Not too long ago a couple rented their home using Airbnb to a man who was supposedly in town for a wedding. The man seemed nice, genuine and the couple happily gave the man a tour of their home, wished him well and handed over the keys.
The couple stayed at a relatives’ home in another part of the city while the man rented their home for the weekend. Everything was fine until the couple started receiving text messages from neighbors asking if everything was okay and that there was a large party bus arriving at the home.
As you could probably guess, the weekend didn’t end well – the house was completely trashed with an estimated $150,000 of damages (check out the pictures below).
The couple’s story hit home for me as I live about ten minutes away from their home. It was crazy seeing all the media, police and cleanup crews around the house for what seemed like a solid week.
Is the Risk Worth The Reward?
I genuinely feel bad for the couple who rented their home to a stranger; they had good intentions and hoped to make a small profit from the rental. Nothing wrong with that.
Personally I wouldn’t be interested in renting my home to a stranger for a couple hundred dollars because the potential risk outweighs the reward. Sure, the additional income would be great but the risk of having something go wrong isn’t worth it. I would be devastated if someone trashed my home and it’s not something I’d want to deal with all for the sake of making $200-300.
I have a rental property that could potentially be damaged by tenants but I feel like the rental is a different situation; I screened the tenants to make sure they were the right and checked their references. The rental property isn’t my home, so if it were to get damaged I would see it from a business perspective rather than a personal one.
Benefits of Airbnb
With that being said, Airbnb isn’t all doom and gloom – far from it.
Airbnb comes with some great benefits for those looking to rent a place when travelling:
- The properties usually come equipped with kitchen facilities not available in a regular hotel
- The costs are usually much cheaper and go down substantially when more people travel and share accommodations (ie. shared house)
- By interacting with local homeowners, travelers can get a more genuine experience where they travel rather than a generic, tourist-oriented experience
- Extras like laundry, private garage parking, wifi, long distance calling and cable TV are all usually free with an Airbnb rental
For these reasons I think Airbnb is a great option for some; I would definitely use it when travelling, but the risks of renting out my own place make it not so appealing as a homeowner.
Luckily for the couple who had their home trashed, Airbnb has a $1 million insurance policy for situations like this. And Airbnb has been great in helping to make the situation right by offering alternative accommodations while the home is repaired.
Insurance for those renting their homes on Airbnb seems to be a grey area. I called my insurance broker to see if I had coverage and they said it isn’t covered. This means if anything were to happen I would be on the hook for it.
Those renting their homes on Airbnb should check their home insurance policies as it seems like some companies offer coverage while others do not.
Taxes on Rental Income
All rental income earned throughout the year needs to be claimed by the homeowners. This means that the rental income isn’t as high as the money received since you’d need to pay taxes on it. The income is taxed at the marginal rate – great for those with little/no other income, not so great for those already working full time.
Luckily there are deductions available to those who earn rental income from Airbnb – click here for a more detailed explanation.
Conclusion: Thousands of people rent their homes out all the time and nothing bad happens, but I just wouldn’t feel comfortable having a stranger in my home to make a few hundred dollars.