AirBnB your primary home part of the year? 🤔

[MacGyverIt]

Does/has anyone AirBnBed their home part of the year?
(Ran a search on AirBnB and didn't find anything previously in the forum, at least not for a while back.)

TL;DR
We have a 3/2 in a popular beach vacation destination less than a mile from the Gulf of Mexico, bought a couple of years ago and the property has increased ~150k in value since then. Low cost of residency here. Great location close to stores and restaurants. Mortgage under $1800.
In short, it's NOT a cultural fit here (Confederate flags waving, invasive questions about religion, etc.) so we're looking at options.
We'd love to live at least part time in New England- a higher cost of living but far more in keeping with our socio-cultural preferences.

Had the idea of AirBNBing the residence for 181 days out of the year so our "primary" residence is still here, while we rent something small (studio of one bedroom) in our location of choice (Mass or CT) to avoid costly home ownership but can enjoy the local scene and build better in-person social networks.

We had considered downsizing here to a 1/1 but prices have gone up and the house/location is great and would be an easy rent or sell, but mortgage at $1800 means a profitable rental income.

Has anyone part time AirBNBed their own home?
Rented a part time residence elsewhere, thus navigating the residency requirements of another state? (How do states even prove primary residence...?)

[GuitarStv]

If you don't like where you live, why not just move?  Seems like the air bnb thing would be a bit of a headache and potential to go wrong that you could just sidestep.

[Freedomin5]

We hired a management company to AirBnB our 3/2 cottage in a popular area of cottage country. Our cottage was very popular with vacationers. The house sustained some damage and quite a bit of theft.

Our experience is that vacationers will definitely not treat your house like someone’s house. They’ll treat it like a hotel and because they’ve paid good money to rent the house, they will feel entitled to what’s inside the house. One guest stole our pillows. Another stole the vacuum. Still another broke a few pieces of furniture. But that’s okay, because “they paid for it” paying $250/night. We also found that some people would rent the house, telling you that it would just be their family of four for the weekend, then invite ALL their friends to “come over to the beach house they rented to hang out” on Saturday, and you’d end up having 20 people use your water and toilet and propane for the BBQ. The cost differential is quite large between using the BBQ for a family of four and cooking lunch and dinner for a party of 20-30 people. Wear and tear is also several magnitudes larger.

We learned that if we want to keep our private residence kept up nicely, don’t make it a short term rental. Or only rent it out through word of mouth to friends and family you can trust, which is what we do now. We’d rather let it sit empty than have to deal with strangers who rent your place as a party pad and who are out to have a good time.

[bacchi]

We learned that if we want to keep our private residence kept up nicely, don’t make it a short term rental. Or only rent it out through word of mouth to friends and family you can trust, which is what we do now. We’d rather let it sit empty than have to deal with strangers who rent your place as a party pad and who are out to have a good time.

Living nearby also works. If the property owner lives down the street, it tends to quell any parties.

[GilesMM]

We used a local rental company which took security deposits and check the property immediately after checkout for any issues.  In ten years we had maybe three incidents - broken vase, broken fireplace glass doors and dent on the fridge door. Other than that, the place looked amazing and when we bought (and sold) you would never know it was a rental.

But I agree with the advice to bail out completely if you don't like living there.  This came up in another thread - you can't just pull up stakes and move to another state without a great deal of due diligence on what you are getting into.  Either move back home or to a place you have visited many times or lived in previously.

[Freedomin5]

We learned that if we want to keep our private residence kept up nicely, don’t make it a short term rental. Or only rent it out through word of mouth to friends and family you can trust, which is what we do now. We’d rather let it sit empty than have to deal with strangers who rent your place as a party pad and who are out to have a good time.

Living nearby also works. If the property owner lives down the street, it tends to quell any parties.

True, but the OP is planning to be in New England while the house is on the Gulf of Mexico, which, if I’m correct in my U.S. geography, means that OP will not be living down the street.

[Paper Chaser]

AirBnB occupancy rates have taken a nose dive in many places recently (see AirBnBust). If you're in a spot with a bunch of Short Term Rentals already, you might have a lot of competition which means low nightly rates, higher vacancy, or both.

I'd just sell the house and use the tax free equity gain to buy in a place that's a better fit.

[Dicey]

AirBnB occupancy rates have taken a nose dive in many places recently (see AirBnBust). If you're in a spot with a bunch of Short Term Rentals already, you might have a lot of competition which means low nightly rates, higher vacancy, or both.

I'd just sell the house and use the tax free equity gain to buy in a place that's a better fit.

Ding!Ding!Ding!

[MacGyverIt]

Thanks for this input, I’m definitely cooling to the AirBnB idea. Maybe 6 month rental so it’s one person/family on the hook and a realtor/manager/I can do background and credit score checks.

Hate to give up the house because it’s such a good investment.

Plus, residency here versus in, say, CT- from no state income tax to 6.9% would really suck.

Forgot to mention main reason - in addition to residency $$ - to keep an address here is we have elder care issues so this seemed like the best compromise to keep my sanity and still keep a place near the family if/when needed.

This discussion has given me an idea for an alternative. Rent the house entirely for the income stream, the family has a small duplex, maybe when one of the two units opens up we can rent (god knows we’d be better, more reliable renters!) from the parents which would allow us to downsize, minimize monthly payment, etc.

Having aging parents is hella difficult 😞

[Paper Chaser]

Hate to give up the house because it’s such a good investment.

What makes you say that "it's such a good investment"? Without running actual numbers for rentals in your area I'm not sure you can say that. It has seen significant appreciation in recent years (like most every place), but that's not really worth anything until/unless you sell (I'm assuming you won't be doing cash out refi with current rates).
You need to run the numbers for cash flow. Otherwise you'd just be speculating that it would continue to appreciate, which seems pretty dubious in the current environment (prices falling, market cooling, rates increasing, etc).

[sonofsven]

Another reason for selling is to take advantage of no capital gains tax on the sale of your primary home (when you meet the requirements).

[Freedomin5]

Forgot to mention main reason - in addition to residency $$ - to keep an address here is we have elder care issues so this seemed like the best compromise to keep my sanity and still keep a place near the family if/when needed.

This discussion has given me an idea for an alternative. Rent the house entirely for the income stream, the family has a small duplex, maybe when one of the two units opens up we can rent (god knows we’d be better, more reliable renters!) from the parents which would allow us to downsize, minimize monthly payment, etc.

Having aging parents is hella difficult 😞

Run the numbers. I understand the need to keep a residence in a certain area. We are in the same boat. Bought a condo in Toronto because aging family is there. We rented it out and the tenant basically helped us pay off the mortgage, but it absolutely did not meet the 1% rule. However, real estate has been bonkers, going up by 10-15% a year. If we hadn’t purchased, we would definitely have been priced out of the market and not be able to afford a place now. By purchasing, we were able to take advantage of leverage with cheap interest rates and keep a foot in the market. In our case, the numbers worked.

[GilesMM]

A lot of real estate which has been "a great investment", meaning the value increased during the last several years, may have already peaked in value.  The years ahead could hold anything, of course, but soaring interest rates will cool the housing market. A recession, if any, will hit the vacation/second home market hard (although not as hard as it did before WFH started). If you have any inkling to sell, now might be the time to catch the peak.  That is why we sold our place of 10 years - it became ridiculously valuable, triple what we paid.  With the sale proceeds and the 4% SWR on that we could afford a couple months of luxury vacation anywhere in the world every year and skip all the headaches of maintenance, taxes, renters, etc. We visited the same area a few months ago, stayed in a fabulous AirBNB, and had a real vacation instead of trips to the hardware store, trimming trees, cleaning, etc.

[LaineyAZ]

Speaking of numbers, don't forget the added homeowners insurance - my insurer requires additional premiums for anyone who rents out their home for more than 30 nights a year. 

[GilesMM]

Speaking of numbers, don't forget the added homeowners insurance - my insurer requires additional premiums for anyone who rents out their home for more than 30 nights a year.

Many insurers (e.g. USAA) will not insure a short-term rental property as it is considered a business venture.  In this case, you must find another insurer.  You should also review your umbrella insurance to make sure it is adequate and reflects the rental situation.  Renters tend to look for compensation when they fall down your stairs and break a leg, etc (although I did have one who claimed her broken leg entirely on her own insurance and didn't make a claim).

[MacGyverIt]

Mortgage on the house is $1780 and the house next door to us (not updated, ours is much nicer) rents for $2500 and another house in this community is currently listed for $3200 a month. This is a military heavy community meaning there are thousands of families in the area with a federally funded housing stipend and our city has the best schools in the county, which helps on the rental side. This huge DoD presence also functions as a support against huge housing price swings in the area; there will always be demand here because of the extensive federal spending, enormous DoD personnel presence and limited acreage for housing since the government owns much of the land in the area (scarcity sell…)

[waltworks]

Rent>mortgage is not how you analyze a rental...

-W

[Paper Chaser]

Mortgage on the house is $1780 and the house next door to us (not updated, ours is much nicer) rents for $2500 and another house in this community is currently listed for $3200 a month. This is a military heavy community meaning there are thousands of families in the area with a federally funded housing stipend and our city has the best schools in the county, which helps on the rental side. This huge DoD presence also functions as a support against huge housing price swings in the area; there will always be demand here because of the extensive federal spending, enormous DoD personnel presence and limited acreage for housing since the government owns much of the land in the area (scarcity sell…)

It's been mentioned multiple times now, but be sure you're comparing any potential cash flow to the ~$150k tax free gain that you could have from selling too. If it's no longer your primary residence, that advantage gets phased out and eventually disappears completely. So you'd pay LTCG on any future profit, plus depreciation recapture, etc.

[calimom]

@MacGyverIt  what part of the year would you want to rent out your Florida house? If it's the winter season, would finding a snowbird from a frosty climate for the entire time (or most of it) be an option? My mom and her husband have a condo in a nice community in Arizona. They live there fulltime except of some off and on times where they decamp to a place near Flagstaff. Some of their neighbors who own units rent to early-retirees from Canada, Portland and Seattle who want to play golf and tennis and just enjoy warmer temps. They appear to be great tenants, plenty of resources to pay a reasonable rent and basically treat the rental as they would their own home. There's not the in-and-out of Airbnb visitors (the complex has a 30 day minimum statute in place in any case) and the owners will often use the units in the shoulder seasons.

Would something like that work?

[PDXTabs]

@MacGyverIt  what part of the year would you want to rent out your Florida house? If it's the winter season, would finding a snowbird from a frosty climate for the entire time (or most of it) be an option? My mom and her husband have a condo in a nice community in Arizona. They live there fulltime except of some off and on times where they decamp to a place near Flagstaff. Some of their neighbors who own units rent to early-retirees from Canada, Portland and Seattle who want to play golf and tennis and just enjoy warmer temps. They appear to be great tenants, plenty of resources to pay a reasonable rent and basically treat the rental as they would their own home. There's not the in-and-out of Airbnb visitors (the complex has a 30 day minimum statute in place in any case) and the owners will often use the units in the shoulder seasons.

Would something like that work?

I'm not the OP but I think that sounds great. FWIW when I go looking for listings like that I find them on https://www.sublet.com/ and a lot of them have a minimum stay of three months.

[SeattleCPA]

@MacGyverIt Maybe someone else mentioned and I didn't see, but one thing to consider with short-term rentals is this: They provide a great way to save taxes because a short-term rental property often allows investor to avoid the passive loss limitation rules.

You have to carefully work the rules. The main thing is your average rental interval needs to be 7 days or less. Also like all money losing investments, you need to meet material participation tests.

I've got a ton of info on short-term rentals at our CPA firm blog (link in my sig below) in case you're interested.

[beekayworld]

Mortgage on the house is $1780 and the house next door to us (not updated, ours is much nicer) rents for $2500 and another house in this community is currently listed for $3200 a month.

You need to factor in your property taxes and homeowners insurance. Say this is another $500/month, plus a 1% maintenance fund. If the house is 600k, then the maintenance is another $500/month (you will eventually need a new water tank, roof, plumbing, electrical issues, etc). Is there a landscaper or pest control you are forgetting to factor in?

Plus the equity you have tied up in the house could be liquidated and invested elsewhere.  You're losing the gains that equity money could earn. It's not like the cash would just be sitting under your mattress if you sold the house.

[beekayworld]

(How do states even prove primary residence...?)

They can go to extensive lengths such as checking your credit card statements to see where you regularly bought groceries and gas.

They ask for proof of your membership in different locales. Where do you attend church/synagogue/country club/library/gym? Where are you registered to vote?  Where is your car registered? 

15 years ago I bought a small vacation home in Portland while living in Texas  and received a letter from the State of Oregon asking me to prove I didn't live in Oregon. 

I sent in copies of my daughter's recent high school transcript, showing the school is in Dallas; both of our Texas drivers licenses; and a screenshot of the Dallas County Appraisal District showing my Dallas home was worth considerably more than the Portland home and much bigger.  That was enough to satisfy them.  But it was a relatively small amount and I don't know if Oregon is very aggressive in pursuing.  (I could have easily passed any criteria just to be clear. My gym attendance alone would have totaled more than 180 days).

New York and California have reputations of being especially thorough in determining your residency. 

I wouldn't try to "outsmart" a tax district by not actually living out of state more than half the time, as they have had a LOT of experience in finding the cracks.