Renting Your Vacation Home? Here's What You Need to Know

Renting Your Vacation Home? Here's What You Need to Know

  • Alain-Martin Pierret
  • 09/7/22

If you're a vacation homeowner, renting your place out can be appealing. It's an opportunity to offset some of the costs of owning a second home and earn extra cash. But before you list on Airbnb or VRBO, you should know a few things about renting your vacation home.

What you need to know to rent your vacation home

Be prepared for the tax consequences of renting your vacation home

If you own the property in question, renting it could trigger capital gains taxes if the rental period exceeds two years. You may also have to pay self-employment tax on your rental income, which revenue service would otherwise withhold from your paycheck if you were an employee. And even if you don't rent out the property yourself, the Wine Country real estate agents you hire will be considered independent contractors and, therefore, will owe self-employment taxes on their earnings.

Is it legal?

The good news is that most places have laws that allow or regulate vacation rentals. This means there will be at least some regulation on noise and parking restrictions, fire safety regulations, and property safety standards. The bad news is that these laws vary widely by location—some cities require permits for short-term rentals while others don't regulate them, so check with your local authorities before listing your home. Even if you don't have any local rules, it's still a good idea to take measures like installing smoke sensors and adding deadbolts on exterior doors if they aren’t there already.

Get the right insurance

If you have a mortgage on your house, you probably have insurance to protect it from damage and provide a financial cushion if something happens.
Investing in similar coverage is essential if you rent your home to vacationers. Some people think they can get homeowners' insurance to cover their rental property—but that's not the case. A homeowner's policy doesn't include liability protection or other vital protections when renting out property.
Rental home insurance protects both renters and owners against potential losses related to damage or theft of personal belongings left on the property or injuries suffered on the premises. It also protects against liability claims resulting from accidents on the premises.
This may come as a surprise, but if your guests get hurt or cause damage while staying at your vacation home, you could be on the hook for their medical expenses or repairs. That's because when you rent a property, you become the homeowner in all aspects of the transaction. The person who rents from you is considered a guest, not an invitee or licensee—which means they aren't covered by any liability protections that homeowners usually enjoy.
If someone gets into an accident on your property, that person can sue for damages caused by their injuries (and even recover punitive damages). And if someone causes damage to your property—say, by leaving the water running in the sink and causing a flood—they can also sue for those losses. The same goes if they break something while staying at your vacation home.

Know your rights as a landlord

As a landlord, it's essential to know your rights and responsibilities. You should check with your state's laws and local ordinances to learn about any regulations that apply to vacation rental properties. For example, if you're renting out a private home, it may be subject to different laws than those governing commercial properties, such as hotels or bed and breakfasts.

Clean your home before agreeing to rent it out

Before you agree to rent out your vacation home, take the time to clean it thoroughly. It's not just about tidying up—you need to get rid of any dust or dirt that could irritate guests with allergies or asthma. Clean all surfaces, including windowsills and radiators, so they’re spotless. If there are any stains on the floorboards or walls (such as stains from pets), scrub them off with a mixture of warm water and white vinegar before they set in permanently.

Account for maintenance and upkeep costs

It's typical to want to make as much money as possible off your vacation home, but it can quickly become costly if you're not prepared for regular maintenance and upkeep costs. For example, if you have a pool or hot tub, consider having it professionally cleaned after each guest leaves and before the next one arrives.
You can also hire someone to do regular lawn maintenance and landscaping work throughout the year. If the house is near the beach, consider hiring someone to clean up after each storm season or pay for this type of service upfront so that you don't have to worry about it later.

Hire someone to clean when guests leave

To get the most out of your rental experience, hire someone to clean up after guests leave. The last thing you want is for guests who stay at your house to write negative reviews about how dirty it was when they arrived. This can cost you future business and ruin your reputation as an owner or manager of the property.

Do some research about potential rental rates

Before deciding how much to charge for rent, research what other properties in your area are going for. This can help determine an appropriate rental rate for your property.
The best way to do this is by talking to real estate agents who specialize in vacation rentals. They’ll be able to give you information about the average price per night for homes like yours and other pertinent information about the local market.
When you rent out your vacation home, you need to consider several factors that’ll influence its potential rates. The following are some important considerations:
  • Location: The more desirable the area, the higher the rent will be. If you live in a popular tourist destination, you can expect to earn more than if you live in a rural area with fewer attractions.

  • Condition of property: If your vacation home is in good condition and well-equipped, you’ll likely be able to charge more for it than if it's run-down or lacks amenities.

  • Size of home: The larger the house, the higher the rent will be. However, there are exceptions to this rule; some owners may prefer two small units over one large one because they think it’ll be easier to rent out both units at once and make more money overall.

  • Seasonal demand for rentals: Renters will pay more during peak seasons (such as summer) than during off-peak times (such as winter).

When is the best time to rent your vacation home?

When renting your vacation home, timing is everything. So naturally, you want it to be available when your potential guests need you. But what if they want to stay at your place when you're not even there?
This is where vacation rental management services come in. They can help book and manage reservations for you, so you don't have to worry about them.
Vacation rental management companies are a great resource if you want to rent out your vacation home but don't want to spend all of your time doing so. These companies take care of all aspects of renting the property—from booking reservations to cleaning up after guests leave. They even handle security deposits for guests and payouts for owners when something goes wrong!

Check everything that guests may damage

Your guests may not be as careful as you are when it comes to the condition of your home. Whether it's a few scratches on the walls or an accident with a glass vase, it pays to ensure you know exactly what may be damaged during a stay. Also, if something needs repairs before new guests come in, make sure they know about it ahead of time.
You also need to ensure that insurance covers any potential damage caused by guests. If it doesn't, consider upgrading your policy or getting additional coverage.
It's a good idea to have a list of items in your house that guests may potentially damage and ensure that your insurance covers them. These items may include the following:
  • Carpets.
  • Furniture and beds.
  • Fixtures such as light fixtures and showerheads.
  • Marble countertops.
  • Electronics such as televisions, computers, and printers.

Communicate well with your guests

Communicate clearly with guests inquiring about your property from the beginning. Ensure they understand what's included in the rental price and what isn't. For example, if there's an outdoor grill or pool table, let them know it's available for use and requires extra cleaning fees.

Vacation rentals in Sonoma County

As of May 10, 2022, until potentially May 9, 2023, there’s a moratorium on new vacation rental permit applications in Sonoma County. There’s also a prohibition on new vacation rentals in R1-zoned (low-density residential) areas and caps on vacation rentals in other concentrated areas. As well, to restrict corporate ownership of vacation properties in Sonoma County, future vacation rental permits can only go to “natural persons” or trusts, not corporations. Existing vacation rentals won’t be affected by these new changes.

Work with a Wine Country real estate agent

Renting your vacation home can be a good idea. It's a great way to make extra money by renting out for short periods. However, you should make sure you’ve thought about the expenses involved in this process.
When you need help renting your vacation home, look no further than Alain Pierret and Haley Skerrett. With their combined years of experience, these real estate agents have helped countless homeowners maximize their rental income. Contact them today to learn more about how they can help rent your vacation home!

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Alain and Haley's real estate group honors the art of living with a high level of commitment, style, and attention to detail when working with clients. Whatever your real estate goals, they are well prepared to help you accomplish them.

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