Legal Restrictions on Short-Term Rentals

The Airbnb rentals website has a summary of legal requirements of about 50 cities and links for more information. You could also look into the “Short Term Rental Advocacy Center”, created by Airbnb, HomeAway, Trip Advisor, and FlipKey, for information on restrictions on short-term rentals.

Conclusion

Real estate short-term rentals can be the best rental strategy for making money from real estate. In practice, aspiring short-term real estate investors need to make sure to do their homework and play by the rules. Investors also need to identify the kind of guests they hope to attract, how much they’ll pay, and what they should expect from them.

For more information about short-term rentals, or Airbnb rentals, and to learn how to start your career as a real estate investor, don’t forget to visit Mashvisor.

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Eman Hamed

Eman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions.

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