You can use Airbnb even if you have a mortgage, as long as you have permission from your lender and follow other rules and requirements.
Pros and Cons of Using Airbnb If You Have a Mortgage
If you are on the fence about using Airbnb, here are some things to consider:
| Pros | Cons |
| Extra income | Liability |
| Tax deductions | Higher utility and maintenance costs |
| Flexibility of short-term rentals | Upfront costs of getting the property ready |
Rules for Renting with Airbnb If You Have a Mortgage
If you are considering renting out your home (or part of it) on Airbnb, be sure to:
- Talk With Your Lender
- Read Local and State Laws
- Check with Your HOA
- Chat with Your Insurance Provider
- Tax Requirements for Airbnb
Talk With Your Lender
Rules regarding renting while you have a loan differ between lenders. It also depends on the type of loan you have.
For example, FHA loan rules do not allow rentals of less than 30 days. So if you have an FHA loan, you would need to refinance with a different loan type. However, if you have a conventional loan or a hard money loan you can typically rent out your house using Airbnb.
Talk with your loan officer to discover your options. They are a great resource for determining what loan types are a good fit for your individual needs (credit score, cash assets, loan limits, and debt-to-income ratio).
Read Local and State Laws
Local regulations about short-term rentals are in a state of change. Many areas fear landlords steering toward Airbnb rentals rather than renting to long-term tenants. In fact, there are over 4 million hosts with 6 million listings on Airbnb.
For example, in Las Vegas, residents must have a permit and remain present during the stay. In San Francisco, hosts must be permanent residents, have no more than one listing, and rent out less than 90 days each year. In New York City, short-term rental laws require owners to be present and don’t allow more than two guests.
Check with your local and state laws to ensure your plans meet the laws and regulations.
Check with Your HOA
Many HOA communities also have restrictions on Airbnb rentals. You will need to review the policies, bylaws, and CC&Rs of your community.
If there are restrictions, consider meeting with a lawyer. They may be able to offer legal insight and advice to help you avoid fines, a permanent Airbnb ban, or legal action taken against you.
Chat with Your Insurance Provider
Most homeowner insurance policies do not cover Airbnb rental uses. Chatting with your insurance provider about your policy will help you determine what is and is not covered. Your provider can also suggest extra coverage options including personal liability coverage.
You may also be required to have landlord or business insurance. Commercial business insurance provides a higher level of protection for your property. Landlord insurance will cover you should you rent for an extended period of time to one renter.
Having the proper coverage when using your home for Airbnb is crucial. Renting your home to strangers includes risks such as vandalism, theft, and damage to your property.
Airbnb does offer some insurance coverage to its hosts, however, this may not be enough for your specific home.
Tax Requirements for Airbnb
You must pay taxes on any income you receive, including Airbnb rental income. Airbnb is required to record each host’s taxpayer information for tax reporting. They also provide tax documents that report the gross amount of each reservation.
Hosts will need to file a 1099 tax form as an independent contractor. However, if you make more than $20,000 and have more than 200 reservations in a year, you will also need a 1099-K form.
Airbnb hosts also have tax deductions they can write off including:
- Home depreciation
- Mortgage interest and insurance
- Cleaning and maintenance fees
- Marketing
- Furnishing and decorating expenses
- Airbnb fees
Can You Buy a House Specifically for Airbnb?
You can buy a home to use for short-term rentals like Airbnb. Unless you are buying with cash, you will need to get an investment loan.
Investment loans generally have higher down payment requirements and require all the normal expenses when purchasing a home (inspections, closing costs). Investment property loans include:
- Conventional loans – Offer options such as conforming conventional loans, jumbo loans, adjustable-rate loans, and portfolio loans. They are backed by a bank, credit union, or other financial institution, not a government agency. They also typically require a higher credit score (620+) and have stricter qualifying guidelines.
- Hard money loans – A short-term loan from private companies or people that take property as collateral. They typically have higher interest rates, but they can be arranged quickly.
- Private money loans – A loan from an individual investor like a friend or family member. This loan type has further requirements and can be granted quickly. But, loan rates are higher and typically require repayment in 6 to 12 months.
- Home equity loans – Allows homeowners to borrow using the equity in their home as collateral. This option allows you to access the funds quickly and doesn’t restrict how you use the money. However, you will have a second mortgage to pay on top of your primary mortgage and risk foreclosing if you default.
Why Should I Use Airbnb To Rent My House?
Airbnb has great name recognition among the public. Those searching for a homier experience or something outside the ordinary can find hundreds of options with ease. As a host, you can determine all aspects of your rental including length of stay, price, and certain fees.
Airbnb also offers a variety of perks to its hosts including:
- Guest identity verification
- Reservation screening
- Superhost guidance
- $3 million in damage protection
- $1 million liability insurance
- 24-hour safety line
How to Airbnb Your House
After confirming you can Airbnb your house, here are a few steps to put your short-term rental plans in gear.
- Create Your Listing
- Prepare your space
- Set Guest Policies and Rules
- List Your Space
- Add the Final Touches
1. Create Your Listing
Consider how you want to market your space and determine if you are offering your entire home or just a room. Then examine any special areas of your home. Be as honest as possible as exaggerating your space may cause disappointed guests.
Highlight any fun activities around your home and in your area. Identify reasons why your ideal renter would visit your area and market your listing to them. Feel free to look at other listings in the area for ideas and inspiration.
Using a professional to get high-quality images of your rental space allows you to earn more than your competitors and get up to 20% more bookings. Airbnb also allows you to take payment from future bookings, so there are no upfront costs. If you are serious about the short-term rental business, it is well worth the investment.
2. Prepare Your Space
The amount of time you need to prepare your space largely depends on if you are renting a room or your whole house. It also depends on the timeline of a potential stay. Here is a list of things you should do to prepare the space:
- Determine areas of access – walk around your home as if you were the guest. Determine what areas they can have access to. Be sure to have locks for any areas such as closets you don’t want the guests to be in.
- Required cleaning – no one wants to stay somewhere unclean. It’s a good idea to create a checklist for each area and what needs to be completed.
- Offer the essentials – Soap, toilet paper, and towels are necessary items to make your guests comfortable. If the guests have access to the kitchen, it’s also nice to offer basic cleaning supplies, utensils, plates, salt, pepper, and coffee.
3. Set Guest Policies and Rules
Identifying clear guest policies and rules allows you to protect your home and gives guests an idea of what they can expect while staying in your space. Standard house rules for Airbnb generally include:
- Pet policy
- Smoking policy (including vaping and e-cigarettes)
- Maximum number of guests
- Quiet hours
- Events
- Check-in and check-out times
4. List Your Space
You need to create a listing that will compete for the attention of potential renters compared to those in your area. Similar to a rent concession, an Airbnb host can offer special deals to potential tenants. You may need to try a few different strategies to find one that works best. Consider using these ideas below:
- Offer early bird pricing to those booking more than 2 weeks ahead of time
- Choose a flexible cancellation policy to offer guests peace of mind
- Use the Airbnb pricing tools to keep your price competitive depending on the day of the week and demand
- Activate the instant book feature so renters don’t have to wait around for you to confirm or deny their booking.
5. Add the Final Touches
After getting your first booking, you need to add the final touches to ensure your guests have a great first stay. Your goal with each guest (especially the first few) is to get 5 stars and a glowing written review. Consider adding fresh flowers, leaving baked cookies, or delivering a few treats from a local favorite spot.
