It’s important to research regulations in your city or town before renting out your home.
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Vacation rental platform Airbnb is expected to show resilience when it releases its first earning results today since going public, with more travel taking place closer to home during the pandemic and a housing boom possibly leading to more property owners looking to cash in on home sharing.
However, there are many things a prospective host should keep in mind when considering whether to rent out their property.
The most important part is researching regulations in the cities and towns where your home is located.
Some municipalities have strict regulations regarding what’s considered a legal short-term rental. For example, New York City law prohibits rentals under 30 days except when the owner is present in the unit and no access doors are locked, and some Brooklyn townhouse owners have been fined tens of thousands of dollars for illegal rentals.
In Los Angeles, the city council passed legislation in 2019 that only allows primary residences to be rented out on vacation rental platforms.
“While this can be limiting, one area that is strong for collecting a secondary income is multi-family investment,” said James Harris, principal of LA real estate firm The Agency. “Multi-family properties provide a unique opportunity for buyers to live in one unit and make money by renting out the additional units. This rental income can also offset costs by contributing to monthly mortgage payments, income tax and more.”
Palm Springs only allows a limit of 32 stays per year at single-family residence, with an additional four stays permitted during the third quarter.
“While surrounding jurisdictions do not have such limitations on the total number of stays, they may have more severe restrictions on the conditions of operation, limiting parking or the ability to play music,” said Fiona Quinn, vice president of business affairs at short-term rental and hospitality startup AvantStay. “It is therefore important to carefully examine not only the regulations that govern short term rentals where you intend on buying, but also how you intend to run your rental and who your guests will be.”
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Bill Kowalczuk, a broker with Warburg Realty in New York City, said if you’re purchasing a unit in an apartment building, it’s also crucial to check the building’s rental policy.
“There is a very short list of buildings in Manhattan that would allow a lease as short as one month,” Kowalczuk.
A home is already a big investment, but hosts need to budget accordingly.
“Don’t forget to outline unexpected expenses, such as additional taxes, property management fees, maintenance, insurance and even landscaping,” Harris said.
Harris recommends hiring a property manager or service, making sure to ask before hiring how they handle routine and emergency maintenance issues, how they choose vendors — to ensure they only hire insured, licensed workers to come on your property — and ask for a few references.
There are several companies that specialize in handling short-term rentals in Manhattan and prices for that can be as high as 25% or more of the monthly rental income, according to Kowalczuk.
You can also purchase a property that is specifically designed for home sharing. Natiivo Miami is a tower developed in partnership with Airbnb (this relationship was marked by a lawsuit that has since been settled). Each unit can be used as a full-time primary residence, but short-term rentals are encouraged, with a team that manages units and listings, handles guest issues and schedules cleaning.
The 400-unit development, which broke ground earlier this month, is more than 65% sold, according to Natiivo Miami developer Keith Menin.
We’re extremely optimistic about the short term rental market in Miami,” Menin said. “Buyers are also increasingly seeking out a more ‘nomadic lifestyle,’ where they can live in a few different cities throughout the year.”