Renting out your primary residence via Airbnb, VRBO, etc. as part of FI plan?

[CloserToFree]

Hi all, does anyone rent out their entire house/primary residence via sites like Airbnb, VRBO, or HomeAway (I'm not talking about hosting someone while you're also in the house)?  I'm wondering if this could be a solid income source for us, either pre-FI by renting it out while we travel (my understanding is you can do this for up to 14 days per year without having to pay taxes on the income -- see linked articles below), or post-FI by renting it out either monthly or on a more short-term basis while we travel or live elsewhere (in US or abroad).  We live in a very desirable area near a major city that's a big tourist destination, so we could probably get $200-$400 per night or $3,000-$5,000 per month.  I still need to look into the local laws/ordinances/etc. to assess how to go about this legally and what sorts of fees or local taxes might apply, but I'm wondering if this kind of thing has been part of anyone else's strategy -- either for generating supplemental income or for financing early retirement.  Would love to hear folks' experiences and advice!  Thanks!  (I should note that I quickly perused a few threads in the forum about airbnb, but they mostly dealt with renting out rooms and most were a few years old - feel free to point me toward more recent relevant posts if they're already out there.)

Here are a couple articles I found via google about some of the basics:

http://www.nolo.com/legal-encyclopedia/tax-issues-when-renting-your-home-airbnb-vrbo.html
https://www.washingtonpost.com/news/get-there/wp/2015/07/24/the-many-unseen-costs-of-renting-out-your-home-through-sites-like-airbnb/

[Villanelle]

I've briefly considered it.  We are living in the States short term and decided a furnished rental was our best bet.  We are in a super expensive vacation market, but managed to find something, on VRBO, and I the numbers she usuall gets for this modest place are astounding, and I looked in to it. 

In the end, I just didn't want to deal with it, and the numbers didn't turn out to be as good as they first looks.  Rents are much higher, but so are management expenses if you can't do it yourself because there is so much more for them to do.  If we were going to be living in this area so that we could manage it, I might consider it.  Tending to it during FIRE seems like it would be ideal.  But the costs to pay someone to let in every new tenant, to do check out cleanings (and check to make sure there is shampoo and dish soap and toilet paper), and to deal with all everything else is pretty significant.  And it's a lot more of a headache than a regular rental--not so much that it would be detrimental to a FIRE lifestyle, but more than I want to deal with from afar.  If you were living abroad, do you have someone local who you could pay to do all this? Or a local service that does it?  If so, look at the fees and realize how much they would cut in to the profit, and see if it still makes sense.  I'd have to pay them much more than I pay the manager of my regular rental, and it seems like it would probably end up eating most or all of the extra profits of a vacation rental vs. that regular rental. 

At one point, someone here posted the blog of someone who did a VRBO (or AirBnB) and compared it to his regular rental properties.  I can't remember the blog, but it was pretty interesting.  He was local and could self-manage, and his vacation rental ended up being slightly more profitable.  But a lot more work.  And that was without paying someone, as you'd need to do if you were traveling or living abroad. 

[InTheSeam]

Just VRBO'd our primary residence for an upcoming long weekend during a major annual sporting event. It will be my first time doing so, but it is a common practice in the area due to limited hotel capacity causing rates to skyrocket. It just booked for $1700 per night x 3 nights! That is roughly the cost of our monthly mortgage per night! It is quite obviously worth it for this weekend, but as I am planning the preparation and logistics, I could not imagine doing this on a regular basis for a reasonable market rate. The time to market, communicate, clean, move out our valuables, etc just makes the happiness:income ratio too low for most occasions.

[NonprofitER]

This is something we've considered as well, since we live close to downtown in Austin, TX. Many of our neighbors do short term rentals of their entire residences during ACL, SXSW, Formula 1 weekend, etc. for several thousand dollars and a 4 night minimum.

We priced out all the thing we would need to do it to our comfort (IE, locking away valuables and replacing the door with programmable entry, etc.) but the *one thing* that held me back was realizing that liability insurance coverage wouldn't protect us in the case of someone getting injured on the property. 

AirB&B and others do insure (up to a million?) on your property, but doing some further investigating, I realized that if someone got hurt on our stairs, etc. they could feasibly sue us and we'd be denied by our insurance coverage because of the commercial arrangement of the rental. I haven't yet investigated whether a rider or a clause in an umbrella policy would help in this situation...  Most insurance companies consider you renting out your home as a "business" and negate coverage for accidents that happen as a result. 

We haven't totally decided against it... but it did give us pause.

[zephyr911]

It's a valid idea, and could make you plenty of money, but I'd suggest you try it well before FIRE to validate all your assumptions and figure out if it's a good long-term fit for you.

[robartsd]

I don't see it being worth the work for normal rates, but do see the value when an event allows a premium. You can always get extra libablity insurance to protect yourself.

[Beaker]

Another option is doing medium-term (30+ day) rentals for visiting nurses, business people, etc. We had some retired neighbors who did that - every time the house rented they would just go travel for that long. The rates and the amount of work are both somewhere between a typical year-lease kind of rental and a hotel-style rental.

Also note that depending on your local laws and HOA covenants you may not be allowed to do hotel-style rentals. But typically that only applies to stays under 30 days.

[robartsd]

Another option is doing medium-term (30+ day) rentals for visiting nurses, business people, etc. We had some retired neighbors who did that - every time the house rented they would just go travel for that long. The rates and the amount of work are both somewhere between a typical year-lease kind of rental and a hotel-style rental.

Also note that depending on your local laws and HOA covenants you may not be allowed to do hotel-style rentals. But typically that only applies to stays under 30 days.

MMM had one family rent his house each summer for at least a few years in a row. Finding someone like that would be great for opportunities for retirees who want to do extensive trips, but I don't think I'd bet my FI on it.

[NoNonsenseLandlord]

I think you can rent your house out for two weeks, tax free.  It's not a great FI plan, but might be worth it.

Why not just get a roommate?

[randymarsh]

Following this thread. I'm looking at doing this now to reduce my housing cost/pay down debt quicker.

The issue I'm running into is that landlords have evicted renters doing it and many condo HOAs prohibit it too. If you don't own a house, there are definite risks.

[NinetyFour]

Following.

[Lowerbills]

I'm a fan of this idea.  Last year was the first year I rented our home though VRBO.  Only had it rented for 6 nights (two 3 night stays) and this year I'm going for the full 14.  Whenever there's a chance for NO INCOME TAX, I'm all ears...

I do feel like the whole "you're house is not an asset" discussion led me to see if there was a way to at least offset some of the cost associated with home ownership. 

My two cents from last year...

1.) It's the same amount of work to get your house ready for one night as it is for ten. Duh? right, but still, my goal is to get those 14 days in three bookings rather than seven.
2.) Come up with a good system to depersonalize your home.  It's a lot of work, and I feel like I was pretty efficient last year.  We are fortunate to have family in town where I took one car load of valuables or just other personal stuff we did not want left at the house.
3.)  Have to go for the premium days / event pricing.  I won't even consider renting our home for non-event price level. 
4.) There are costs associated, be sure to itemize and include everything: local permits (if needed), cleaning, short-term rental sites charge fees, any extra toiletries / linens etc...

One of my longer term goals is to develop relationships with our guests and have same people stay year after year.  One of my neighbors has been fortunate in this regard.  I also try to really make the home inviting - welcome visitors with a bottle of wine, lots of bottled water in fridge, nice coffee, some flowers in vases from my garden etc...  But I am aiming for the upper end of the market. 

Also - it really helps to have a free place to stay when you're not at home, or go camping or something!  If you don't,  then figure this into your calculations of how much you'd net.

[Villanelle]

I'm a fan of this idea.  Last year was the first year I rented our home though VRBO.  Only had it rented for 6 nights (two 3 night stays) and this year I'm going for the full 14.  Whenever there's a chance for NO INCOME TAX, I'm all ears...

I do feel like the whole "you're house is not an asset" discussion led me to see if there was a way to at least offset some of the cost associated with home ownership. 

My two cents from last year...

1.) It's the same amount of work to get your house ready for one night as it is for ten. Duh? right, but still, my goal is to get those 14 days in three bookings rather than seven.
2.) Come up with a good system to depersonalize your home.  It's a lot of work, and I feel like I was pretty efficient last year.  We are fortunate to have family in town where I took one car load of valuables or just other personal stuff we did not want left at the house.
3.)  Have to go for the premium days / event pricing.  I won't even consider renting our home for non-event price level. 
4.) There are costs associated, be sure to itemize and include everything: local permits (if needed), cleaning, short-term rental sites charge fees, any extra toiletries / linens etc...

One of my longer term goals is to develop relationships with our guests and have same people stay year after year.  One of my neighbors has been fortunate in this regard.  I also try to really make the home inviting - welcome visitors with a bottle of wine, lots of bottled water in fridge, nice coffee, some flowers in vases from my garden etc...  But I am aiming for the upper end of the market. 

Also - it really helps to have a free place to stay when you're not at home, or go camping or something!  If you don't,  then figure this into your calculations of how much you'd net.

Having stayed in more than a few vacation rentals, I think this kind of thing is huge.  It doesn't have to be wine, butsome sort of welcome is really nice, and is the kind of thing people remember and which causes them to recommend you to fellow travelers.  If there is a local food, perhaps you have some of that waiting for them, for example.  Also, assuming this is a tourist location with tourists, having information on local transportation options, local restaurants (with menus is even better), local sites that are off the beaten path a bit, and things like that really does help, and it creates the feeling that you are being hosted, rather than that you are just renting a room. 

[robartsd]

Having stayed in more than a few vacation rentals, I think this kind of thing is huge.  It doesn't have to be wine, butsome sort of welcome is really nice, and is the kind of thing people remember and which causes them to recommend you to fellow travelers.  If there is a local food, perhaps you have some of that waiting for them, for example.  Also, assuming this is a tourist location with tourists, having information on local transportation options, local restaurants (with menus is even better), local sites that are off the beaten path a bit, and things like that really does help, and it creates the feeling that you are being hosted, rather than that you are just renting a room.

If I was renting for a vacation, I'd particuarlly like the local recommendations from a resident - if you want to go the extra mile, you could even find out why the traveler is visiting your location and tailor your recommendations accordingly. Just make sure it doesn't feel at all like paid promotion. As a teatotaller, I wouldn't get any value from a bottle of wine.

[Lowerbills]

I also put together a list of restaurants, bars and coffee shops.  Two or three of my favorites for certain types of cuisine at different price levels and a couple sentences describing them or recommending a dish etc...

Also printed and laminated a list of instructions.  Things you wouldn't maybe think of, for example: where extra towels are, where are trash bags(guest sent me a text msg because couldn't find them), wireless network password, neighbors contact info if there's a problem, how to turn on TV, stereo, etc...

Things that may seem like they don't need instructions if it's your house, but to a guest it could be completely foreign.

[Dicey]

IIRC, the someone who did it and fully detailed the experience was Paula over at Afford Anything.

Don't forget to consider local permits and taxes. If collection is required in your area, you can bet whoever is paying them will be trolling for others who aren't. Learn in advance so you don't get busted.

[cambridgecyclist]

At the risk of taking an unpopular stance I don't think Airbnb or VRBO should be a big part of any FI plan. To me, FI is a long-term plan that should span decades. Airbnb, VRBO and similar short-term DIY rental options are showing up on the radar of local and regional government as untapped and unregulated revenue streams. If I were to count these as part of a long term FI plan I would discount these income streams substantially since they may dry up or become unfeasible due to regulation in the future.