Tips on Starting a Short-term Rental Business with your Vacation Home

Is it legal?
The Poconos are well known for vacationing and recreation. Tourist revenue in the Pocono region (defined as Carbon, Monroe, Pike and Wayne counties) has been the main economic engine in the region and the area is responsible for approximately 1/3 of the state’s hotel tax revenue. In Pennsylvania, like other states, short-term rentals are taxed just like hotels. If you operate a short-term rental, you will need to collect taxes.  Booking agencies like Airbnb and VRBO manage that process through their reservation systems and therefore make tourist tax compliance easier.

As for municipal compliance, that isn’t so easy.  In 2019, the PA Supreme Court ruled that homeowners do not have the inherent right to rent their properties as short-term rentals and that local zoning can prohibit the practice. This has put a lot of uncertainty into the short-term rental market as the pace of government regulation lags behind the explosion of rental units. In Pennsylvania, like most states, the regulation of short-term rentals falls into the hands of municipal zoning boards and there are a growing number of boroughs, townships and cities that have chosen to create ordinances and set zoning regulations around the practice. These rules vary wildly from municipality to municipality and I am attempting to keep a current list of these Rules and Regulations for Short-term Rentals in the Poconos. Check this list to see what regulations, permits and options you have, then double check with the municipality to determine if anything has changed.

Is it Marketable?
Once you find out if short-term rentals are possible with your property (or your desired property), you should consider if the property is marketable. If you build it, will they come? Ask yourself why would someone want to stay in your house? Is it close to recreational facilities? is it close to popular destinations or is it a place that people will want to stay and enjoy? Is the house equipped to handle a wide variety of visitors or will it cater to a specific clientele? Does it have the infrastructure needed to be popular? Do you have the resources to keep it maintained and marketable?

A highly desirable property will be ultra-clean, uncluttered, attractive and well maintained. Prospective clients will comb through the reviews and photos and compare your property to others in the area or the category before booking. Prospective guests will also ask lots of questions, so as a host you should be prepared to be available at a moment’s notice.

Positioning your Property?
When you use a platform like Airbnb or VRBO, there are settings/rules that you can apply to the potential renters. Minimum requirements can go a long way to bringing well-behaved, well-intentioned renters and keep your property from becoming a known party house which from our experience can put a lot of strain on your home, your neighbors and the community. As a host, we learned early that being the lowest priced doesn’t always mean you get the booking. Sometimes young people from your own community will use short-term rentals as a place to host a party, kind of like having a party while another kid’s parents are away. Here are some of those settings and possible constraints that may impact your short-term rental:

• Age Restrictions: We use VRBO and they have a verification process where you can limit the age of a renter. We chose 25 years old as the minimum age to rent.
• Minimum night stay: You can also select a minimum number of nights for a stay. It has been our experience that the longer the guests stay, the less likely they are to be a party group, so we choose a 4-night minimum for our place.
• Same Day Bookings: We strongly suggest you not allow for rentals to start on the same day of the booking. A spur of the moment decision by a renter is generally a sign that something went wrong, or that a group is looking for a party house or some other potentially disruptive activity. Longer lead times are a good indicator that your guests have thought out their trip.
• Pricing: The lower the price, the more likely the group will be rowdy. I’m not trying to sound snobby, but if the property is really cheap, you might get folks who aren’t used to nice places and who will be rough on it. If your guests can afford nice things, they will likely treat things they rent nicely.
• Insurance and Security Deposits: The more the better. You can require a minimum level of property insurance (damages) as well as a cash security deposit (for things like cleanliness). We require both and we believe this has greatly helped keep our place running smoothly. It may detract some, but if they are asking to waive insurance or a security deposit, think to yourself – why?

What’s wrong with party groups?
There is nothing wrong with party groups if your rental unit is designed for parties. Hotels, restaurants and banquet halls love party groups and they often bring big money. If your short-term rental is capable of hosting frequent parties, then you might do very well as the party house by charging extra per guest per night. Some things to consider:
Water and Wastewater: One of the biggest problems that come from large party groups is the strain it puts on your water and wastewater systems. If you have a well and a septic system, these have been designed to fit your house as your house as built. The amount of water and waste from 20 or 30 people is much greater than 4 or 5, and compound this over multiple days and systems can break. Zoning officers and Sewer Enforcement Officers all over the region will tell you that aging systems are failing due to relentless use by large groups. Accounts of sewage bubbling out from under septic system caps have been reported and those aren’t easy to fix and will get you in trouble with your township.

Parking can be another issue. Large parties may end up parking on your lawn and doing damage to the grass or those vehicles might even get stuck in bad weather. If your property is in close proximity to neighbors, the overflow parking may end up on neighbors’ property giving you added liability.

Party groups are rough on a property, they will require more cleaning, more trash capacity and more time to be designated to maintenance. If you are set-up for this, you might do OK. If you are not, you will find yourself struggling to keep up.

See my List of Communities in the Poconos that allow Short-term Rentals.

Running a short-term rental business can be rewarding and profitable. Before starting you should do your homework so that you don’t end up losing money, or even landing in court. You can browse through our vacation rental property listing called Blue Mountain Vacation Home to get some ideas on how we applied the above lessons. If doing yourself it too daunting, search for Airbnb management companies as one option and if you are looking for property, contact me, Mark Shay, Your Carbon County Realtor.

As with any investing, double check with local governments and homeowners associations about the Rules and Regulations for each specific property.  Call the municipality, call the HOA.

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