If you regularly go away on vacation, renting out your home on Airbnb, HomeAway, or some other short-term rental site makes sense—at least financially. However, you’ll have to put in some work to rake in a profit, and there are risks.
To help you decide whether and how to rent out your place, here are some important questions to consider first. By answering them, you’ll gain a better sense of whether this is the right decision for you.
1. How many days do I plan to rent out my place?
Many areas limit the number of days a year homeowners may rent to short-term guests. In some areas, like Los Angeles, it’s up to 120 days per year; other cities, like San Francisco, set that limit at 90.
If you don’t comply with your city’s regulations, you could face hefty fines. In San Francisco, for instance, you’ll pay $484 for each day you rent out your place over the 90-day limit. Make sure to check your area’s rental laws lest they land you in financial hot water.
2. Are there other restrictions on short-term rentals where I live?
Lawsuits and pushback from locals have spurred some cities to crack down on home sharing. For example, anyone putting a listing on Airbnb in Santa Monica, CA, must live on the property during the renter’s stay, register for a business license, and collect a 14% occupancy tax from guests that’s payable to the city.
Knowing what the regulations are in your area is crucial. For an introduction to these rules, check out Airbnb’s hosting guidelines, which outline city regulations for many of its U.S. locations.
3. Does my HOA allow short-term rentals?
The lesson: Contact your HOA to see if subleasing is permitted, and find out if there are any restrictions you have to follow. (Some HOAs require short-term renters to submit an application to the board for approval before they can occupy the property.)
4. How much effort am I willing to put in?
Depending on where you live, you may face heavy competition from other short-term rentals. If your house is located in a hot neighborhood, you might have to go to extra lengths to make your listing shine.
Most Airbnb hosts provide guests with basic toiletries (e.g., soap, shampoo, and conditioner) and free Wi-Fi. Offering extra provisions can make your listing stand out. For example, many Airbnb “superhosts”—the website’s top rated and most experienced hosts—distinguish themselves by setting out fresh flowers, stocking their fridge with local foods and wine and beer, or even offering guests “experiences” like surfing, spa treatments, adventure sports, or cooking classes for an additional fee.
Also, keep in mind that it takes time to clean up your place before guests arrive and after they leave. Alternatively, you could hire a cleaning service, which would cut into your profits.
5. Am I planning to refinance my mortgage?
Though renting out your house on Airbnb can be a great way to help pay your mortgage (or even help you qualify for a mortgage), it could hurt your ability to refinance. If your mortgage lender decides that you make enough money from your home for it to qualify as a commercial or investment property, it may charge you a higher interest rate or deny your refinance application altogether.
That being said, earning a supplemental income might be more advantageous than refinancing your mortgage to a lower interest rate, depending on how much you’re making and what rate you’d qualify for. In that situation, consider consulting a financial adviser before renting out your house.
6. What’s the best home-sharing service for me?
Airbnb may be your first thought when it comes to listing your short-term rental, and for good reason: It offers more than 6 million places to stay in nearly 100,000 cities and 191 countries. But it’s not the only home-sharing player in town. Choosing one of these alternatives may be a better option for you, depending on your needs.
Targeting high-end travelers? Onefinestay offers luxury home accommodations (think private villas and penthouse apartments) in destinations such as London, Paris, New York, Los Angeles, and Rome. Looking to host gay travelers? Misterb&b offers home sharing for the LGBTQ community in more than 135 countries. Meanwhile, home-sharing providers Outdoorsy and RVShare specialize in offering RV rentals in cities across the U.S.
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