Considering listing your property on sites such as Airbnb or VRBO? Living in Florida makes for a desirable destination vacation due to its generally warm climate and beaches. There is a reason why there are more than 7 million listings worldwide on Airbnb and more than 2 million on VRBO – the potential for profit.
But despite the possibilities these sites can provide for bringing in supplemental income through renting your property, it really helps to know a few things before you jump into the short-term rental game. Here are some key points to remember to help you maximize a profit in this sector of the sharing economy:
Know the 14-Day Rule
This is the most important piece of information you should know and is often overlooked by people listing properties on short-term rental sites. If you are listing your home for more than 14 days, you will be required to pay tax on any income you make from that rental, according to the IRS.
If you are listing for 14 days or less, the income is not subject to tax payment. Your “home” is defined as any home that you own and live in for 14 days out of the year or 10 percent of the number of days you rent the home. This applies to both room rentals or the entire property.
Here’s what this look likes: Let’s say you rent your home this year for two weeks in December. This is the only time this year that you have rented your home. Because it is within that 14-day time period, the income would not be taxable.
Other Tax Requirements
If during the course of one year you earn more than $20,000 (in gross income) renting your home on these sites and having 200 or more payment transactions, Airbnb and VRBO are required to send you a 1099-K. Different states also have different laws and tax requirements for short-term rentals. For example, property owners in Santa Monica, California are required to collect a 14% occupancy tax that is paid to the city.
Consider Allowing Bookings on Major Holidays
If you are going to list your property for 14 days or less, it helps to rent out homes over busy times of the year. This is when you can charge the most amount of money for your home. If you live in a tropical climate, such as certain parts of Florida, consider listing your home during the winter months. Potential guests might be more willing to pay a higher rate if it means getting a break from the snow and cold.
A quick search for St. Petersburg, Florida homes for four adults from December 23rd to 27th shows rates for $115 and higher per night (on both Airbnb and VRBO).
You can also search in your area to see what other nearby homes are listed at price-wise. Keep in mind, if you have a pool or are within a 10-minute walk to the beach, this usually means you can charge a higher nightly rate.
If you can accommodate more guests (by having more bedrooms) then this will also translate to a higher rate.
Like any business, there are fees involved when it comes to listing your property, which tends to differ slightly based on which site you use. Airbnb charges a 3 percent fee for each booking your property gets. VRBO uses two subscription plans, one of which charges approximately an 8 percent fee (broken into a 5 percent commission and a 3 percent payment processing fee). The other charges a flat-rate of $499 per year.
Two Night Stay Minimum
Consider requiring guests to book at least a two-night stay. This is another way to maximize profit since you are guaranteed to receive two nights’ worth of payment.
Both Airbnb and VRBO offer liability insurance up to $1 million, which includes property damage and guest injury. But you should still look into your own insurance policy to see what is covered. One way you can attempt to reduce your chances of major issues is by considering to not allow automatic booking. The majority of listings on Airbnb and VRBO do not allow booking with this feature.
By opting out of automatic booking, you’ll receive “requests” from potential guests interested in staying at your home, which you can then approve or deny. For example, you might prefer guests to stay at your home for purposes of a family vacation, rather than a bachelor party. It also enables you to interact with your potential guests before they stay in your residence.
Listing your property on these vacation rental sites is fairly straightforward and easy to use. Hopefully, these few tips will help you increase your profit and have an enjoyable experience with the rental process.