Offering flexibility and added revenue stream through Airbnb hosting can be a tempting opportunity for homeowners. Make money off of space you aren’t using or when you are away? Why not? It seems like the obvious way to get the most from your home buying investment.
Currently millions of people have listed their properties, or portions of them, on the site making an average of $20,000 per year (or more depending on the location)! But as enticing as extra cash can be, hosting isn’t for everyone. And for the Homeowners with mortgages, there are serious implications to consider before jumping on the bandwagon.
Fortunately, Airbnb hosting doesn’t put you in breach of your mortgage contract, however with many cities pushing back against Airbnb and short term rental platforms, there are potential legal ramifications to think about. Below is a list of due diligence items every homeowner should check off before opening their doors for business:
- If you pay homeowners association fees/condo fees, make sure to check there are no violations or restrictions within your condo building or community.
- Some cities require specific licences and registration to operate an Airbnb so make sure to call the city licencing department for clarity.
- Check with your insurance company to be sure they cover what you are trying to do. Consider adding another layer of protection for worst case scenario and this may increase your premium substantially. Though Airbnb does offer a $1 million Host Protection Insurance, relying on this could be a mistake, according to research, as this can be sometimes be hard to get a reimbursement from.
- If you are doing this to increase your income level on paper as well for financial purposes, keep in mind that not all lenders accept Airbnb generated income on applications. There is also a chance that renting out your property, even a few days a month, could classify your home as an investment property which equals higher interest rates. Luckily because of the popularity of short term rentals, there are a variety of lenders that will consider money accumulated from Airbnb as income so just be sure to shop around.
- If you are in the market to buy a house with Airbnb in mind, always consider properties with a second private entrance and rooms with their own bathroom and possibly a living space. As much as guests like the idea of saving money using Airbnb vs hotels, they do still like their privacy and want to feel like they are on a vacation. And location is key as well…as your realtor, I am here to help make an educated decision.
PROS...making money! Whether its paying down your mortgage, doing those home improvements, travelling, earlier retirement or putting your kids through College/University, anyone and everyone loves extra income. Another pro is meeting new people from all over the world and making some amazing new friendships that would have never happened otherwise.
CONS…you have heard the stories of nightmare guests so you will always take the chance of damage to your home/furniture. Airbnb does offer a rating system for travellers who have used their booking system prior so when you can, doing your homework and try to gather as much information as you can on your guests…this is key to a successful stay. Another con being an upfront investment…no ones home is 100% ready or setup for hosting guests/travellers and having great reviews is a key component to a successful business as a host. Having comfortable beds, nice bedding/linens, toiletries and room amenities such as a coffee maker, mini fridge, etc are all items that will lead to positive reviews so plan to spend some money before you can make some money! And lastly, If you are trying to pocket as much money as possible from the rentals and you are doing the cleaning and bookings yourself, then be prepared for the extra hours you may be putting in during peak seasons above and beyond your everyday hustle!
At the end of the day, there are risks both financial and legal. It is up to you as a homeowner to do your homework and consider the situation from all angles and decide if hosting is the right fit for you. Bottom line…are you willing to open your door to someone you don’t know…this is the REAL question you need to answer.