5 Questions to Consider Before Listing Your Property for Short-Term Rental | To AirBNB or Not to AirBNB

Recently, Airbnb touted that it generated over 1 Billion Dollars in revenue for the third quarter of 2018 by offering over 5 million short term rental listings in thousands of places across the world.  With this boom of accessible, short-term rentals, and the recent uptick in individuals seeking supplemental income (think Uber drivers and Rodan+Fields consultants), many individuals with rental properties, or even a spare room, have likely thought about listing their property on Airbnb, or other similar short-term rental sites.  However, there are five questions you must ask yourself before agreeing to collect rent from couch surfers.

1) Does the zoning of your property allow for short-term rentals?

First and foremost, you should check the zoning of your property and your local zoning code to determine whether short-term rentals are allowed.  Many localities have limitations on the geographical areas where short-term rentals are allowed, and some towns have gone so far as to ban short term rentals all together.  Other cities have embraced short-term rentals and have created specific laws to regulate them.  For example, in the city of Cleveland, Ohio, short-term rentals are permitted in areas zoned residential but only if the unit is booked 91 days or less per year.  But be aware; these laws and regulations can change as municipalities enact legislation throughout the year.

2) Does your community require you to obtain a business license or rental permit?

Ohio requires that all businesses conducting business within the state be registered with the Secretary of State.  Additionally, if you rent five or more rooms, the State of Ohio may determine that you constitute a hotel, and registration with the Department of Taxation will be required.  There can also be different permits or licenses required if you are renting a room in your personal residence as opposed to if you are an investor renting a home outright.  Additionally, whether a permit is required may depend on how often you rent.  For example, Cleveland requires a rental registration and permit if the unit is rented more than 91 days per calendar year or if the unit is not owner occupied.

3) Is your house up to code per your community’s housing and building standards?

You should take steps to ensure that your home is up to code in order to curb liability from injured tenants.  While the Ohio Building Code has state wide regulations, each locality may also have specific rules that must be adhered to.  For example, the city of Akron, Ohio has special rules for houses or rooms rented to three or more different people (rooming houses), which includes specific code provisions for smoke alarms, fire extinguishers, and heating.  The code even goes on to say that you must provide towels and linens to your guests and change them once a week!

4) Are there special taxes that need collected in your community for short-term rentals?

Given the nature of short-term rentals, there may be additional taxes and fees that must be collected at the time of booking.  For example, Cleveland has a 3% transient guest tax, which applies to persons renting a room for thirty days or less.  This tax, while generally collected by the booking agent, must be paid, or liability can fall back on the property owner.

5) Are there any additional rules burdening the property by an HOA or Condominium?

Many Home Owners Associations and Condominiums do not allow for short-term rentals.  If your property is subject to an HOA or Condo Declaration, you are going to be bound by those rules.  If you break those rules, you could be fined or have a lien placed on your property for enforcement costs.  You should thoroughly review and HOA or Condo Declarations and Restrictions before deciding to list your property for a short-term rental.

Although there is plenty of money to be made in short-term, transient rentals, there are also plenty of pitfalls.  Don’t let one of these oversights or missteps eat into your well-earned profits!

Tara J. Rose is an associate Real Estate & Construction practice group. She practices in the Cleveland office of Buckingham Doolittle & Burroughs, LLC. Tara assists clients ranging from small to mid-size, middle market business owners and executives with land use, zoning, construction contract disputes, eminent domain, real property tax and real estate transaction matters. She can be reached at [email protected] or 216.615.7318.

About Buckingham, Doolittle & Burroughs:

Buckingham is a corporate law firm that counsels Middle Market executives and business leaders all over Ohio and beyond. With offices in Canton, Akron, and Cleveland, Buckingham offers clients Business Law Reimagined through sophisticated and practical legal services. Serving the region for over 100 years with nearly 70 attorneys, Buckingham’s mission is to deliver meaningful experiences through the practice of law, exceed expectations in terms of service, counsel and business sense, and to offer continuous value to the industries, communities and clients they serve. See all of our news and updates by visiting our website.