Retirees are not only one of the top demographics that participate in summer travel, but they are also the fastest-growing group of short-term rental hosts in the US. In fact, according to Airbnb’s 2017 report, senior hosts have earned a collective $747 million in income through the short-term rental industry community.
People own and operate vacation rentals for a variety of reasons: to have a home in their favorite resort area, to secure a place for future retirement, to help offset the cost of a second home and to earn extra income. Yet, few enter this industry knowing that their venture will be considered a small business.
Below are tips to ensure that your vacation rental and new business will be successful:
Step 1: Evaluate your Property.
To evaluate a potential vacation rental home investment, look at comparable rental rates on sites like Airbnb, HomeAway, and VRBO. Consider what future renters would find most attractive about properties in that area. For example, is the property close to popular restaurants or beaches? Is it near the airport or a top tourist attraction? All of these aspects will greatly impact the value of your property. Additionally, before purchasing or putting a property on the market, do your research. One of the top items to confirm is that the zoning laws and boundaries in the area allow you to rent out your home to guests.
Step 2: Obtain the License to Rent.
Many people believe (erroneously) that if they own the property, they can rent it out of their own accord. Not true! In the last several years’ government agencies have increased their focus on short-term rentals and discovering if these rentals are registered and remitting required occupancy taxes. You’re effectively operating a hotel business in the eyes of the tax authorities and must collect lodging tax from your renters. This means that you need to first register with the authorities and obtain any required business licenses or tax collection permits in order to rent your property legally. You will want to make this process as easy on yourself as possible by finding a simple solution to collect taxes from your renters, to make sure you are doing so at the right rate and submitting the taxes by the accurate deadline.
Step 3: Manage your Vacation Rental Like a Business.
Owning a vacation rental is a great way to earn extra income but it isn’t “hands off” – the most successful owners are diligent and meticulous in managing and maintaining their property. You must remember that your guests are relying on you to have a great vacation which means their experience should be as painless as possible. You will likely have to do general maintenance on your vacation home and provide essentials like extra linens and towels and basic amenities like condiments and coffee filters for guests to use. In popular areas, the vacation rental market can be fiercely competitive and it is important to research how others are marketing their properties. If all of this sounds like too much work, you always have the option of turning over the administration of your property to a management company. They will handle the work of booking, managing guests, cleaning, and maintenance, at a fee that is typically 20% to 40% of your gross rent.
With summer vacation season in full swing, more and more people will turn to host their own short-term rental. It is important to keep in mind that as a landlord, you are essentially running a small business and as a business owner, you must comply with complicated regulations and obligations and also keep up with the competition. It is vital to tick all of the regulatory boxes and strive to make your rental appealing to ensure the success of your endeavor. That way, you can take your mind off of your property and enjoy your retirement.
By: Rob Stephens, GM of Avalara MyLodgeTax