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Seven Airbnb Dangers Hosts Should be Aware of

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Airbnb can be a great way to make extra cash during the summer but the short-term rental site poises serious risks hosts must be aware of. These risks can quickly turn your quest for extra cash into a major drain on your finances.

Many people who rent out rooms, homes or apartments on Airbnb end up broke because they failed to understand the risks associated with the site. Disturbingly the potential costs and dangers from Airbnb rentals seem to be increasing but many hosts are unaware of them.

A lot of hosts quickly discover that destructive guests are often the least of their worries on Airbnb. There are other greater perils lurking out there; that can quickly eat up your bank account and wreck, your credit rating if you are not careful.

The Perils of Airbnb for Hosts

Some terrible risks that Airbnb hosts need to be aware of and watch for include:

  1. Lack of liability insurance. Normal homeowner’s and renter’s insurance policies specifically exclude claims arising from business activities. That means you might lose your house; if your guest slips in the shower and breaks her leg. There are companies like Proper that have policies for short-term vacation rentals. If you are making a business of Airbnb consider one.

  1. If you rent or lease your place you might get evicted. Read your lease or rental agreement carefully and see if excludes business activities. If it specifically bars them or subleases forget about Airbnb, because that is grounds for eviction. Forgo Airbnb even if your landlord or manager says “it’s alright.” Remember a verbal contract is not legally binding.

 

  1. You might get into legal trouble with or face charges from local authorities. There are special requirements for short-term rentals in many jurisdictions including licenses. Short-term rentals are illegal in many communities. It might also violate the zoning in some communities. Hosts that violate these ordinances can face fines, liens on property and even jail time in some communities. Check with the city or county government before you start renting. If you cannot get a straight answer from government officials – talk to a local real estate lawyer. When dealing with the law what you do not know will hurt you.

  1. Running out of money. Experienced hosts know that Airbnb can sometimes take a long time to pay a booking, sometimes several weeks or months. This slow pay can be a real problem because expenses like the rent, insurance, the mortgage, and utility bills will not stop. Make sure you have extra money in your savings; or a source of emergency financin, available before you start. If you do run out of money; factors like Payfully will advance cash against unpaid Airbnb bookings. The great thing about factoring is that it is not a loan so there’s no interest accumulating and nothing to pay back.

 

  1. Your mortgage company might foreclose on you. Some mortgage agreements specifically bar you from renting or business activities. Read your mortgage or call your lender and ask if it is allowed. If your mortgage bars rentals you might face foreclosure or be forced to refinance. This can be tough because many banks will not issue mortgages to Airbnb hosts.

  1. Your Homeowners Association (HOA) might sue you or try to evict you. If you live in a condo or a neighborhood with covenants they might bar short-term rentals; read your HOA agreement and see what is allowed. Also be leery of HOA members’ promises; if short-term rentals are banned they might come after you, even if somebody says it is alright. As with a landlord; or property manager, a verbal agreement is worthless in this situation.

  1. You might get hit with additional taxes. An increasing number of communities are subjecting short-term rentals to hotel room and sales taxes. This is not always included in Airbnb. Call the local tax authority; usually the county or city treasurer’s office, and ask what taxes you should be paying. Make sure that you read the IRS webpage on rental income and expenses before you begin. If you get money from real estate related activities you will probably have to file a special form called a Schedule E with your tax return.

 

Airbnb can be fun and profitable but it is also fraught with peril. Make sure you do your homework and prepare for those risks so they will not drain your bank account and ruin your life.