If you live in a pricey, popular area, like the downtown of nearly any major city, or a resort destination, you might be extracting income from your house through short-term vacation rentals. Services like Airbnb and HomeAway make it easy to get cash from your real estate.But the potential of rental income cuts both ways when it comes to marketing your property. Here’s why..and what to do about it. Cities across the country are cracking down on short-term rentals (that’s the generic name for Airbnb, Homeaway, VRBO and other services that help homeowners and shelter-seeking tourists find each other.)
In Chicago, for instance, the hotel empire is striking back. Airbnb is siphoning off so many potential customers that the city’s lodging industry is urging officials to crack down. According to the Chicago Sun-Times, Airbnb isn’t aiming for homeowners – like you – who occasionally rent out a room or their entire place. Instead, the industry is determined to curb landlords who are using units as permanent short-term rentals.
Short-term rentals can drag down your property’s value and complicate selling if traffic, noise and congestion from the constant stream of visitors is a neighborhood nuisance. Buyers can easily find out if your neighborhood association is complaining to the city about the impact of short-term rentals. A smart buyer might even check police reports to see if there are many noise complaints based on visitors. If you think this is an issue, do this research yourself so you can have the facts ready should a buyer want to discuss rental trends in your area.
But the upside of short-term rentals is income. And that might be of interest to buyers who think that they can capture rental income that helps them afford your property.
If your house is located in a neighborhood popular with short-term rental customers, you might be tempted to sketch out the potential rental income to buyers. The more expensive your neighborhood, the more likely it is that potential buyers will wonder if they can afford to buy your place if they can count on a bit of regular rental income. You might even consider boosting the asking price of your house because buyers could cover the cost of owning your house with short-term rentals.
Think long and hard before marketing the rental potential as a core element of your home’s value. Just because your or your neighbors have been profiting from short-term rentals so far doesn’t mean that the next owners will enjoy the same freedom. Short-term rentals could be curtailed or even banned. Neighbors, regulators, and industry foes like the hotel lobby in Chicago could all bring pressure on politicians to clamp down on how often a homeowner can rent a room, and ramp up the fees and taxes for doing so.
If a buyer really wants to explore the possibility of renting out rooms to cover the cost of owning your house, recommend that he conduct thorough research and consider any rental income as an extra, not as a reliable source. And if rentals are popular in your neighborhood, closely track the trend, neighborhood response, and potential regulatory response, too, so you can respond accurately to buyers’ interest in the rental potential of your property.