The Trend of Legalizing Airbnb Rentals

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In 2013, a New York resident was fined $2,400 for renting out his home on Airbnb. When a 2011 law against illegal hotels was enforced for the first time two years after it came into effect, Nigel Warren was on the receiving end of the fine, after renting out a room in his apartment while he was absent from the property.

Airbnb makes it easy for people to make extra cash off their spare rooms or entire properties. However, a confusing mix of laws and inconsistent rules between states and cities mean it’s confusing to know whether or not what you are doing is legal, and what the consequences are. With average rent prices in New York reaching over $3,000, New Yorkers are looking for innovative ways to make money. Airbnb offers a convenient way to make significant extra income with almost no additional costs.

Related: Four Things to Consider Before Purchasing An Airbnb Investment Property

A confusing mix of state and federal laws can make renting out your property in the US risky, especially if you are unaware of what laws you might be breaking. For example, in Boston, you can rent up to two rooms to two lodgers “as long as there are no separate cooking facilities”. In New York, until recently, it was legal to rent out a room if the owner was present, but illegal if the owner wasn’t there. In San Francisco it is now necessary to obtain a Short-Term Residential Rental Registration number. Up until recently, in most places across the US it was forbidden to rent out your property at all without paying a ‘landlord’ tax, but as Airbnb and similar companies have grown there is a move to legalize the practice.In general, in major US cities, it is now legal to rent your entire house out to paying guests for three months of the year, and you do not have to be present. Make sure you research local laws if you are considering using Airbnb to rent out your house.

The following are some additional legal issues that you should consider before renting out your home:

  1. You may need extra insurance. Most homeowners insurance doesn’t cover you when you start accepting paying guests in your home. While profits from renting out your house often make this worthwhile, be sure to look into it before you start taking bookings.
  2. You may not be able to rent your house out all year-round. In many states although the practice of renting out your house is now legal, you must still be the main occupiers of the house, with a three month rental period often the maximum. This means that buying property exclusively to rent out may not always be a viable option.
  3. Most rules have exceptions. Specific housing property specifications are exempt from certain laws, and houses in certain areas may either have more or fewer rules imposed upon them for a variety of reasons.
  4. There is a strong trend towards legalizing Airbnb rentals, as cities figure out ways to profit from both short-term and nightly renters. Brian Sharples, CEO of HomeAway has started the Short Term Rental Advocacy Center that works with renters and city officials works to implement laws that are fair for both parties.

Related: 11 Costs First Time Real Estate Investors Should Consider

With a trend towards legalizing Airbnb across cities in the US, now is a great time to make an investment in property to rent out on a short-term and long-term basis. To make the process easier, and to ensure that you are capitalizing on your gains, use Mashvisor to find out where you’ll get the highest returns on your Airbnb investment. Just be sure to research the area before putting down any deposits to ensure you don’t run into any legal issues. 

Do you think that shot-term lodging should be made legal nationwide? Leave a comment, and let's chat!

Are you considering an Airbnb investment property? Use Mashvisor to discover hidden investment opportunities nationwide. 

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