From city apartments to beach houses, vacation home rental sites like Airbnb, VRBO and others have become popular among homeowners and travelers alike. Renting your entire house or even just one room, especially if there’s a big event coming to your town, can be a wonderful way to earn extra income, but it can also expose you to unexpected and potentially costly risks. Before you start seeing dollar signs, learn how to rent your home like a pro.
• List through a vacation rental site: Posting an ad is free on some sites and eliminates some of the legwork involved. Some sites will verify users’ identities, provide guest and host reviews and let you set your own rental price.
• Have the right insurance: What if your renter accidentally spills something on a pricey rug or a valuable antique turns up missing? Or, what if someone slips on a wet floor or falls down the stairs? While some sites offer insurance coverage for hosts and landlords, other sites may require you to provide your own coverage to protect against these types of losses. And you’ll probably need protection if you decide to rent on your own. It’s important to talk with your insurance agent about how you’re using your home, the potential liability risks and to make sure your home is adequately protected against property damage, theft and injuries. One company that offers protection is Erie Insurance.
• Deepen your tax knowledge: According to the IRS, if you plan on renting your space for fewer than 15 days a year, you don’t need to report the money earned as income. But, many vacation rental sites will automatically document the income to the IRS, meaning you could get a letter asking you to pay on unreported income. If you fall within that 14-day window, you need to write a letter stating the income is not taxable and attach proof. However, if you don’t actually live in the home, then you must report the income. Rental expenses, such as for advertising or housekeeping, can be deducted, but don’t deduct any personal expenses.
• Budget for extra costs: While it’s tempting to think about additional income, make sure you understand the fee structure and costs. Most rental sites charge either an annual fee or a percentage of each booking to cover processing and listing. Some take a percentage of the rental fee and may even charge a service fee to your guest once the house is booked. And depending on how much of your home you’re renting out, you may need to find another place to stay. Plus, you also need to consider the cost of supplies like linens, as well as hire a cleaning service to tidy up in between guests.
Decide whether renting out your home is right for you and your family. If so, it’s time to start sprucing up your place to get ready for guests.