It’s absolutely critical to understand the legal, zoning and tax rules about owning a short-term rental, which is considered any property rented for less than 30 days.
PALM COAST, FL – November 18, 2016 – Home sharing is increasingly popular with travelers and homeowners, and Realtors® should understand the opportunities, intricacies and risks when helping clients purchase property intended for short-term rentals.
A recent panel discussion at the 2016 Realtors Conference & Expo focused on the short-term rental topic at a time when state and local governments are actively discussing it. Brian Copeland, 2016 president-elect of the Tennessee Association of Realtors, and Realtors Dawn Thomas and Raziel Ungar, both top producing agents in California's Silicon Valley, served as panelists. All three speakers own short-term rentals.
Thomas emphasized one fact upfront: It's absolutely critical to understand the legal, zoning and tax rules about owning a short-term rental, which is considered any property rented for less than 30 days. She also recommended that clients talk to an attorney about the tax implications if purchasing a second home using mortgage financing.
Copeland agreed with Thomas and stressed the importance of knowing the federal and local laws that apply, and to communicate them thoroughly to clients exploring a home purchase for short-term rentals. He said that a growing number of local governments are creating regulations and laws, including some that limit the amount of vacation rentals within a certain census tract. In some popular areas, the wait list to get a permit can be several years.
"Realtors need to be abreast of the laws and regulations in their market and watch what's happening at the state and local level," said Copeland. "Furthermore, fair housing laws still apply in the short-term rental market. It's a violation of the law if a client has expressed a desire to only rent out their property to certain individuals or intends to use language in their listings that outlaw activities such as bachelorette parties."
Ungar had advice for the owners of short-term rentals or those planning to be: Make sure you're well versed on the popular home sharing platforms to attract potential tenants. He said tenants looking at these sites pay close attention to photos, pricing and online reviews.
"Deliver on a memorable experience and pay attention to the reviews," Ungar said. "Hiring a professional photographer to highlight the features of the home will go a long way in garnering interest from renters."
The speakers all took turns sharing the financial rewards, potential traps and horror stories they've experienced as short-term rental property owners. They summarized the seven key things to know:
- Understand what a short-term rental is (and the rules)
- Familiarize yourself with popular social platforms
- Your guests expect certain amenities – deliver them
- Prepare yourself for liability
- Heed pitfalls and warnings
- Understand supply and demand and how to price appropriately
- Know the strategies that exist to attract a short-term rental investor
Selling a short-term rental property
The session also focused on the approaches Realtors can use to attract investors interested in purchasing a short-term rental property. Thomas said a thorough understanding of the local laws, pitfalls, expenses and opportunity will go a long way in building trust with investor clients. A buyer shouldn't be surprised by any local fees and taxes a short-term rental owner must pay.
"Make sure they understand that they may have to buy in areas that are more expensive for the potential for a higher yield," said Thomas. "Ask clients what they want to achieve and help deliver on it."
Even with the potential dangers and expenses involved, the panel all agreed that being a short-term rental owner can be extremely profitable.
"Especially in markets where hotel occupancy is limited or pricey, seeking out residential properties for vacation and weekend getaways is becoming more popular among travelers," said Copeland. "Homeowners interested in renting out their property will succeed by marketing and pricing accordingly and staying attuned to big events such as sports, concerts and festivals."
Data from NAR's 2016 Investment and Vacation Home Buyers Survey show that homeowner interest in renting out their property for a short period of time is rising. According to the survey, 42 percent of recent investment buyers did or tried to rent their property in 2015 for less than 30 days and plan to do so again this year.
NAR recently released a white paper on residential rentals that's available online (password required). The paper analyzes the issues raised by different regulatory approaches, provides Realtors with ways to address short-term rental obstacles, and outlines best practice approaches to rental housing that Realtors can use in discussions with local government officials.
© 2016 Florida Realtors®. All rights reserved. Reprinted with permission.