Before renting your home on AirBnB or VRBO, make sure you've considered all the pros and cons of being a host.
After months of saving, you're finally ready to take that expensive dream vacation. Well, almost ready. Between plane tickets, accommodations, food, sightseeing, and ground transportation, the costs seem to keep adding up. Then a friend suggests renting your home on AirBnB to make some extra money while you're away. It seems like a good idea—but is it?
When you rent out your home on AirBnB.com or VBRO.com (Vacation Rentals By Owner), there's more to consider than whether or not you're comfortable with a stranger living in your house (though that's a huge consideration, as well). There are costs, legalities, and neighbors to think about, among other things. If you're going to list your home on AirBnB, take a moment to familiarize yourself with the risks and rewards.
What are AirBnB and VRBO?
AirBnB and VRBO are companies that list either a home or room for rent, usually for vacationers or others traveling through an area. According to AirBnB's website, the service has hosted over 60 million guests in more than 34,000 cities worldwide. Hosts pay a service fee to the company for the listing and guests get to use it for free to find affordable places to stay.
In recent years, horror stories have emerged about poor guest behavior in AirBnB and VRBO rooms, but the reality is that there are other risks more common than bad customer conduct. First, let's talk about the positive points of these services.
The pros of AirBnB and VRBO
The obvious benefit to renting your home on AirBnB or VRBO is that they are both easy and affordable ways to list your home for rent, and they maintain some customer accountability. Guests and hosts both are invited to leave feedback about each experience, which is public information for other would-be visitors to see. If you plan to rent your home out with any regularity, make sure that you provide a positive experience for your guests, and likewise, if the guests ever want to rent again, they'll need to have a high approval rating from hosts.
And of course, there's the money. If you have a vacation home you only use now and then throughout the year, you can rent it out to others who might be interested in visiting the area in the off-season or outside of your window of occupancy. Some of the money will surely have to go to maintaining the home for rental, but much of it can be pocketed and used for other things, like a more expensive restaurant while you're on vacation. Some people even pay off their mortgages on rental properties this way.
The risks of short-term rentalsAirBnB and VRBO also come with their share of challenges. The first and most important is whether or not it's even legal to rent your home on these services. New York City and San Francisco, among cities around the world, have banned short-term rentals (though the term "short-term rental" has a different meaning in different places) and greatly limited room sublets via the two online services. If you're thinking about putting your home up for rent, make sure you know the laws in your city and state.
Taxes are also a consideration. Again, the laws vary between cities and states, but generally, you must report most of the income earned on short-term rentals to the IRS and pay taxes accordingly, with very little (if any of it) qualifying for write-offs. Depending on how long your guests stay, you might also have to register your rental as a business and get separate insurance.
Insurance and incidentals
While we're on the subject, insurance is a major consideration when you rent your home on AirBnB. Damage caused by guests may not be covered by a homeowners policy, but if your rental isn't registered as a business, you won't be able to cover it through a business policy. Your homeowners policy also may not cover injuries sustained by guests renting your home, which can become costly. You can take your chances and have no insurance at all, but there's a heavy risk involved, especially for very short-term stays.
There are also incidentals to think about, like supplies, meals, bedding, linens, and other amenities typically offered by hotels. These add up over time, and while the more you have, the more value you add, such things can also be hard to keep up with.
Business more than pleasure
While earning the extra income by renting your home on AirBnB or VRBO is attractive, the reality is that it can become a full-time job. Managing a property isn't easy, and if you're going to offer one for rent all year round, there are going to be a lot of things to keep tabs on. Make sure you're ready to take on the challenge before you cough up that service fee for a listing.
Whether for your home or business, Pekin Insurance has insurance solutions to suit your needs. Contact us today to find out more.
Do you rent your home or a room out for short-term rentals? What are your thoughts on the subject? Let us know in the comments.