Think twice about renting out your vacation home
By Harry Styron, Styron & Shilling, Branson, Missouri, copyright 2009
Income from the rental of your lake house or condo unit would certainly help to defray the costs of ownership. So it seems. Possibly the real estate agent who assisted with the purchase even mentioned that rental income could help make your payments. VRBO.com, Craigslist and other web marketing outlets make vacation rentals seem like a wonderful possibility.
Unfortunately, there are several factors that suggest that rental of your vacation home can result in increased costs and risks.
Here’s a list of the negatives:
1. Recorded covenants customarily prohibit short-term rentals, require homeowner association approval of rental terms or reserve the right to manage rentals to the developer or the developer’s agent. Violating the covenants can trigger fines, litigation and payment of your homeowner association’s attorney fees as well as your own attorney’s fees.
2. Weekly and nightly rentals will disqualify a subdivision or condominium from many types of mortgage financing, such as Fannie Mae programs. What is allowed to exist in one house or unit affects the whole development. Vacation rentals are not neighborly. This disqualification will usually apply to the entire development, not just the house or condo unit being rented.
3. The Missouri Department of Health and Senior Services imposes health standards for short-term accommodations in “lodging establishments,” which are those places having five or more “guest rooms.” A guest room is a room in which one or more guests sleep. These regulations cover structural, electrical, plumbing, life-safety (fire alarms, fire retardant materials, emergency lighting and exits, etc.), and sanitation issues. Inspections and permits are required.
4. If your vacation home is a public accommodation under federal and local regulations, you may be required to make it comply with regulations relating to accessibility for handicapped and disabled persons. If use of outside amenities is included in the rental arrangement, those rules can apply to parking areas, sidewalks, swimming pools, clubhouses, etc. Fines can be stiff. Your neighbors will not appreciate the attention from regulatory agencies for what they thought were private facilities.
5. A typical homeowner’s insurance policy cannot be expected to protect the owner against injuries resulting from the owner’s commercial use of the home. Appropriate insurance is required.
6. Income from rentals is subject to state and local sales taxes and income taxes. Failure to report and pay can result in fines, penalties and liens.
7. Availability of property for rental lodging can result in its property tax classification to be changed from residential to commercial. This can result in property taxes increasing as much as 200%.
8. Use of residential property for rental short-term lodging may result in zoning violations, resulting in fines and possible injunction suits.
9. Corps of Engineers regulations prohibit use of community boat docks on Corps-managed lakes without the physical presence of the boat slip owner. Boat dock association rules require compliance with Corps regulations and respect for the property of the other boat dock owners. Commercial uses of community boat docks is a serious violation. Allowing others to use your boat, who may be inexperienced or foolhardy, creates risks to you and others.
10. Your neighbors will not appreciate unsupervised guests using the pool and other common property of the community. They will not appreciate numerous vehicles carelessly driven and parked and late night traffic, unfamiliar pets and noise.
11. Your guests may not be who you think they are. You will have to arrange for keys to be delivered (which may be copied by guests). You can expect damage and stolen items. You will have to arrange for housekeeping and laundry services. One guest can destroy your vacation home, even if ten guests are considerate. The sweet person who makes the reservation may be fronting for a rowdy group.
Ozarks Law & Economy 
Solid info!! Hope to come back.
Harry – We have this exact situation going on in our neighborhood on south Table Rock Lake. An original owner sold a property to one of their children (call her Lisa) but did not transer ownership of the boat slip to Lisa within the community dock. Lisa is now divorced and cannot afford to keep the trailer and property so she has decided to rent it on Criagslist; daily, weekly, whatever. It’s not very neighborly as we now have no idea who is coming into our remote housing area and possibly “scoping things out” for later no good. That said, I guess there is nothing we can do to stop her…or is there? It’s probably important to note that the parents now do not live in the area anymore…but boy were they picky when they did! If any of us other neighbors would have put our homes in a rental pool while they lived there, they would have had a hissy fit! But since they no longer live there and of course it’s their daughter, it’s now ok. Now, the even bigger problem is Lisa is posting the rental to include use of the dock. The Corp doesn’t allow that, right? As neighbors, we feel this isn’t right (or legal?) because of insurance liability, potential damage, the “no ownership, no care” approach by renters that cause us that do pay to make repairs, etc. It looks like, from your point #9, that the owner of the slip has to be present when someone is using the slip/dock. Lisa’s parents rarly come to the dock anymore and even if they were to give Lisa their permission to use it, they would have to be present, right? Let alone Lisa giving her renters permission to use it. Heck, within the last year or so that she started renting her place out, we have found strangers sleeping IN OUR boats, walking onto neighboring docks, etc. We have tried to talk with Lisa about what she is doing in a nice way. But her answer is, “I’ll sue you!”…of course it is. Harry, I’m open to your thoughts and comments, both from an attorney stand point and just common sense standpoint. Must we seek a lawyer to thwart her efforts? We are just common folks who want to get a long with everyone and would like all to continue to be neighborly, the way it has been for years and years. Does it really take one bad apple to spoil it all and think they are better than everyone else and above the law? Thank you Harry – I’d appreciate hearing from you. M.P.
This is a very old article. I am curious to know how things are now.
Judson, the past six or seven have seen many changes in vacations rentals, at least where I work, in the Table Rock Lake area of southwest Missouri. Airbnb has made its appearance and displaced VRBO and Craigslist to some extent. County zoning regulations require special use permits for vacation rentals; Taney County also requires fire sprinklers in vacation rental homes. Fewer transactions are escaping sales taxes.
I still hear complaints from neighbors of disruptive behavior by rental guests.
Many large and costly structures are being designed and constructed for vacation rental, and the income and expense projections deserve careful scrutiny. I’ve spoken with lenders and appraisers concerning whether the vacation rental market is becoming saturated, and they say they lack data. If there is a downturn in demand, the rental units with the best locations will suffer least. Reduced revenues will result in poorer maintenance, and its is difficult for me to believe that most owners are accumulating reserves for replacement of appliances, fixtures, deck boards, roofs, etc.,, which means that in 10-15 years, values will drop unless these units can be renewed.
The six to ten bedroom units, without garages, may not be well-suited for adaptive reuse if the revenues will not support debt service.