7 Risks to Consider Before Renting Out Your Home

Renting out your home may seem like an easy way to make some extra money. You may have a spare room or an ADU you want to rent out when hotels are at full capacity (like when there’s a big game, concert, university graduation, or other nearby event) or you may want to rent out your entire house while you’re on a vacation of your own. Before you sign up with a short-term rental platform, make sure you understand the risks.

1. Short-term rentals may not be allowed by local jurisdictions.

Before anything else, you need to determine whether you’re even allowed to rent out your property.

In response to the problems associated with the rise of short-term rentals, some cities have passed ordinances to ban or severely restrict short-term rentals. According to Investopedia, New York City says hosts cannot rent out an entire apartment or home to guests for fewer than 30 days. San Francisco and Santa Monica have also placed restrictions on short-term rentals.

If you live in a community with an HOA, your HOA may also prohibit short-term rentals. Breaking these rules could lead to fines and lawsuits.

2. Renters might not want to leave.

If you’ve ever had party guests who don’t take the hint that it’s time to leave, you already know how frustrating it is when someone overstays their welcome. The situation is much worse when you’re dealing with renters who refuse to leave your home. Unfortunately, Airbnb squatters are sometimes a problem, with local tenant protection laws making it difficult to kick them out, especially for stays that last for over a month.

According to ABC Eyewitness News 7, a North Carolina host experienced this after renters refused to leave without an eviction order. They also refused to pay!

3. Short-term rental properties can be damaged or destroyed.

You probably take good care of your home, but renters might not. The damage they cause could be anything from muddy footprints on the floors to broken appliances, kitchen fires, and theft.

Damage may be particularly severe if guests rent a home to host a party. For example, KDRV reports that a host was devasted after renters trashed her home during a large party. Among other issues, the partiers managed to get gum all over the carpets, which the owner had to replace.

Intentional damage is also a risk. Yahoo says guests at one short-term rental property shoved garbage bags down sinks, broke floor tiles, placed crab legs and blue cheese behind cabinets, and cranked up the heat.

4. Your renters could introduce bed bugs.

Bedbugs are a common problem in the rental industry and it is often difficult for owners to prove their origin. If renters claim the bedbugs were present before they arrived, it can be hard to provide otherwise. Regardless, cleaning up a bedbug infection is a pain.

5. Renters could use your home for other purposes.

You probably assume that guests will rent your home to have somewhere to stay on vacation. However, some guests may have other purposes in mind. For example, WRAL News reports that a Chicago Airbnb was used to film a movie. The homeowner believes it was an adult movie and was very upset, especially since he didn’t want the family photos he had in his home to pop up online.

While the filmmaking scenario sounds bad, even worse scenarios are possible. Your home could be used as a location to make or sell drugs, harbor criminals, and many other nefarious activities.

6. Your short-term rental must be ADA compliant.

When you rent out your property, you enter the business of public accommodations, which means you need to comply with anti-discrimination laws like the ADA as well as any applicable state or local laws.

Airbnb says hosts cannot reject guests on the basis of disability, meaning they must accept service animals in most cases. This creates friction when hosts believe that guests are lying about the purpose of their animals or when hosts have allergies or other reasons for not wanting animals around. The ADA says service animals do not have to wear special vests, patches, or harnesses to identify them and hotels cannot charge cleaning fees for hair or dander.

7. Your insurance may not cover losses involving rentals.

Homeowners insurance is not intended to cover commercial risks – and short-term rentals count as commercial endeavors. As a result, your insurer may deny your claims. Furthermore, if you try to hide the fact that you use your property as a rental – or simply forget to notify your insurer of the fact – your coverage could be in jeopardy. Although some rental platforms offer limited financial protection, you may need to purchase additional short-term rental insurance to cover your risks.

Are you thinking about renting out your home? Heffernan Insurance Brokers can make sure you have appropriate insurance coverage first. Contact us.