Renting houses and rooms has become a popular thing to do lately with the advent of companies like Airbnb making it easy to do so. It all seems like the perfect solution to making a little extra money by renting out an extra room or a second house while not doing that much work. But there are pitfalls to watch out for that can actually make the whole thing a money losing venture. Here are some things you should pay attention to.
As usual, in most cities there are local zoning and permitting that need to be adhered to. There are also applicable taxes that you would need to find out about. And there may be rules about rentals in general. Not adhering to these things could cost you a lot of money and make trouble for you.
Before you rent out your house or a room, you must make sure your homeowners insurance will cover you if there’s a problem. A homeowner’s policy may not provide the necessary coverage if a renter is injured on the premises or steals something from the property.
Many people don’t realize that renting a room is income and under certain conditions can be taxable. You don’t have to worry about taxes unless you rent for more than 15 days a year, so it pays to be aware of how any days you are renting. On the bright side, once you’re paying taxes, you can also start taking deductions on expenses relating to the rental.
If you have a homestead exemption you may be putting it in jeopardy by renting. Once you start making money off you home, a state or municipality may consider it a business and change your tax status.
Renting a room or house can still make you money but it pays to talk to a tax or property management professional first.