If you’ve got spare space, putting your home on Airbnb is becoming a popular avenue to earn some extra income. With Central Otago hitting the peak summer season, there will be an influx of visitors looking for accommodation and with most hotels and motels in the area already booked out, travellers are turning to the popular platform of Airbnb. While this is a great option to earn extra cash over the festive season, here are a couple of tips to be aware of before you sign up.
- Your insurance company needs to be aware you have tenants – insurance policies will often differ between a property used exclusively as a private residence and if rented as a short-term rental. In many cases, this will be treated as a commercial property so will require a different policy.
- There can be GST implications – providing short-term rental accommodation can be subject to GST even if from your private house. There are thresholds that apply so it depends on the extent of rental income derived, what other activities you do and who is operating the rental. However, this can be a significant risk, as you don’t want to find out later your house is subject to GST on sale, costing you 15% of the sale proceeds.
- Council regulations – when you rent your property short term it is possible that you may need to notify the council of this. Depending on the extent of the use, this may only require a notification, however, you may have to pay higher rates (usually around 25% or more) and in some cases you will need consent.
- If renting – you need to be very careful if you’re planning to rent out a room on Airbnb from your own rented accommodation. In many cases this will be a breach of your tenancy agreement. Further, your activity could have flow-on implications for your landlord, such as insurance issues, which may pass onto you if you have breached your agreement.
- Finance – there has been big movement in finance conditions with banks of late. One of these is restrictions on the loan-to-value ratio (LVR) rate depending on the use of the property. If renting on Airbnb, some banks may treat this as an investment property subject to a higher LVR rate. Also, banks will generally not recognise Airbnb income for lending purposes unless operated more like a business.
If you have any further questions please do not hesitate to give your local adviser a call.
This information is general in nature and readers should seek specialist advice before making financial decisions.