Short-Term Home Rental Risks

August 24, 2018

Renting out your home might seem like a great way to make some extra cash. Companies like Airbnb make it easy to rent your house out for short periods – but easy doesn’t equal risk-free. Before you let strangers into your home, make sure you understand the potential problems.

Your local laws might prohibit it.

Some local governments prohibit short-term rentals. According to CNBC, many cities are moving to ban short-term rentals, which can be associated with unruly parties and other problems. Depending on the local regulations, anyone found flouting the local ban could face a fine – sometimes a big one. In Miami Beach, for example, first-time violators can be charged a $20,000 fine.

Even locations that allow short-term rentals may have strict requirements in terms of business licenses, zoning rules and taxes. Before you list your home, you need to make sure you’re not breaking the law by doing so.

If you live in a neighborhood with an HOA, you’ll also need to check the rules of the HOA. If you don’t own the home you’re planning to rent out, make sure you check your rental agreement, which may prohibit the practice.

Your Home Could Be Damaged

You might trust the renters to take good care of your home – but you probably shouldn’t. After all, you don’t know them, and damage could happen in a number of ways.

  • The guests could throw a party that results in damage. This is what happened to one homeowner in Ohio, according to Fox 8 Cleveland. The renter threw a New Year’s party with 250 guests. In addition to facing property damage, the homeowner also got cited for noise disturbance. Another party, this one at an Airbnb in New York, resulted in property damage totaling $100,000, according to ABC 13.
  • The guests could steal from you. You’ve heard of people stealing towels from hotel rooms. Even if they don’t completely trash your place, dishonest guests might pocket some items.
  • The guests could damage your home accidentally. For example, they could break a vase or even start a fire.
  • The guests could injure themselves on your property.
  • The guests could do pretty much anything. This report from WRAL says that a homeowner found Airbnb guests shooting what appeared to be an adult film in his home.

You can’t completely eliminate the risk of damage to your property, but you can take steps to reduce it.

Remove valuable and irreplaceable items, like expensive antiques and family heirlooms. Also address any hazards, such as broken flooring that could cause people to trip or very fragile items that are likely to break. Make sure the smoke detector is working and supply fire extinguishers.

In your listing, be very clear about what is and is not allowed. Be especially careful around holidays known for big parties.

Your insurance might not cover it.

If something goes wrong, you’ll need your insurance to cover the resulting expenses. A personal homeowners policy may not cover short-term rentals, however, as these can be considered a commercial activity.

Don’t try to hide the truth from your insurer. If you need to file a claim, the truth will likely come out, and then you can be left without the coverage you need. Instead, ask for a policy that fits your needs.

You may also be able to get coverage through the company you use to rent out your property. Airbnb, for example, offers Host Protection Insurance. Don’t just assume that you’re covered by the company, however. Check the limits and exclusions. Also see what the process is for filing a claim.

Need help assessing your homeowners insurance needs? Heffernan Insurance can help. Learn more about our personal insurance services.