Airbnb Short Term Real Estate Rentals

You may have noticed where superstars like Beyonce and Justin Bieber stay in their downtime. After stealing the halftime show at Super Bowl 50 in San Francisco, Beyonce retreated to the Los Altos Hills for a night of relaxation in her luxurious home away from home, courtesy of Airbnb [1]. While most of us could never even dream of such extravagance — the mansion is rumored to cost a pretty penny at $10,000 a night [2] — Queen Bey is the poster girl for a broader trend toward private home rentals. Millions of people are defying the paradigm of hotel accommodation and opting instead for a more modern approach to travel: short-term rentals of private residences.

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Short-Term Rentals: A History

The concept of renting out spare space for an extra buck is nothing new. However, the Internet age has boosted the home-sharing economy by making it easy, and often cheaper, for travelers to stay in private homes instead of hotels. We largely have Airbnb to thank for this. The San Francisco-based company started out in 2008 as an online platform meant to make hosts a little money on the side for renting out a room (or even space on the couch). From its humble beginnings, Airbnb now serves millions of people in over 190 countries [3]. It has grown into an estimated $24-billion business — yes, you read that right: billion with a “b” [4].

A huge part of this success is the wide range of options available. The type of rentals available run the gamut from a spare room in a metropolitan, owner-occupied apartment to a huge, secluded home all to yourself. No matter your taste or budget, Airbnb has the perfect accommodations for you. VRBO, a similar platform, focuses more on entire homes and apartments rather than rooms or couches. For security, both businesses facilitate all aspects of booking and money exchange and, unlike some rental directories, Airbnb does not charge to list a rental; they only receive a commission when a booking is finalized.

Why It Makes Sense

Whether you’re traveling or hosting, short-term rentals make sense. For pleasure or business travelers, they’re an innovative way of traveling economically that’s often more comfortable than a hotel. Additionally, many people enjoy making connections with other people around the world. From a hosting standpoint, short-term rentals can be very lucrative without too much effort on the homeowner’s part. If you have the means, purchasing a second home to rent out in a popular area can earn you a lot of return on your investment. Buying a rental property can even help you save for retirement or put your kids through college. And the benefits aren’t just personal — short-term rentals can also be a great boon for communities. They promote tourism, which in turn generates revenue for the city or region and ultimately makes your property more valuable. However, with the good comes the bad — or at least the confusing.

The Great Debate

Many communities have begun restricting the rights of short-term hosts, arguing that private rentals create competition for hotels and other local establishments. Unfamiliar tenants and increased noise and traffic are also issues for neighbors. And furthermore, although Airbnb isn’t the sole perpetrator, residences that serve strictly as vacation rentals can mean less housing for those who actually live and work in areas where housing is less than plentiful.

In San Francisco, for example, scarce, expensive housing coupled with a huge number of visitors has set the stage for an especially tumultuous battle over the legality of short-term rentals [5]. Despite legal wrangling, however, the popularity of Airbnb rentals continues to climb in San Francisco and the Bay Area at large. And why shouldn’t it? At the heart of the tech movement, the Bay Area is also a place of stunning natural beauty and international culture. It’s no wonder the region is having its moment in the spotlight.

Avoiding Pitfalls

When buying with short-term renting in mind, you must consider a variety of factors. The property has to be zoned for short-term rentals, which may mean that it can’t be located in a strictly residential area. Your homeowner’s association or condo board may need to approve, and some mortgage lenders require additional insurance as well. Tax compliance can be another complicated issue for short-term rental owners, and you may have to pay hotel or second-home taxes [6]. On the other hand, however, myriad tax benefits of owning a vacation rental exist, including deductions for depreciation as well as management and operating expenses [7].

Navigating the complex web of legal issues can be extremely confusing, especially since laws vary depending on the property’s location. Enlisting the help of a savvy REALTOR® will make the most of your money. Kyle Else is a trusted REALTOR® based in Silicon Valley who helps clients make smart investments in rental property throughout the San Francisco Bay Area. Keller Williams Realty and Kyle know the ins and outs of short-term rentals and can help even the most astute client choose the right property and understand the laws associated with short-term rentals. Let Kyle help you take advantage of the short-term rental boom today.