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AirBnB or VRBO Advice
updated: Mar 11, 2014, 8:22 PM

By Edhat Subscriber

I'm considering renting my house for a few weekends this summer by using AirBnB or VRBO. I think it's fair to pay the 12% TOT (Transient Occupancy Tax) to the city but does anyone know:

1. how to calculate the "average occupancy for the month" since it's a house...?

2. whether I have to pay the TBID assessment, whatever that is...and

3. why I have to say that I'm a commercial business when I'm not?

4. what the negative repercussions might be in the future (IRS, property value, refi options...?)

Comments in order of when they were received | (reverse order)

 COMMENT 502009 agree helpful negative off topic

2014-03-11 10:01 PM

I have some experience doing this. First of all, where are you getting these terms such as "TOT", "average occupancy for the month", "TBID assessment", and who is saying that you're a commercial business? Airbnb never threw ANY of those terms at me.


 COMMENT 502011 agree helpful negative off topic

2014-03-11 10:16 PM

And i don't see how "refinance options" come into play if you're renting your place out on Airbnb for a few weekends. I suspect maybe you're overthinking this thing. Just rent your place out, and if you make over $600 in a calendar year from doing so, then Airbnb will send you a 1099 or something similar, which you include when you file your income tax. At least that's been my experience.


 MESARATS agree helpful negative off topic

2014-03-12 12:09 AM

Less than 14 days will not get1099 on Airbnb If you rent for 28 days or greater, no TOT.


 MESARATS agree helpful negative off topic

2014-03-12 12:16 AM

Not much to worry about if it is a short term or one time deal, but if you find you it is something you want to continue , talk to your tax guy. Also, if you live in a busy body neighborhood, discuss with your neighbors first.


 COMMENT 502016 agree helpful negative off topic

2014-03-12 06:12 AM

If it ends up being for more than a month you better let your homeowner's insurance know, could be coverage issues if there is a fire while you're renting it out or if they bring a dog that bites someone.


 COMMENT 502025 agree helpful negative off topic

2014-03-12 07:00 AM

I'd be really bummed if my neighbor did this.


 COMMENT 502034 agree helpful negative off topic

2014-03-12 07:23 AM

Yeah, you'd better be in good with your neighbors, or make sure your renters are nice people.

I can see all kinds of liability issues with this.


 COMMENT 502038P agree helpful negative off topic

2014-03-12 07:32 AM

Be really really careful about vetting your occupants. They can trash the entire place in one good domestic fight. I've seen it again and again.


 COMMENT 502039 agree helpful negative off topic

2014-03-12 07:33 AM

Very common in SB. Our neighbors in San Roque do it every summer and we have met many cool people from around the world.

Always call your tax guy first.


 COMMENT 502042 agree helpful negative off topic

2014-03-12 07:36 AM

025, why so? you've never stayed somewhere temporarily without buying the place? Did you become a problem that was a bummer for the neighbors? You probably were very nice and most people didn't even notice you were there.

Summer rentals are a great way to experience unfamiliar people, places, and cultures in ways that foster real understanding. I find that the people who get involved in them tend to be sensitive to fitting in and enjoying the neighbors. People who are looking for nothing more than a place to sleep and a place to bathe usually end up at a motel.

We've had our house rented to visiting professors, foreign exchange students, and visiting missionaries from 3 continents over the years and our neighbors loved them (and left us wishing we could have been around to interact with them). One neighbor kept in touch with some of the Summer students up until the time of her death.

Relax! Enjoy someone else's choices.


 COMMENT 502053 agree helpful negative off topic

2014-03-12 08:09 AM

Great topic. We're thinking of doing this with my mom's vacant San Roque condo but worry about the effect on the neighbors and deadbeat renters. How do you vet your renters? Large cash deposits? Can you recommend a good property manager to oversee cleaning etc?


 COMMENT 502058 agree helpful negative off topic

2014-03-12 08:16 AM

From the IRS website...
Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E (PDF). If you provide substantial services that are primarily for your tenant's convenience, you report your income and expenses on Form 1040, Schedule C (PDF). Income and expenses related to personal property rentals are reported on Form 1040, Schedule C (PDF) or Form 1040, Schedule C-EZ (PDF) if you are in the business of renting personal property and directly on Form 1040(PDF) if you are not.


 COMMENT 502067 agree helpful negative off topic

2014-03-12 08:43 AM

Someone I know had a neighbor who rented their place out while they (the neighbors) were on vacation. They said they were having "friends" stay over while they were away. Yeah right. I'm sure they didn't get anything approved or pay occupancy taxes. Of course the renters trashed and blasted music all over the place. There needs to be an easy way to enforce violations to prevent this from happening.


 COMMENT 502072 agree helpful negative off topic

2014-03-12 08:53 AM

Go for it! I do this in Solvang and use Airbnb, Flipkey, VRBO/Homeaway for advertising. If you get your home up now you are sure to have some rentals this summer. I've been renting mine for two years now and make a nice second income from it. I rent the entire house, with a two night minimum it rents in the $700 per night range + your cleaning deposit (100$). I have three lined up this month, that's about 4500$ extra that I can put away in savings this month and it's filling up for the summer as well. There is a reason people do this, it's hard to earn enough money in this area to get ahead. This 'sharing economy' with home rentals is a fantastic way to finally build yourself some wiggle room in life.

One thing I like about Airbnb is you can screen your renters more, they get reviews as well as the rental home. So, you can be picky and not rent to people without reviews or any negative feedback. You are also covered by Airbnb if someone trashes your house (always check with your home owners insurance as well) but Airbnb has a 1,000,000.00 host guarantee backed by Lloyds of London should someone ruin your property. Anyhow, renting our home for weekends has done a multitude of good for us:

1) Wife doesn't need to work and can stay home and raise the kids without worrying about finances of not having a second income.

2) When our house rents, it forces us to get out and go do fun stuff WAY more than we would if we didn't do this. We stayed in a Yurt at Cachuma last weekend and this weekend we are going to a cabin at Thousand trails!

3) Extra 50k+ a year in income for just renting March through October, weekends only

Also - our neighbors are totally fine with it, nobody is impacting them any more than we would should we be home.


 COMMENT 502073 agree helpful negative off topic

2014-03-12 08:54 AM

067: Yes, let's "prevent this from happening" because of something that happened to "a neighbor of your friend". Seriously? Let's prohibit this cultural exchange, travel opportunity, and refreshingly unique & authentic way of visiting a new place because of one story by a friend of a friend, and not allow anyone to do this anymore!


 COMMENT 502084 agree helpful negative off topic

2014-03-12 09:12 AM

Short term rentals are a blight on a neighborhood and the community. Short term renters have no stake in the neighborhoods they temporarily reside in as far property values and more basic things such as sanctity of peace and quiet. Residents in residential neighborhoods have jobs and kids that do not need to be barraged by music with explicative lyrics at all hours of the day and night as well as almost constant drinking and use of illegal substances. Having a short term rental in a residential neighborhood is completely inconsiderate of your hard working neighbors who take pride in their home and value their biggest monetary asset. Hopefully SB will step up like other cities and ban these sort of rentals in true residential neighborhoods. They threaten to demise of community value and neighbohoodly living. The idea that 99% of these renters are kind and wuiet people is a total myth, you too will learn when one appears on your street.


 COMMENT 502100 agree helpful negative off topic

2014-03-12 09:39 AM

NATURE BOY: I didn't mean prevent it from happening ever. I meant prevent it from happening illegally, in a way that circumvents paying taxes, and where there a no controls in place that prevent bad situations from happening. There are reasons that you can't just open up a business willy nilly in a residential area without permits. If it can be done in a responsible manner, then fine. But I completely disagree with allowing violations to take place and disturbing all your neighbors just on the off chance that some cultural exchange will take place.


 COMMENT 502101 agree helpful negative off topic

2014-03-12 09:40 AM

084 has absolutely no idea what they are saying. All of my renters, and I've had a lot, have been totally respectful of my neighbors, respect our quiet hours and our home. I've had nothing but good feedback from my neighbors regarding the renters at my house. Of course.. I don't rent to college age kids either and your are asking for it if you do. Nobody is blaring explicit music and doing drugs...come on now. Where do you get this information?

People with vacation rentals have jobs and kids and work hard too...we're just being SMART and maximizing our income by leveraging one of our largest assets to help put our kids through college, save some money and improve our lifestyles. It's not going to stop, the only city that has a 'ban' on it is New York, and that's because of big hotel business lobbying against it, that will change in time.

A well managed vacation rental is an asset to a neighborhood, nice groomed property that is constantly kept clean and maintained in tip top shape won't hurt your property value.


 COMMENT 502115 agree helpful negative off topic

2014-03-12 10:13 AM

It's clear here that those that say these rentals are a blessing to the community and all the neighbors love them are making some significant $$ from doing it themselves. If you’ve had the misfortune of having a neighbor rent their house out short term then you know all too well the ramifications of these types of rentals on your street. Sure they are often cleaned up afterwards but during the stay there is always a significant increase in noise, partying, trash, and general debauchery even with respectful and mature renters. Furthermore it creates an unsafe environment for the children on the street as it introduces fly by night strangers who could have a history of who knows what awful things. All too often after these rentals how up things begin disappearing from your garage for example. They degrade the neighborhoods quality of life and the time has come to regulate this practice more closely or possibly outright ban it in historically family oriented neighborhoods.


 COMMENT 502124 agree helpful negative off topic

2014-03-12 10:27 AM

115 - No need to be paranoid. If you are a good neighbor then you should be communicating with those that live next to you to let them know that you will be renting your house and if there is any problems that they can call you.


 COMMENT 502130 agree helpful negative off topic

2014-03-12 10:39 AM

I'd definately talk to the neighbors first and see how they feel. I've talked to people who have neighbors doing this and they HATE it. They say they hate suddenly having a string of temporary strangers around. They're on vacation, partying, coming and going at all hours of the day and night, have no respect for the neighbors, and are LOUD.


 COMMENT 502132 agree helpful negative off topic

2014-03-12 10:42 AM

You will rarely find a neighborhood that doesn't have renters, SB is an investment town with many rentals in every neighborhood from the most upscale and less.

If you want to get an idea of just how many short term rentals there are in SB check out VRBO Santa Barbara, you might be surprised.

If I had a home to rent that is exactly what I would do and I would use a reputable management company that deals exclusively with the VRBO market. I would as a courtesy to my neighbors give them the management company name and number they could contact if there was a tenant problem.

My question about just doing a weekend rental is how much work is it to prepare your home every week for strangers coming in? Do you lock up your valuables and personal items and clean out your food or just how do you do it? It seems like a huge amount of work if you do it often.


 COMMENT 502160 agree helpful negative off topic

2014-03-12 11:43 AM

132 - It's not that bad at all. We keep a clean house to begin with, so it's basically just clean the bathrooms and remake the bedrooms with the rental linens. We have separate towels, sheets, comforters, etc. We lock up our valuables, the garage, etc. Anything we don't want touched goes in our office, which is separate from the main home. During the rental season, we only keep the things we absolutely need in the house so it's easy to 'move out' and be ready. We already know months in advance that it's rented that weekend so it's simple.

As for food, we take anything fresh with us camping or wherever we go for the weekend. It's a huge amount of work for the first rental of the season, but after that it's a cake walk. It's well worth it for the memories we create when we are out and the financial benefit.

As for the paranoid person above...strangers drive through your neighborhood every day, Do you know the history of ALL of your neighbors? You realize that any one of them could snap at any time? Quit living in fear!


 COMMENT 502170 agree helpful negative off topic

2014-03-12 12:04 PM

When my husband's mother passed away several years ago, she left a rundown house and it was a terrible time to sell anyway, so he fixed it up and has rented it for varying periods, usually a weekend, maybe up to a couple weeks. He has used Alpha Investment Management (Christina Loring) and they handle finding the renters, collecting deposit and rents, cleaning between renters and so on. Of course there is a fee for that, but having them manage means laws including tax laws are being followed and property is not damaged. The management company was able to advise us on what linens, etc renters preferred. I think it is safer than leaving the house empty, and it covers the taxes and insurance on the property. Frankly I have rented out houses in the past and thought it costs some to have a management company , it saves a ton of time and aggravation, and is well worth it.


 COMMENT 502179 agree helpful negative off topic

2014-03-12 12:28 PM

Are prospective short-term renters protected by the same anti-discrimination laws as long term renters? If so, I wonder how you can "vet" applicants based on age/income/lifestyle etc?


 COMMENT 502184 agree helpful negative off topic

2014-03-12 12:42 PM

It's the Wild West out there in terms of renting! Let's all get in on it and make some serious cash!


 COMMENT 502226 agree helpful negative off topic

2014-03-12 03:00 PM

JBYRD - reading your enthusiastic comments was refreshing, but $700/night? No wonder you need to rent it out. You place must be really nice. Must be tough to afford the mortgage without the rental income. Pricier than the Bacara or the Biltmore per night.


 COMMENT 502274 agree helpful negative off topic

2014-03-12 04:54 PM

226 - It sleeps 8 people, so if you took 4 couples and stayed at the a nice hotel you would be paying more for less amenities and privacy. Mine is an acre property, outdoor kitchen with pizza oven, natural gas grill, organic gardens that are open to the renters, professional kitchen. It's not really about affording a mortgage, I can do that without the rental. It's about being able to get ahead, using my largest investment (my home) to make extra money as well. That and the benefit of being able to take mini vacations that are fully paid for by the rental!


 COMMENT 502279 agree helpful negative off topic

2014-03-12 05:09 PM

Good to hear all your reactions. I originally asked about the city tax issues because I feel it's appropriate to pay the 12%. I was just looking for help understanding the forms. From the sounds of it, no one who has commented so far is paying the Transient Occupancy Tax to the city. Some might feel that the city's registered hotels and B&Bs need the competition, but I don't think it's fair for them to be required to pay the tax and we private homeowners not. I also know that the city is actively (whatever that means) looking for these vacation rentals and doing what they can to get their tax money.
As far as the reference to refinancing issues, I vaguely remember the bank requiring a signed statement saying that I would not rent the property if they provided refinancing money (they are part owners after all). That was in a previous house.
We fully intend to declare the income to the IRS, I'm just not sure whether I want to declare it as rental income..


 COMMENT 502452 agree helpful negative off topic

2014-03-13 01:11 PM

As a follow up, I do not pay TOT in Santa Barbara and I'm not familiar with SB's regs on this. I live in unincorporated SB county, but my address is in Solvang. I pay my TOT (which I collect from renters) to Solvang City. I also pay my income taxes on the revenue received. You get sent your tax forms from each of the online sites that host your rental website. You can also deduct for improvements, etc. Talk to your tax professional.

As for the banks, there is usually a length of time that they require you to live in the home and not rent it out after you get your loan. Usually it's 6 months to 1 year. Then you can do what you want. You can check with your lender.

You should also know that if this is still your 'primary' residence and you live there full time and are just renting it as a vacation rental when you are away, there is no wrong doing with your loan. That is placed on the loan to prevent fraud, where someone refinances there's 'primary' residence, but it's not really the primary residence.


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