Charleston is one of the country’s hottest markets for Airbnb investors. But knowing the pitfalls that arise within the short-term housing industry is a must for those who want to be successful at it.
Airbnb and similar vacation rental portals have changed the game in real estate investment. The benefits of renting a Charleston investment property on Airbnb are many, and it’s a trend property managers and owners are jumping into headfirst.
Here are a few tips to help you avoid the common pitfalls associated with renting out Charleston investment properties on Airbnb.
KNOW MUNICIPAL RESTRICTIONS
Make sure you know your local laws. For example, Charleston’s City Council recently finalized a new set of rules that allows short-term rentals citywide, but only under strict circumstances. It bans whole-home rentals and requires property owners to stay home whenever they host guests.
While this new ordinance only affects the City of Charleston, for many who have already invested in downtown’s short-term rental market, this is a financial blow. As such, if you are considering an Airbnb type investment in downtown Charleston, do your homework first!
BE AWARE OF TAXES
Income earned from short-term rentals is taxable income. The City of Charleston is now charging short-term rental investors fees and taxes, namely business license fees and accommodations taxes. Knowing what taxes and fees to expect in your locality is a must prior to engaging in the short-term rental business. Again, do your homework!
Airbnb lives and dies by reviews. Things get risky when an upcoming guest has never tried Airbnb housing before, and he or she doesn’t know what to expect from the process. Giving guests attention up-front is a must to ensure that they will have a pleasant experience and give you a positive review.
BEEF UP INSURANCE
Before renting out property, you need to check in with your insurance agent. “The insurance industry has not caught up with the latest trends in technology and real estate,” James Steele of S&T Insurance Agency explains. “Nine out of 10 times policies have strict exclusions for short-term rentals.”
Most homeowner’s insurance policies carry a business pursuit’s exclusion, and liability falls on the homeowners. While Airbnb and other hosting sites offer trip protection to their users, make sure to consult with your insurance provider. Remember, insurance is complicated and waiting until you actually have a claim is not the best time to sort out your coverage.
CHECK FOR CONDO RULES
Chances are, your condo bylaws or rules and regulations prohibit short-term rentals. Make sure you review your condo documents carefully. It is typical for a condo association to require a minimum lease term for any renters, and a requirement for association board approval is also typical.
PAINT YOUR INTERIOR FOR FAVORABLE REVIEWS
The success of your Airbnb investment is inextricably linked to the quality and favorability of your guest reviews. A cross-sectional study of Airbnb reviews sites dirty walls and chipping/cracked paint as the 3rd highest “interior” guest complaint (behind kitchen and bathrooms). While kitchen and bathroom renovations often run into the tens of thousands of dollars, painting your interior surfaces is a cost-effective way to make your guests feel more comfortable and far more likely to leave favorable reviews.