Short-term rentals via websites like Airbnb, Flipkey, HomeAway and VRBO offer some spectacular places to stay, and for homeowners, they also offer a way to make a little extra from that extra room. Cities around the country and the world are paying attention as their citizens dust off guest beds in hopes of attracting short-term lodgers.
The industry’s boon is nothing to ignore. After just ten years, Airbnb alone boasts more than five million listings in 81,000 cities around the world. More than 300 homes are listed on the company website in Columbus, Ohio including everything from private rooms to whole homes. However, before setting out a set of guest towels and tidying up the bathroom, there are a few questions to consider.
Is it legal?
The short answer for residents of Columbus, Ohio is yes. It is possible to rent out a room or your entire home with Airbnb or other agencies, but there are a few hoops to jump through first.
A recent short-term rental ordinance passed by the Columbus City Council in August 2018 took effect in January 2019. It states that homeowners wishing to offer short-term rentals will have to get a license and are subject to the same regulations as motels and hotels. There is an application process and a fee of $75. If the residence you are applying for is not your primary residence, the fee jumps to $150. The permit needs to be renewed annually.
Do you need special insurance?
Yes, you do. The City of Columbus requires short-term rental providers to maintain a liability policy of at least $300,000. Just like the liability portion of your homeowner insurance policy, this helps protect you in case a guest or their visitor or anyone else visiting your property as part of the short-term rental (taxi driver, etc.) is injured on your property.
Is it taxed?
Again, the short answer is yes. As a short-term rental host, you pass that tax on to your guests; however, at the end of the fiscal year, you will have to include that information on your tax form and give it over. For more details, head over to the City of Columbus website where all of your red-tape questions are answered.
Will this affect my chances of refinancing?
Whether or not offering a short-term rental will affect your chances at a successful refinance is a great question and one that only your lender can truly answer. The good news is, though, that some major lenders such as Quicken Loans, Citizens Bank and Better Mortgage have said they will consider inclusion of short-term rental income in refinancing applications. Fannie Mae also started a pilot program to do the same in February 2018. Again, whether or not this will work for your particular situation will depend on the particulars of your situation. If refinancing is in your future, chat with your lender first before moving forward.
Can I use Airbnb income on a mortgage application?
So far, the answer here looks to be no. Lenders appear to be ok with the idea of using that income toward refinancing a mortgage but not if you are applying for a fresh mortgage. Some experts cite the changeability of the tourism market as reason for this. New homeowners considering using Airbnb as extra income to help pay for the mortgage will have to rent for a total of two years before being able to include that information on a refinance application.
It is also worth noting that if you are applying for or have an FHA Loan that the current rules forbid a home to be purchased for the purpose of being a hotel/motel, but short-term rentals might be a little bit different. Again, it is best to discuss short-term rentals with your loan officer first.
How does a short-term rental affect the value of my home?
The jury is still out on this one, but some evidence is beginning to emerge. A study published in March 2018 at the Social Science Research Network (SSRN) looked at Airbnb in 100 of the largest metro areas in the United States from 2012 through 2016. The researchers compared the increase in the number of Airbnb units in those areas with prices found on Zillow. What they found was that a 1-percent increase in the number of Airbnb units resulted in a 0.026% increase in median home prices. While they may not seem like much, it can add up. (Check out this post on appreciation to see how outside factors can affect the value of your home.)
Like any rental situation, short-term rentals create wear and tear on a property. Suitcases bump into woodwork and walls. Guests accidentally break things. The furnace might run more, and guests might take long hot showers twice a day. You might do these things, too, but added traffic in your home ups the possibility for this kind of damage and usage to occur. Granted, you can factor these things into the rate you charge for the short-term rental space, but the maintenance costs are important to consider.
How do short-term rentals affect the sale of my home?
If you are considering selling your home, offering short-term rentals could be a selling point. Prospective buyers might like the inspiration you offer, and if you have a system in place – spare room, extra bathroom, private entrance, etc. – they may jump at the chance to take over. Others might see it as less than attractive and worry about the aforementioned wear and tear on their future home.
Short-term rentals might also prove tricky in terms of last-minute showings and showings in general. Even with our online listings, a prospective buyer is going to want to visit in person. Balancing that with the happiness of a guest is something you will have to consider and discuss in depth with your real estate agent.
Short-term rentals are an exciting opportunity, but like all opportunities, they also come with a serving of responsibility. As always, do your homework and make the choice that you think is right for you and your family. And as always, if I can help, get in touch!
Photo by turkeychik