Home sharing is increasingly becoming popular among travelers and homeowners, and Realtors need to be aware of the opportunities and intricacies when helping their clients purchase property that’s intended for short-term rentals, according to a panel discussion last week at the 2016 REALTORS Conference & Expo in Orlando.
The timely conversation on short-term rentals and private property rights comes at a time of much debate on the appropriate amount of regulation for home sharing from state and local governments. Providing their insights and advice on engaging with local authorities and navigating clients through the process were Brian Copeland, 2016 president-elect of the Tennessee Association of Realtors, and Realtors Dawn Thomas and Raziel Ungar, both top producing agents serving clients in California’s Silicon Valley. All three speakers own short-term rentals and provided their unique insights into what other Realtors should know.
Thomas kicked off the discussion emphasizing the critical importance of understanding the legal, zoning and tax rules pertaining to ownership of short-term rentals, which is considered any property rented for less than 30 days.
She also recommended clients have a conversation with an attorney about the tax implications of purchasing a second home through mortgage financing.
Copeland agreed with Thomas’ remarks and stressed the importance of knowing the federal and local laws and to communicate them thoroughly to clients exploring a home purchase for short-term rentals. A growing number of localities are deploying regulations and laws, he said, including limiting the amount of vacation rentals within a certain census tract. In some popular areas, the wait list to get a permit can be several years.
“Realtors need to be abreast of the laws and regulations in their market and watch what’s happening at the state and local level,” Copeland said. “Furthermore, fair housing laws still apply in the short-term rental market. It’s a violation of the law if a client has expressed desire to only rent out their property to certain individuals or intends to use language in their listings that outlaw activities such as bachelorette parties.”
Ungar’s advice centered on ensuring clients are well-versed on the popular home-sharing platforms available to attract potential tenants. He said tenants looking at these sites pay close attention to photos, pricing and online reviews.
“Deliver on a memorable experience and pay attention to the reviews,” Ungar said. “Hiring a professional photographer to highlight the features of the home will go a long way in garnering interest from renters.”
The speakers all took turns sharing the financial rewards, potential traps and horror stories they’ve experienced as short-term rental property owners. They highlighted these seven key things to know:
- Understand what a short-term rental is (and know the rules)
- Familiarize yourself with the popular social platforms
- Your guests expect certain amenities – deliver on them
- Prepare yourself for liability
- There are pitfalls and warnings to heed
- Know supply and demand and how to price appropriately
- Strategies exist to attract a short-term rental investor
The end of the session focused on the approaches Realtors can use to attract investors interested in purchasing a short-term rental property. Thomas said a thorough knowledge of the local laws, pitfalls, expenses and opportunities will go a long way in building trust with investor clients. A client shouldn’t be surprised by any local fees and taxes a short-term rental owner has to pay.
“Make sure they understand they may have to buy in areas that are more expensive for the potential for a higher yield,” Thomas. “Ask clients what they want to be achieved and help deliver on it.”
Even with the potential dangers and expenses involved, the panel all agreed that being a short-term rental owner can be extremely profitable.
“Especially in markets where hotel occupancy is limited or pricey, seeking out residential properties for vacation and weekend getaways is becoming more popular among travelers,” Copeland said. “Homeowners interested in renting out their property will succeed by marketing and pricing accordingly and staying attuned to big events such as sports, concerts and festivals.”
Data from NAR’s 2016 Investment and Vacation Home Buyers Survey show homeowner interest in renting their property for a short period of time is rising. The survey found 42 percent of recent investment buyers did or tried to rent their property in 2015 for less than 30 days and plan to do so again this year.
Source: NAR