These days, the largest hotel operator doesn’t even own a property. We’re talking about Airbnb, of course. Homeowners have realized that such platforms make it easier than ever to enter the lucrative rental home business. But before diving headlong into it, make sure to ask these questions first.
Are You Comfortable Renting Out Your Home?
Can You Manage It Yourself?
Have You Read Up on Applicable Taxes?
Is your home equipped to be a rental property?
Will I make money?
Renting out your home to strangers is not for the faint of heart. You need to be comfortable with the idea of others using your home and the possible risks that come with it. That said, most renters will be very respectful of your home, and are well aware that any damage caused will be tacked onto their final bill.
A rental vacation home is a great investment, but don’t forget that it’s a business venture. As such, someone has to address inquiries, vouch prospective renters, draft quotations, and hire cleaners to keep the place spotless. You have to decide whether you’re comfortable taking on these responsibilities or if you’d rather hire someone else to manage the house for you.
Yes, Uncle Sam gets a cut of your rental earnings, too. Your city, county, or state will typically require you to register your vacation home as a business, so expect to pay the same taxes levied on hotels. Again, this is something you might want to outsource if you’re not well-versed in business taxes. On the upside, if you’re only renting out your home for short periods, many of the related expenses can actually be deducted from your income taxes.
Renting a home offers many advantages of staying in a hotel room, such as greater privacy and more freedom to do things. That said, renters will expect your property to offer at least the same amenities as a hotel, such as fast internet, a great cable package, pools/hot tubs, etc. In short, make sure your home is well stocked and well equipped to accommodate guests.
Here’s the big question: after adding up your operating expenses, will your rental home be able to generate income for you? A key part of this is making sure that you’re pricing your rental home competitively, and that all expenses are accounted for.
Hopefully, the tips above will help you better understand the lay of the land, so you can thrive in the vacation home rental business.