Before Opening Short-Term Rentals, Consider These Risks

The short-term rental industry has really taken off over the last decade. In some areas, it has become one of the fastest-growing types of real estate investment. Most people start by hosting in a home, either offering up unused bedrooms or else booking in stays when they are out of town. Before getting started, though, you should know the unique risks involved with short term rentals.

  • HOA restrictions on short-term tenants or other rentals
  • Insurance limitations excluding damage from tenants from coverage under your homeowner’s policy
  • Local laws limiting or prohibiting the practice

There are ways to deal with each of these issues, but you need to be aware of possible consequences. Insurance can be extended with coverage aimed at protecting you from damages caused by tenants while also extending your liability protection. The rest is not so simple.

Understand Your Community To Minimize Risk

HOAs and municipalities that limit the short-term rental industry do so because of their own financial interests. As such, the limitation is usually not designed to be malicious but to prevent the exploitation of resources that are not designed for high-traffic consumption. Resources like community security and cleanup services, for example. In some cases, additional licensing or the assumption of related costs might be enough to ease your path. To learn more, start researching the local community’s reaction to short-term rentals in your area.