When you go to Airbnb’s website, you will see that they strongly recommend that you understand the laws that apply to your “…city, county, state, province, territory, and/or country (your ‘jurisdiction’).” They also specifically state that they do not offer legal advice. With that said, it is crucial to understand that even though you may be able to rent out your property through Airbnb’s platform, logistically, that doesn’t mean you are operating within the l confines of the law. Furthermore, the laws will vary based on the rental property’s location.
The blog’s purpose is to highlight some things you need to consider before purchasing a property or using it as a short-term rental (i.e., an Airbnb). Additionally, some people wish to rent out their primary residence simply because they can. Think of a typical consultant who travels consistently and spends extended amounts of time away from their home. If you are interested in diving into this market, keep reading.
Think of It as a Business
This is the first step. Although we will discuss laws and regulations momentarily, don’t overlook the fact that money is being exchanged—which means that you will likely have to file taxes. You must register your rental property with the Illinois Department of Revenue, and you can charge rental tax to cover these associated costs. Taxes can be overwhelming to most, but you will get a clearer picture of how to pay them once registered. You will receive a taxpayer ID and a certificate of registration.
Depending on your property’s location, there are several different taxes your Airbnb could be subject to. For example, the Hotel Operators’ Occupation Tax Act requires you to pay upwards of 6.17% of your listing price, including a cleaning fee, if applicable.
Start Local and Work Your Way Up
Anyone who owns (or rents) a piece of property, start small and work your way when determining whether you can host a short-term rental. (Short-term rentals are reservations that last fewer than 30 consecutive days.) For instance, does your HOA allow short-term rentals if you own a condo? What does your lease say? For some, this may be the end of the road. There will be no need to register for tax purposes. However, if you can use your property as a short-term rental, become familiar with the laws governing your municipality and state.
If you live in Chicago, you must register with the city. Before you do so, be aware that close to 1000 buildings (over 90,000 units) in Chicago have filed paperwork to prevent short-term rentals on their property. You can verify whether your unit is on that list by searching the “Prohibited Housing List.” Even if you have cleared these two hurdles, you must be intimately familiar with permits, zoning regulations, and potential limits on how you can advertise. So again, don’t rush into filing with your local municipality or the state before you have begun at the lowest level.
Speak with a Real Estate Attorney
The Auricchio Law Offices have represented people in Illinois and Indiana with various real estate issues, including litigation and condominium/HOA representation. If you have further questions about purchasing a rental property, contact our office and set up your free consultation. The laws surrounding real estate are complex, and they evolve quickly. We look forward to assisting you with your real estate endeavors.
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