3 Things To Consider Before Renting Out Your Home

Once upon a time, the idea of renting out your home to a stranger while you left for vacation was considered quite odd. Today, renting a room or your entire house out to unknown travelers isn’t an outlandish concept – thanks in part to Airbnb and VRBO. Short-term rentals provide an income opportunity for owners and a unique way for visitors to experience a city. If you thinking of being a host of a short-term rental, here are 3 things to keep in mind.

Legality

Some cities have enacted restrictions against short-term rentals. You may need to register and get a permit or a license before hosting. Check with your local government to make sure you understand the laws.

Taxes

You may not need to report the money earned from the short-term rental of your home if you meet both of these requirements:

1. You rent it out for fewer than 14 days a year AND

2. You live in it for more than 14 days or more than 10 percent of the total days you rent it out during the year (this determines if the property is seen as a residence or a rental property by the IRS).

Still unclear about the taxes on your short-term rental? TurboTax provides some more information, or you may want to consult with a tax professional.

Additional Costs

Renting out your home could mean an extra insurance bill. Check with your insurance agent to learn what your current policy covers regarding short-term renters. They may recommend increasing coverage. Airbnb does provide free primary liability coverage for up to $1,000,000 per occurrence, and many of the other sites have partnerships that make it easy to take out additional coverage, if needed.

In addition to insurance, you’ll have to pay a percentage of the rental income to the website: Airbnb and FlipKey both charge a 3% host service fee, VRBO has an option to pay-per-booking or an annual subscription fee.

Article originally appeared on RE/MAX.