With the unpredictability of the current climate, there has been a rise in demand for self-catering vacation properties, and many travelers are looking for immediate departure. Indeed, one rental company has said that trips booked a week before departure are up 300% from last year. This is great news for those looking to rent out their property for short term visits, but if you’re considering doing this for the first time, there are a few legal considerations to bear in mind.
Is it legal for you to rent out your property?
Some lenders prohibit the rental of a property for up to three years if you bought it with a second home mortgage loan. Check the details of your mortgage agreement before you consider listing your property as a vacation rental. You may also be unable to legally rent out the property if it is part of a homeowner’s association or co-op. If you are not limited by these factors, make sure the property is officially registered in your state.
The taxes you are liable for will depend on how you rent out the property. If the house is to be an investment property and you will be renting it out frequently, this is legally regarded as a second income stream. This means you’ll be required to pay tax after renting it out for the first two weeks. If you will only be renting the property out for two weeks or less in any given year, you will not have to pay taxes on the profit, and can use these to cover property expenses and running costs. Consult with a real estate attorney to determine which approach will work best for you.
Preparing for potential liabilities
Ensuring that you have a legal rental contract drawn up is essential if you are to protect both yourself and the property. Make sure you always receive a signed contract and the full payment before passing over your keys. You can also invest in landlord insurance, which will protect you against third party liability and any accidental damage. If you consult free resources to help you get set up, make sure your attorney looks over your final contract in order to identify any problems.
Your contract should contain rules for renters to make sure everyone knows what is expected of them. Rules about cleanliness, noise and security should be included in the contract itself, while a visitor’s book can include small details and clear instructions for looking after the property. This might include guides for operating electrical equipment, directions about where to dispose of trash, recycling guidelines and where to find spare towels and linens.
You can also use this resource to include advice for travelers about visitor spots and healthy travel. As you will have multiple visitors to your property, cleanliness is vital: you have a legal responsibility to ensure the property is clean and hygienic before new guests arrive, but it’s also important that travelers are aware of their own responsibilities. Use your visitor guidelines to remind travelers to clean and sanitize the property, but also use it to reassure them that hygiene is taken seriously and thorough cleaning is done between visits. Your guidelines should be presented upfront along with the rental contract.
To ensure peace of mind and to make sure you’re always fulfilling your legal obligations as a landlord, it’s important to have someone in the area who can deal with any problems. This also helps with the cleaning schedule and in getting the keys to new guests. If your property is not where you live or you’re unable to be on call, consider enlisting the services of a property management company. For a fee, these companies will ensure that all the requirements are met from a legal perspective, and this will also mean you can take a step back from the property. Alternatively, ask for help from a friend or neighbor who lives locally.
It is a lucrative time for renting out property to travelers, but it’s vital to make sure all legal requirements are met in the process. If you’re considering renting out your property, consult with a real estate attorney and check the permissions on your mortgage agreement before proceeding.