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Is renting out your home to travelers a good money idea?

Created date

September 13th, 2018
a pile of coins sits next to a tiny house while a person makes calculations on pen and paper in the background.

You’ve probably heard of Airbnb, the home-sharing site where people rent their homes to travelers. Maybe you’ve even stayed at an Airbnb house or apartment during your own travels. But have you ever thought about renting out your home through the site (or one of its competitors, such as VRBO or HomeAway)?

Renting out your primary residence when you’re away could be an interesting way to generate revenue. A 2018 analysis by SmartAsset (https://bit.ly/1cY4AKk) found that the average annual profit for an Airbnb host renting out a full two-bedroom house or apartment is $20,619 in 15 popular cities, including Houston, Boston, Chicago, and Washington, D.C.

Of course, some Airbnb hosts earn far more—or much less—than that amount, depending on how many weeks they rent their home each year. Hosts can also opt to rent out vacant rooms in their homes while they’re living there. Average private room rental rates range from $66 in Dallas to $111 in San Francisco, according to SmartAsset.

Highest earning power

According to Priceonomics (https://bit.ly/2rMrZVF), Airbnb hosts have the highest earning power of all workers in the so-called gig economy, which includes driving passengers through services like Uber, selling handmade goods on Etsy, or completing odd jobs with a company like TaskRabbit. Priceonomics’ analysis revealed that the average Airbnb host earns $924 per month, while the median host brings in $440 per month—not too shabby for letting people stay at your house while you’re away!

Of course, like any side business you’d get into, you should be aware of the risks and responsibilities that come along with renting your home on a temporary basis. California financial planner Kevin Gahagan (mosaicfp.com) says hosts should be aware of the laws protecting renters in their city.

“In some jurisdictions, a tenancy—think vacation stay—of as little as one month can create tenant rights,” Gahagan says. “In a worst-case scenario, the ‘landlord’ might have to pursue eviction proceedings to evict an unwilling and uncooperative ‘tenant.’”

Gahagan also says standard homeowners’ insurance policies do not cover business or commercial activity. Therefore, you’ll need property and casualty insurance to protect yourself in the event of property damage or personal injury. You should also familiarize yourself with IRS rules about rental income, which kick in once the property is rented for 15 days in a year. But the upside there is that you may also be able to take some deductions related to your rental income.

“A tip is to ask your tax advisor about writing off some of your house expenses as a business expense, since you are now using part of your home as a business, to rent out to customers,” says Stacy Caprio of DealsScoop.com.

If you discover that renting your home through a site like Airbnb works for you, you’ll want to maximize your earning potential. That is partly dictated by the area where you live, and how appealing it is to travelers. But Sara Cannon, a designer for House Heroes LLC (househeroes.com), says you can also attract renters by making your home stylish and well-equipped and offering amenities like suggested activities or a basket of local goodies upon arrival.

“To get top dollar, stage the space in a way that appeals to a wide range of tastes. Think neutrals with pops of color using throw pillows, framed art or vibrant blankets,” Cannon says.

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