Purchasing and Managing a Property Meant for Short-Term Rentals
Short-term rentals are properties that are rented out a (typically) weekly basis (some properties are made available for two-to-three-day rentals). A rental property is a great asset to your investment portfolio and addition to your income stream; however, before you invest in a rental in South Walton County, there are a few things you need to know.
Picking a Property that Can be Used as a Rental
Whether you’re looking for a large home that can be rented by multiple families or groups, a single-family dwelling, or a condo, it is important to realize that home owner / condo owner associations as well as the city or county plays a role in determining what properties can be used as short-term rentals as well as the length of the rental. Every city is different in regard to these guidelines, so it is important to find out the regulations before you buy.
Generally speaking, listings used as a rental in the past or that can be used as a rental will note those points those are sales features. You can also find out how much the property previously rented for. This will give you an idea of how much you can reasonably expect to make from it, which will enable you to determine if you can afford it.
Note that the property listing might not indicate mandatory taxes that have to be paid on rental income; however, your realtor can assist with that. For example, in Walton County:
- There is a 4% Walton County Tourist Development tax
- Along with a 1% Walton County surtax
- And a 6% Florida State sales tax
According to the Clerk of Courts of Walton County, taxes are collected on any rental property income, which includes cleaning fees, reservation fees, additional furnishing charges, and any nonrefundable deposits. If a friend or family member uses the rental, then any monetary or non-monetary compensation received should be reported and is subject to taxation as well.
Managing a Rental Property: Some Considerations
If you manage the property yourself, you are responsible for collecting and reporting taxes; however, if you use a property management agency, then they usually pay taxes on your behalf out of the revenue collected. It is your job to make sure this is transpiring appropriately.
Note that if you do use a management company, fees paid to them are tax deductible along with listings you pay for through sites like Airbnb, HomeAway, VRBO, FlipKey, etc. In addition to deducting marketing expenses, you can generally also deduct:
- Guest screening fees
- Cleaning fees
- Maintenance and repair fees resulting from guest visits
- Costs of furnishings like sheets, soaps, and other house supplies
- Utilities like Internet, cable, electricity, gas, etc. (partial deductions)
Note to claim these deductions, you’ll need to have maintained detailed records and to have retained receipts of transactions you wish to claim against your rental.
If you work through a property management agency, they might also be able to help you with knowing what’s deductible and what isn’t. If you don’t live in the area where your short-term rental property is located, then hiring a property management firm is going to be requisite (the realtor who sells you the property should be able to make recommendations). Property management companies will handle much of the above-referenced paperwork along with property maintenance, vetting renters, and more.
Knowing What Matters to Local Property Owners
Every area where rentals are common has different points of concern. On 30A, there’s a healthy mix of rentals amidst people’s homes where they dwell 365 days per year, so it’s to the advantage of any new property owner to get to know the neighbors and to carefully vet to whom the property is rented.
In addition to local issues, it also helps to be on top of state legislation that could impact your rental property. In January of 2018, it was reported that the State of Florida is considering regulating vacation rentals on the state level versus locally. Given different localities like Orlando or Miami have different rental concerns than Destin and 30A, such a change would no doubt impact all rental property owners.
To conclude, having a short-term rental property can be a huge asset. By working with the right realtor to acquire your investment property, you can get a place that fits your budget, find a good managing company, and even get involved at the state and local level to preserve your interests as well as the interests of the community you own property in.
With her legal background and passion for real estate, Cameron Strayhan is the 30A realtor to work with when it comes to buying a short-term rental property in Walton County.