What to Consider When Owning a Short-Term Rental in Florida

You want to do your due diligence if you're thinking of Airbnb or Vrbo

It’s easy to see the appeal of short-term renting: You take a residence that’s sometimes or partially available, or even a dedicated property, and make a few extra bucks by letting guests stay there.

“It’s a way to get income from your property, like any other rental,” says Hal Lewis, a real estate and banking attorney at Pathman Lewis in Miami. “Generally speaking, short-term rentals sometimes pay the utilities, and sometimes they don’t.” 

Issues can arise, however—from angry neighbors and municipal restrictions to insurance liabilities and tax implications. But that doesn’t mean you can’t pull it off, Lewis says: “I just think that you have to do your due diligence and understand the economic decision, the risks of it, and decide whether it’s right for you.” 

“Figure out the financial stuff: your tax implications, your carrying costs, everything inside and out,” says Fort Lauderdale real estate and business attorney Brendan A. Sweeney at Sweeney Law. “Then, where can you do it? Are there municipal or local rules? Are there any exceptions to variances? Then you have to look at what type of property it is. If it’s an HOA or a condo or co-op, they’ll have declarations on it, so you’ve got to review that and see whether or not they’re allowing it.”

With a condo, Lewis says, “generally speaking, there are going to be restrictions in your condominium documents that limit short-term rentals or prohibit them altogether. Many times, there’s a minimum six-month leasing requirement.”

Then there are municipal rules. A home in unincorporated Dade County will likely be much easier to transform into a rental than a Miami Beach condo.

“Miami Beach is kind of front and center, because they have imposed severe penalties,” Lewis notes. In 2016, the city imposed fines starting at $20,000 for illegal short-term renting. Though licensing exists for areas where it is permitted, many have skirted the rules. Airbnb sued the city over a 2018 ordinance requiring the site to post business-license and resort-tax numbers with every listing. A settlement requires Airbnb to post those numbers but prevents it from being penalized if they turn out to be phony. 

Some municipalities have adopted registration fees, building inspections, safety requirements, licensing and land-use/zoning restrictions. “The tourism industry, which runs the whole state, has been opposed to short-term rentals. I don’t know how much they’re going to let Vrbo and Airbnb cut into hotels,” Sweeney says.

A 2011 state law said municipalities cannot outright prohibit short-term rentals or regulate durations/frequency. Those that already had regulations were grandfathered in. This has yet to be enforced by legal precedent, though. “It’s still the wild, Wild West,” says Sweeney.

But you might get lucky. “I had a client that bought an eight-unit, almost duplex-type situation that was allowed to have short-term rental on it. The city had already recorded a covenant that allowed it,” Lewis says.

Often, owners must make some adjustments to their homes to accommodate renters, and should expect increases in taxes. Renting will put a homestead exemption at risk, not to mention what you may have to declare to the IRS for income, the state for sales, and the county for tourism development. And a typical homeowners’ insurance policy may not cover you in the event of injuries and other extenuating events.

“If I have a friend that stays over and something happens to them, generally speaking, your homeowners’ insurance covers the guest,” Lewis says. “If I have a person who’s in a commercial environment, where they’re paying me for occupancy, and somebody burns the house down, there’s a possibility that your insurance company is going to say, ‘Sorry, but you’re using this for commercial purposes now, and that’s an exclusion under your insurance policy.’

“People also have to weigh the wear-and-tear on their house, the impact on the neighbors. You have to build all of this into whether or not it’s worth it from a cost standpoint for the extra money.” 

For more information on this area of law, see our overviews of real estate and landlord/tenant law.

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