Short-term renting a home or investment property is becoming incredibly popular and accountants are increasingly asked for guidance from clients getting into this marketplace.
Moreover, savvy accountants are jumping in to help their clients, constantly working to remain up-to-date on tax and licensing requirements and -- more importantly -- what mistakes to avoid.
Short-term vacation rental property management is a growing trend as both a side business and a full-time opportunity, whether your client is simply renting out their own property or managing a portfolio of properties. There are opportunities for your clients to make significant extra income or even make a good living by being their own boss—but most clients need advisory assistance from the first mention of their venture.
As an accountant looking to connect with this growing audience, consider asking all clients if they have plans to rent out their home on a short-term basis. More and more people are renting their homes on a short-term basis, which triggers new and unique tax requirements.
Looking out for these pitfalls can protect your client from both hidden tax liability and operational problems. For any current or prospective clients engaged in property management and real estate services, the risk can be significant.
Here are the top four recommendations to follow when advising clients to make sure they avoid costly mistakes when working with short-term vacation rentals:
1. Listing quality and rental rates
While the vacation rental market is increasingly popular, it’s also increasingly competitive. If your client doesn’t have a quality listing and the correct rental rates, they may not succeed. Your client is competing against hundreds or thousands of other properties in their area via searches from travelers on large vacation rental websites, such as Airbnb and HomeAway.
It is imperative to have high quality and plentiful photos, good descriptions of the property location and amenities and a hospitable attitude. If you don’t have quality pictures or travelers don’t understand your location, they will skip over the listing.
Also, if the property isn’t priced correctly your client may not get the bookings they had hoped—resulting in potential earnings being left on the table. Rental rates can have broad fluctuations based on seasonality and property attributes.
It is important for your client to research the market and understand the pricing of similar properties. Short-term rental pricing varies primarily based on size, location and quality. A beachfront property can rent for a significant premium compared to one block off the beach.
About Rob Stephens
Rob Stephens, Co-Founder and General Manager of Avalara MyLodgeTax. Finance expert for the rapidly growing short-term lodging marketplace, Rob Stephens co-founded Avalara MyLodgeTax in 2002 out of his own necessity to understand and manage compliance with his rental property. Avalara MyLodgeTax is a provider of tax compliance solutions for the vacation rental industry.