Renting Out Your Crested Butte Home
Are you considering renting out your Crested Butte Home? Many of my clients consider the opportunity to generate income by renting their home when they aren’t there. This can be a benefit to help offset the costs of owning the home. There could even be additional income left over.
If you’re just in it to have a cash flow property, meaning that all your expenses will be covered by your rental income profit, then I’d suggest looking at the beach. There are different local ordinances here in Crested Butte when it comes to having a rental property. Some areas even prohibit short-term rentals. Many mountain towns support rentals on a seasonal basis. This means that there will be many weeks in the spring and fall that nobody will want to rent your Crested Butte home. Think about if you got 50% of your projected rental income and how it would affect your finances. The IRS considers an income property a business that has tax ramifications. I suggest discussing this with a financial advisor before making any rental decisions for your property.
What About You?
When will you use your home? Holidays? Christmas to New Years? 4th of July? What about Spring Break? These are fun times here in Crested Butte. But then you have to remember, it’s also a peak time to visit. Meaning there could be high demand to rent out your house. There are many variables that go into the financial equation. You need to decide how much you will use your home personally.
Will you be renting out your home yourself? Examples could be through AirBnb or Vrbo. This can be very time consuming as there is a long list of tasks to rent by owner. Or will you be using a broker? Most brokers will charge 20-50% of the gross rental income for their services to rent out your home. This means that they will be managing all aspects of renting your home.
Should you own the rental home or an entity? What if you get personally sued? It’s recommended to separate your business liability and your personal finances, as well as get liability coverage to protect you. Anybody can sue you at any time. You will have to hire an attorney to defend you in this situation. It’s smart to have an attorney set up an entity that will shield your personal assets from a potential lawsuit. I recommend doing this before you start renting out your Crested Butte home.
Renting By Owner
Here is a list of some tasks that you could have if you were renting by owner:
- Website: create, manage and maintain
- Lease, liability waivers, security deposit forms
- AirBnb.com or VRBO.com registration
- Inquiries, phone, email, VRBO.com
- Screen renters (pets, college students, how many people…?)
- Deposit/security deposit, collections
- Final payment collection
- Referral payments
- Sales tax and lodging tax payments (just like a hotel, you will likely be required to collect and remit state sales tax and local lodging taxes)
- Accept checks, credit cards, and/or PayPal?
- Cancellations, refunds
- Renter check-in, keys
- Problems/issues during stay, local property manager contact
- Maid service
- Checkout timing (e.g. check out Guest 1, check in Guest 2 same day)
- Multiple sets of linens/towels, laundry done offsite?
- Snow removal, drive, walkways, deck
- Put gravel/salt down on ice
- Hot tub service (daily?)
- Recommendations, complaints, ratings
- Security deposit refunds
- Wear and tear/upkeep/replacement of items
Insuring Your Crested Butte Home
You will also need to get a vacation home insurance policy because most homeowners policies exclude properties that use rentals. Second homes tend to be more risky since no one lives there full time. This could mean that premiums may be higher. Potential serious issues for second homes can include water damage (frozen pipes), fires or vandalism. What if the door to your home did not get locked and it blows open and your pipes freeze? What if no one notices a problem in your home till a week later? You may need to install a security system that detects water levels under your sink, next to the toilet and your water heater for helping detect problems while you aren’t there. Since most homeowner policies won’t cover these types of issues, you will need to get a vacation or second home insurance. Fire alarms and CO2 detectors are also required. You will need to talk with your insurance company and make sure you have everything covered for when you’re renting.
A regular homeowner’s policy and a vacation home policy may cover personal liability, but personal liability coverage or a personal umbrella policy will not cover business activities. Renting your second home is a business activity. Personal liability is intended to cover you in the event that someone claims that you have caused them bodily injury, or damaged their property as a result of your personal actions.
When you rent your home, you are a business and you need commercial liability coverage (business liability). This is specifically designed for “business activities” like your second home rental business. Liability coverage protects you if someone slips on an icy sidewalk and you are sued for damages. If there is severe damage to your second home and it cannot be rented, you may also want to ensure that your lost rental income is also covered.
When Your Home Is Vacant
Many insurance companies will not cover the home when it is vacant. Typically a home is “vacant” when no one has been there for 30 days. They may require a separate policy or rider (a vacancy endorsement). Check with your agent to see what the rules are and what your coverage will exactly be.
Are You Considering Buying or Selling a Home in the Crested Butte Area?
Contact me to help you. I have been in your shoes – as both a Second Home Buyer and Seller here in Crested Butte.
The Crested Butte area offers a wide variety of properties including ski in/ski out single family homes, ski-in/ski-out condominiums, lake and river frontage properties, golf course property, quality homes in Downtown Crested Butte, and true fine mountain homes on acreage.
To see Crested Butte Homes For Sale or search the MLS – visit ChrisKopf.com.
If you are considering Selling your Crested Butte home and are interested in finding out what your existing property is worth – call me. How is the Crested Butte Real Estate Market doing?
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