The internet gives us more vacation planning options than we’ve ever had before, and as a result we’ve gotten extremely good at taking trips on the cheap. We use third-party discount sites like Expedia and Travelocity to comparison shop for airfare, rental cars and hotel rooms. We use rewards credit cards to rack up points that can later be redeemed for freebies. And many of us search for private vacation home rentals in our destination city on AirB&B, VRBO, HomeAway and similar sites in hopes of finding more comfortable and more affordable sleeping accommodations.
[blockQuote position=”right”]Before you offer your place up for rent, be sure to research the relevant laws in your city.[/blockQuote]A vacation apartment or house has many benefits over a hotel or motel, including access to a kitchen and a residential, less touristy location. Also, when you rent a vacation home you generally avoid paying various hotel taxes and sales taxes, which can amount to a significant amount of money on top of the nightly rate; in New York, you’ll pay more than 18.25% above and beyond the room rate.
From the homeowner’s perspective, offering your home on AirB&B (or another vacation rental site) for a nightly rate to travelers is a great way to bring in extra cash. In high-cost markets like New York City, some financially savvy residents make their homes available every time they are away, seeking to defray the cost of rent or the mortgage on a regular basis.
The problem with Air B&B
Unfortunately, in many cities across the country, including New York, offering your home for rent to the short-term vacation traveler is illegal. Specifically, in New York, you cannot offer your home (in a building with three or more units) for rent when you are not present for a period of less than 30 days. To do so, you must apply and be approved for hotel status, pay various hotel taxes, and comply with a long list of safety, security and accessibility rules. (The laws do not apply to renting a room in your home when you are present.) In San Francisco, the same rule applies to homes in buildings with four or more units and violators face fines of up to $1,000 per day.
One New York, renter who offered his home on AirB&B for three nights, was surprised by $40,000 in fines. Furthermore, many homeowners’ associations expressly prohibit short-term rentals, and some HOA by-laws specifically forbid vacation rental arrangements of any kind. If you rent, your lease may very well prohibit subletting. In all cases, city zoning laws too may restrict short term rentals.
Some hosts learn the rules the hard way. The New York Times reported on one renter who offered his home on AirB&B for three nights, only to be surprised by $40,000 in fines when he returned to his home.
Before you offer your place up for rent, be sure to research the relevant laws in your city. Not all cities prohibit short-term rentals. Hilton Head, NC, for example, allows vacation rentals but imposes a modest 3% bed tax. Chicago issues a two-year license to property owners who wish to offer a vacation rental, but restrictions apply. Smaller cities, like Santa Fe, also offer vacation rental permits to property owners, up to a finite number of permits.
Earning money from short term rentals is not an entirely bad idea, but it’s probably not worth tens of thousands of dollars in fines.
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