It’s summer, and if you’re like us, you are excited about some upcoming vacation plans to celebrate the season. For those renting an AirBnB or VRBO property, you might get the notion that these short-term rentals are a great way to generate passive income.
Our real estate attorneys regularly help clients with property in Idaho and Washington protect themselves from common (and costly!) mistakes that can come with short-term rental ownership. After all, there are local laws, HOA rules, and legal liabilities to get familiar with before booking that first tenant.
Based on years of experience in real estate law, here are three things to know before you commit to a purchase.
Check HOA Rules and City Ordinances
Not every home is eligible to be a short-term rental. Even if state law allows it, many cities, counties, and HOAs have their own restrictions.
For example:
- Some HOAs limit your ability to rent for less than a certain period of time.
- Some cities require you to apply for a short-term rental permit, pay annual fees, and submit inspection checklists.
- Others limit short-term rentals to owner-occupied properties or place caps on how often you can rent.
What happens if you don’t comply with these rules? Fines are a common penalty, but we’ve also seen legal disputes with neighbors crop up.
The bottom line here is that before you buy, check the city code and any HOA covenants tied to the property. A real estate lawyer can help interpret gray areas and ensure you’re not setting yourself up for costly surprises.
Know What “Short-Term Rental” Means in Your City
In Idaho and Eastern Washington, where our offices are based, different cities define short-term rentals differently. In Idaho’s Coeur d’Alene, a popular tourist destination, any property rented for fewer than 30 consecutive days is considered a short-term rental. However, there’s an exemption if:
- You rent it for less than 14 days per year, and
- You only rent it out twice per calendar year.
Cities like Spokane, WA, or Boise, Moscow, and Sandpoint, ID, have their own unique requirements and permit processes. Most require:
- A city-issued short-term rental license
- Payment of a permit fee (often $200–$300)
- Renewal of your license each year
- A designated local contact person in case of emergency
Short-term rental management rules are a fast-evolving area of policy. Earlier this year, the Idaho legislature saw proposed legislation that aimed to balance protecting property owners’ rights to rent their homes while allowing local governments to address potential negative impacts of short-term rentals on their communities. While it didn’t get out of the Statehouse, we expect to see more bills related to the regulation of short-term rentals and encourage property owners to work with an attorney in order to stay current on policies.
Don’t Overlook Insurance and Legal Risk
Regardless of local laws, liability and property damage lawsuits are a consistent threat to owners. Examples range from a renter who is injured on your property and claims unsafe conditions, to a neighbor who sues after repeated noise complaints or damage caused by your guests, to your insurance not covering damages due to increased exposures.
Some landlords assume their regular homeowner’s insurance policy is enough and we are here to tell you that, according to state mandates and insurance regulations, it is not. Of course, you’ll want to speak with a licensed insurance agent about these details, but we can say with some professional insight that property owners need comprehensive short-term rental insurance that:
- Covers both structure and liability
- Protects against renter-caused damage
- Includes coverage for amenities like bikes, kayaks, or hot tubs
You can also limit risk by having a strong rental agreement, especially if you list outside of Airbnb or VRBO. One of our lawyers can draft or review your terms to ensure you’re protected.
Is A Short-Term Rental Worth It?
Owning a short-term rental in Idaho or Eastern Washington can be profitable, but it’s critical to take the right legal steps in order to protect your investment. The income potential is real, especially in areas like Boise, Spokane, Coeur d’Alene, and Pullman, where tourism and college-town activity are strong drivers.
Because short-term rental laws are changing quickly across the Northwest, it’s wise to speak with a real estate attorney before you buy. It may cost a few thousand dollars upfront, and it could save you tens of thousands in court fees and conflict down the road.