If You're an Airbnb Rental Host, You Should Know About These Legal and Regulatory Issues

One great way to make money in real estate is to list your property on Airbnb. However, you need to make sure that you’re aware of the Airbnb policy in your region to avoid fines and legal woes.

You may need to follow your city’s Airbnb rules, contend with your landlord and deal with your homeowners association and neighbors. Here’s what you need to know. 

Do You Need a License to Run an Airbnb? 

People who rent their properties on Airbnb are viewed as business owners in the eyes of many state and local governments. This means that you may need to obtain the proper licenses and permits to operate legally in your area. Keep in mind that you’re also required to pay occupancy taxes and other fees. Before you begin accepting bookings, make sure that you’ve done your homework and looked up the laws that apply to your state and city. 

To obtain all the proper permits and licenses, you may need to bring your property up to all the current housing codes. You also need to show that the property meets the insurance requirements in your area to be used as a rental property. The best way to find out all the requirements you need to meet is to get in touch with the city government. Explain that you’re planning on using your property as an Airbnb, and you’d like to know what paperwork you need to fill out to get started. 

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Where Is Airbnb Illegal in the US? 

According to Airbnb, some cities have stringent regulations meant to discourage property owners from renting their properties with Airbnb, while others have banned short-term rentals outright. The primary reason some cities might have enacted harsh Airbnb rules is that many listings are in residential zones. You can’t guarantee that every guest is going to be a model citizen, and your neighbors might not appreciate the constant arrival and departure of new visitors. 

New York, Honolulu and San Francisco are the largest cities to enact laws making it illegal to rent an Airbnb under most circumstances. New Orleans and Las Vegas have joined this trend, but while it’s more difficult to rent an Airbnb in these cities, it’s also not impossible. For example, while it’s illegal to rent your property out for less than 30 days at a time in all the aforementioned cities, you can do so if you’re present on the property, provide access to the entire property and enforce quiet hours as part of your Airbnb policy. 

Can I Use My Condo for Airbnb? 

You might be able to rent your condo to people through Airbnb, but it’s important to make sure that you’re aware of your homeowners association’s Airbnb rules. Some HOAs allow you to rent condos but require you to follow certain rules. Even if it’s okay to rent your condo, the HOA may change the rules if you have a string of unpleasant guests that cause disturbances with the neighborhood or condo complex.

Some localities have a ban on renting condos through short-term rental companies like Airbnb. If your city has an Airbnb policy that outlaws condos, it doesn’t matter what your homeowners association thinks. It’s much easier to rent a condo out if you own it. If you’re leasing it, you’ll have more hoops to jump through and should check with the property management company before subletting your place.  

Is Airbnb Rental Arbitrage Legal? 

Rental arbitrage is the practice of leasing properties that you intend to sublet to other people. This practice isn’t welcome in all cities or states in the United States, so you need to do your homework before deciding whether you want to rent or buy the property you intend to list. Some people are able to make a decent profit by renting homes and then listing them as short-term rentals. Make sure you research the cost of leasing a place to find the best deal.  

When people rent your property for a trip, they’re often willing to pay more per day than you’re paying on your lease. As long as you can keep the unit occupied, you should be able to pay for your lease, upkeep and taxes while still coming out ahead. The downside is that some cities have tightened their rules regarding rental arbitrage, so you really need to check with the state and local governments before pursuing this strategy to see if you’re able to proceed.  

Convincing property managers and landlords to let you sublet the property as an Airbnb can be tricky. One of the best ways to sell the idea is to point out that you’re willing to invest in the upkeep of the property because you want to attract business. This lessens the burden on the property owner to perform maintenance or keep the unit clean.  

What Other Legal Issues Should You Prepare for as an Airbnb host?

You need to make sure that your guests abide by the same rules you’d have to follow if you were staying on the property. Does the landlord have a pet policy? If so, you’ll have to enforce it when you’re renting to other people. You could be liable for any damage done to the property during a guest’s visit as well. 

You also need to account for things like occupancy taxes, property safety and property insurance. When listing a property on Airbnb, rules state that you’re required to be transparent about the property and not use deceptive advertising practices. If you don’t tell the truth about the property, it could present legal challenges later on.