The 2017 Super Bowl in Houston ushered in an estimated 150,000 guests. Those visitors weren't just a boon to local hotels, but also to residents renting out rooms and properties via short-term rental platforms such as Airbnb, HomeAway and VRBO.com. More than 8,200 people reportedly stayed at an Airbnb property alone.
And according to Christopher Nulty, Airbnb's head of public affairs in the Americas, 50 percent of the listings that were booked for the Houston Super Bowl were hosted by people who had never rented out their property on the site before. For the 2018 Super Bowl in Minneapolis, 70 percent of available listings on HomeAway were booked by October 2017 and average rates were listed for more than $2,300 a night.
It isn't just major events that are encouraging homeowners to rent out their properties. There is money to be made year-round, particularly in vacation hot spots such as ski resorts and Disney parks. In fact, the HomeAway 2018 Customer Satisfaction Survey found that the average homeowner renting on the site made $32,000 a year.
[Read: What Airbnb Means for Your Mortgage.]
But before you list your property, you'll want to familiarize yourself with local short-term rental laws, zoning restrictions and regulations from municipalities and associations. Read on to learn more about various regulations you might encounter, and what you should do if you ever find yourself booked in an illegal rental.
Understand current regulations. Short-term vacation rentals are nothing new. For example, VRBO.com's roots can be traced back to 1995. But the industry took off with the founding of Airbnb in 2008. John Manning, managing broker at real estate firm RE/MAX On Market in Seattle, says he was one of the early adopters in the short-term rental business and he's seen how cities have stepped up regulations in recent years.
"As a short-term rental owner, I welcome it," he says. From Manning's perspective, government licensing not only ensures rental properties are operating within established ground rules, but also creates stability in the housing market. Without regulation, people might be quick to snap up properties to rent out, which could reduce the affordability and community atmosphere of local neighborhoods.
A challenge for owners is the myriad regulations that have sprung up across the country. While some municipalities like New Orleans restrict short-term rentals to certain zoning districts and require them to be licensed, others prohibit them in certain properties. For instance, the New York State Multiple Dwelling Law prohibits rentals of less than 30 days in buildings with three or more apartments, unless the owner also resides there.
But not all communities are trying to squash short-term rentals. San Francisco changed its law in 2015 to expand the legality of short-term rentals. Today, its regulations limit rentals to 90 days per year if the host isn't present and requires the collection of a hotel tax.
Rent legally. Before renting, homeowners must understand their local laws. "It's hard to provide a clearinghouse [of rules] for everyone because there are many, and they change so quickly," says Melanie Fish, a HomeAway spokesperson.
However, that hasn't stopped some platforms from trying to help owners navigate the laws in their area, Nulty says. Airbnb works to direct property owners to local ordinances, when known, during the site's registration process. The company also helps link those new to the short-term industry to more experienced users through groups called host clubs. "We have more than a thousand host clubs around the world," Nulty says. Club members share information on local regulations, along with tips for managing guest expectations.
Still, owners should reach out to their local government directly to check for updated ordinances and policies. "It's really as simple as calling the clerk's office and having a frank discussion," says Mark Hakim, counsel with the law firm Schwartz Sladkus Reich Greenberg Atlas LLP in New York City.
Also, keep in mind that local governments can easily identify illegal short-term rentals. Officials may patrol neighbors and look for extra cars in driveways and other telltale signs of a rental, or look up their municipality on popular rental platforms and cross-reference those properties with those registered to operate in the community.
In addition to checking local ordinances, review any homeowners association, co-op or lease agreements for your property. Lastly, check state and local tax requirements and make plans to collect and remit these taxes if the rental platform you use doesn't already take care of that on your behalf.
Get proper insurance. Owners of short-term rentals also need to be sure they have adequate insurance coverage. "When you own something large, that puts a large target on your back," Manning says.
Some rental platforms automatically provide insurance for owners who list and book stays through their site. Airbnb, for instance, offers $1 million liability coverage and $1 million in host protection. HomeAway and VRBO.com also offers $1 million liability insurance. The key for any of these policies to be effective is that the property must be booked and paid for through the rental website. If you're renting your property through a method or platform that doesn't offer insurance coverage, you'll need to buy your own. You may also want to buy your own coverage to fill in any gaps left by the complimentary insurance policies, including property issues such as mold or pollution.
Ana Robic, chief operating officer for North America Personal Risk Services at Chubb, a property and casualty insurance company, says a typical homeowners policy won't cover any losses that occur while a property is being rented. Some companies may let existing policyholders add coverage for home-sharing, while others may recommend a commercial policy if the property is used mainly for rental purposes. "Every insurance company is going to treat it differently," Robic says.
What to do if you book an illegal rental. Despite efforts by online platforms and government agencies to educate people on the legal requirements of short-term rentals, hosts continue to list and rent out illegal properties. Though rare, it helps to know what to do should you find yourself in an illegal rental.
First contact the owner. Then, call the listing company for additional help as needed. HomeAway offers an emergency relocation service that can be used in these instances. "It's important to call customer service immediately," Fish says. "Don't wait until after your trip."
Finding another property or hotel on your own might seem like a smart idea, but the company may not reimburse you unless customer service has been consulted in advance. For instance, Airbnb's Guest Refund Policy offers either a refund or reasonable efforts to book comparable accommodations, but it requires you to contact customer service within 24 hours of discovering the problem.
In some jurisdictions such as New York City, only the police can remove someone from the premises, Hakim says. If a landlord knocks on the door and tells you the rental is illegal, "Certainly, you don't have to vacate immediately," he says.
But a heated confrontation isn't in your best interest. "You are better served by finding temporary housing immediately," Hakim says. Also, keep in mind that a property owner can't legally require payment for an illegal unit, and your credit card company or a civil court may be able to help with reimbursement should the owner refuse to issue a refund, he adds.
While renting out your house can be lucrative, it will require some work on your part. Make sure you understand your local requirements – and comply with them – and have proper insurance should anything go wrong.
Pulling one over on your property manager won't work.
Your ability to communicate with your landlord or property manager as a renter is key to living happily and in peace. When you fail to notify your landlord of problems you encounter – or try to hide guests or other things that may not be permitted in your lease – the relationship is often compromised. Especially in instances when you’ve brought in an unauthorized pet or let a maintenance issue get worse due to not reporting it, you may find yourself having to pay your landlord extra, losing your security deposit or even getting evicted.Stay in touch.
Stay in touch.
Any good landlord will encourage tenants to be in communication often, which makes it easy to request maintenance or ask a question about what the lease allows. Property management companies often offer multiple forms of communication, from face-to-face conversation with a receptionist or leasing agent to contact via email or an online resident portal, says Lynn Edmondson, regional manager of Wendover Housing Partners, a property management company based in Altamonte Springs, Florida. Once you send a request, the property manager or landlord will then “communicate in writing about what’s going on and what needs to be done,” Edmondson says. Read on for seven things you shouldn’t – and likely won’t be able to – hide from your landlord.A new roommate
A new roommate
Living with a roommate is a great way to save on housing expenses, but your landlord has to know about said roommate – and approve. It may be a matter of simply revising the lease once you notify your landlord of the desired addition, but your landlord also has the right to run the potential roommate through the same vetting process as with every other tenant, which can include a credit check, employment confirmation and previous residence referrals. If you sneak a roommate in, your illegal co-tenant could be evicted. One exception is when you have a dependent, which can be a child, elderly parent or an adult relative you legally care for. Laws in certain states clarify that “you’re not allowed to ask an applicant if they have any dependents living in the unit with them,” says Nat Kunes, vice president of product at AppFolio, a full-suite property management software company. Check your state's landlord-tenant laws, which should be available online, for more information.A sublet
Just like a roommate, sneaking a sublet tenant into your rental will likely be found out by a landlord, and it can have devastating consequences. Always review your lease first for a subleasing policy. The landlord may not allow sublets at all or could require the subtenant to go through the same vetting process all residents go through when applying to live there. Also check your state laws on subleasing, which may give you more or less leeway depending on how detailed the law is. In South Carolina, for example, the law states a sublease agreement isn’t valid unless the landlord has signed off on it. An illegal sublet could result in your eviction for violating the lease, as well as the subtenant’s eviction for residing there illegally.A pet
A dog or cat won’t help you pay the rent, but millions of Americans love adding to the rental family by bringing a pet home. Again, however, your landlord has the right to establish a no-pets policy or place restrictions on the pets allowed, such as the type of animal, size and breed. “If the pet [is] qualified to live there, it’s just a minor thing of changing the lease to add that and collect the appropriate fee,” Edmondson says. If you get caught keeping a pet in your place when the landlord hasn’t approved it, you’ll likely have to fork over the fees anyway. But if the place doesn’t allow pets, you’ll likely either be asked to move out or rehome your pet.Pet damage
Outside of properly notifying your landlord or property manager of a new pet, Edmondson says damage to a rental caused by a pet is one of the more common issues she sees residents try to cover up. Whether you struggled to housetrain a puppy or your cat loves scaling the blinds, the best course of action is to own up to the damage before moving out. “I’ve had that happen several times, when [cleaners] go in to clean the carpet and they come back and say, ‘We can’t clean it, there’s too much pet damage,’” Edmondson says. You’ll have to pay for the repairs regardless, but it keeps a more positive interaction between you and the property manager if you’re honest. Trying to get away with damage could also lead to a negative report from the property manager if any future landlord calls to check on your residential history.Maintenance problems
Whether it’s a backed-up toilet, a leaky roof or fire damage in the kitchen, any problem should be reported to your landlord or property manager as soon as you become aware of it. “A lot of those types of maintenance issues that over time get much, much worse,” Kunes says, noting a leak can lead to extensive water damage and mold. Edmondson says there are tenants who simply don’t report such issues for fear of having to cover damage they caused: “They think after they move out they will not be responsible for those damages.” Of course, any damages outside normal wear and tear will come out of your security deposit, and you can additionally be billed for damages exceeding that amount.Broken appliances
If the fridge, dryer, garbage disposal or any other appliance stops working properly, you have the right to report it and expect it to be fixed. There’s a good chance the landlord will replace an older appliance at no charge to you. If the appliance is relatively new or was damaged from particularly hard use, the landlord may look to you to cover it. If you move out before notifying the landlord, it will be discovered, and you’ll be expected to pay it, Edmondson says.A pest problem
A pest problem
Pests can get into a rental property in a variety of ways: Rodents could be stirred up by construction next door, or maybe other tenants have a habit of leaving food uncovered on the counter or table. Either way, it’s imperative you notify your landlord immediately about a pest problem so it can be taken care of. Most large apartment complexes have standing relationships with pest control companies, which consistently work to keep pests from accessing any rental homes and limit the spread of those that do get inside. If you don’t start communicating with your property manager early on, the problem could become worse – and the blame may fall on you as a result. “That could be a tenant-caused issue that the tenant could be responsible for to pay,” Kunes says.Read More
With more than a decade of reporting experience, Ms. LaPonsie’s work has been featured on MSN, CBS MoneyWatch, Yahoo Finance, NerdWallet and numerous other sites on the web. She has been a guest of Consumer Talk with Michael Finney and The Steve Pomeranz Show.
A native of Michigan, Ms. LaPonsie received her bachelor’s degree from Western Michigan University. You can follow her on Twitter or connect with her on LinkedIn.