Three Ways to Prepare Your Short Term Rental for Severe Weather

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Weather can be unpredictable. Recent hurricanes and flood events in the Caribbean, Florida, Louisiana, and Texas have shown that, as did the tragic fires in Northern California. Your corporate rental is a major investment that you want to protect. Having homeowners insurance should be a given, as well as flood insurance in low-lying areas requiring you to be covered. Beyond insurance there are other ways you can not only prepare your home but also protect yourself from income lost to severe weather that prevents a tenant’s stay. Here are three ways you can prepare your short-term rental for severe weather.

A meteorologist displaying hurricane supplies

Supply “Must Have” Items in Your Corporate Housing

Just like you would in your own home, provide basic emergency supplies for corporate tenants. Bottled water, canned food, a first-aid kit, a hand-crank radio, flashlights, and an emergency kit are important to have on hand. Secure these items in a cabinet with a combination lock. When extreme weather occurs, provide your tenants with the combination. Finally, be sure your home is well maintained both inside and out. If high winds, heavy rain or snow strike, be sure your home is up to the challenge.

TRAVEL INSURANCE

Offer Travel Protection Insurance for Hurricane Rentals

In some states where vacation rentals are more common, if you do not offer your tenants a travel insurance option, and a mandatory evacuation prevents a stay, you must refund them. However, if you offer them insurance, no refund is required. In other states, no refund is required unless your lease agreement covers it. You’ll need to know the laws regarding severe weather refunds in your state and municipality, run it by the attorney drawing up your standard lease contract.

This is distinct from a security deposit because it is different than “tenant caused” damages. CHBO’s covers you in case of tenant accidental damage, a cost that can be passed on the tenant in lieu of a security deposit.

Car covered with Ice

Add a Severe Weather Clause to Your Lease Agreement

In the case of a mandatory evacuation, you could offer a refund or a rebooking at a discount. But you need clear language that only mandatory evacuations apply; guests who are simply disappointed because rain is predicted can’t get a refund, as the home is still usable.

In the case of mandatory evacuations, you could issue a refund in advance when government authorities declare the evacuation, or if the stay is in progress, partially refund for unused days, or credit guests for a future stay.

Again, be clear that this applies only in the case that your property cannot be used due to evacuation. This happens most often with severe storms or hurricane rentals, where there are a few days of advanced notice. If roads are icy but not closed, for example, this doesn’t mean a refund as your short-term rental itself is still usable and the tenant should use chains or winter tires with four-wheel drive.

You may not be able to predict when and where severe weather strikes. You can, however, prepare your corporate rental for hurricanes and your lease as best you can so that when bad weather strikes you are ready.

Business-wise: How Will the IRS Treat Your Corporate Housing?

Tax return for Corporate Housing

There are different reasons people invest in real estate rentals. It may be your primary residence, vacation home, or a pure rental property. You may be renting your primary residence or a portion of it, or a vacation home that you use with different frequencies. Whatever the case, Ben Franklin said, “The only two things certain in life are death and taxes.” So, if you’re renting within the Unites States and you pay U.S. federal taxes, you should be ready and prepare for them. April 15th will be here before you know it, so with that in mind let’s look at how the IRS views your corporate rental.

How You Use Your Corporate Rental Matters

The CHBO Handbook has this to say about taxes on your furnished loft:

“The general rule for renting your personal residence is that for a home rented for less than 15 days in a calendar year (assuming a calendar year taxpayer which includes practically all individuals), the owner cannot deduct any of the related rental expenses, but isn’t taxed on any of the rental income (Code Section 280A(g)). This applies to the United States of America.

Let’s look a bit more closely and pull in some additional situations. The key factors are 1) How often you or an immediate family member uses your corporate housing, and 2) How many days it is rented.

 

In A Calendar Year, How Often Do You Use It? In a Calendar Year, How Often Do You Rent It? IRS Considers It A… Must You Report Rental Income? Can You Deduct Business Expenses?
More than 14 days OR more than 10% of Days Rented Less than 15 days Personal Residence No No
More than 14 days More than 14 days Personal Residence Yes Yes
14 Days or Less OR less than 10% of Days Rented More than 14 days Corporate Rental Property Yes Yes

From this information, we can make some generalizations. If you rent your property for more than 14 days, you do have to report your income, and you can deduct the expenses. If you don’t, you don’t have to report your income nor can you deduct expenses.

How You Use Your Corporate Rental Matters

How Losses are Treated

Another consideration is Passive Activity Losses, or PALs. These are operating losses over and above your rental income for the tax year. Generally, you can deduct up operating expenses up to the amount of income you make. After that, there are limitations and you may be unable to offset your losses.

Understanding the rules around how your furnished loft is taxed will help you prepare for meet your tax obligations and even help you determine how much you can put back into the property. It should be said that US code is complicated. These are basic guidelines for how the IRS will treat your furnished rental, but it is recommended that you consult with a tax professional. For more great tips on how to maximize your corporate rental investment, download the free CHBO Handbook or call CHBO today at 877-333-2426!

How to Choose a Location for Your Furnished Corporate Rental

Real estate rentals from CHBO

Welcome to the world of Corporate Rental! Excited to become a corporate landlord? Not sure how to start? Let’s look at some things to know before you take the plunge.

Flexible? Where to Buy Your New Executive Rental

If you’re able to buy anywhere, you should think about these factors.

First, what areas or cities are growing economically? Where do people need luxury rentals? Project work and corporate relocation are main reasons tenants look for short-term housing. So is the temporary need for medical expertise or a long-term shortage of it. Do some research into areas where these situations are frequent. For example, places with lots of military bases or oil companies will need furnished rentals for relocating staff, since people in these careers move often. Also, rapidly growing cities are good because they attract construction professionals and travel nurses.

Second, how do local laws, taxes, regulations, costs, impact your investment? Be sure to fully study local laws regarding temporary housing rentals and taxes, utility costs in that area, etc. These things can have a great impact on your bottom line. Look for areas with low costs and taxes and minimal regulations.

Finally, be sure it’s a place you’ll want to visit often. Not only will you visit when setting up the home or for upkeep, you may want to use it for your own travel.

Modern Apartment Buildings Exteriors Or Contemporary Architecture

Will Your Corporate Tenants Want The City or The ‘Burbs?

Once you’ve picked a region or city, you need to zoom in. Where within that place should you buy? This depends, and there are many pros and cons.

Look at where the city you’ve chosen is growing. Is there a downtown or inner city being redeveloped? Is there a “hot” place to live? Are the suburbs expanding? The best choice is to buy where your tenants will want to live.

This also depends on your target tenant. Relocating families will need larger, family homes close to their new work locations. Temporary project workers will want to be close to the office but don’t need a big home because they tend to travel solo or as a couple. Know your city and the type of corporate tenants that come there so you know what location is best. Other key aspects are:

1) Walkability – The CHBO walk score takes into account how easy it is to live without a car. The scale looks like this:

  • 90–100 Walker’s Paradise – Daily errands do not require a car
  • 70–89 Very Walkable – Most errands can be accomplished on foot
  • 50–69 Somewhat Walkable – Some errands can be done on foot
  • 25–49 Car-Dependent – Most errands require a car
  • 0–24 Car-Dependent – Almost all errands require a car

Zillow.com discovered that Walkability in metro areas means your property is more likely rise in value and less likely to fall in value during downturns. Corporate tenants tend to value Walkability highly. You should too.

2) Crime and Safety – All corporate tenants have one thing in common. They want to live in safe places. So be sure you check crime reports for the areas you are considering. If possible, drive through the area and look for signs that it’s a high crime area such as burglar bars on windows or doors, more police presence than normal, and an excess of litter are examples.

3) Ambiance – Tree lined boulevards, parks and flowers, local retailers of interesting wares, friendly pubs and roadside cafes, beautiful views in the distance. There’s a charm to certain neighborhoods, and these are just some of the things that add to that charm. Seek out areas with ambiance.

4) Convenience – No one likes the grind of a long commute, no matter the method of travel. Try to find properties that offer close access to public transport, major roads, and the airport. You’ll need to balance closeness to these systems with the noise that can result, but a few blocks away is usually far enough. Research the area and be sure that parks, fitness centers, medical care, groceries and shopping aren’t far either.

Residential Neighborhood

What Type of Home to Buy?

 You’ve found the perfect town and the perfect location. Now, what type of home to invest in?

  • Condominiums have the benefit of lots of common amenities like pools and fitness centers, on-site property management, and covered parking. They tend to be found in denser, urban areas but can also be located in suburbs as they sprawl out from the city. Safety and noise tend to be a bigger concern with apartments. Some benefit from a Condo Association that set rules making the entire property more desirable.
  • Townhomes are the mid point between apartments and single-family homes and tend be found, like apartments, in areas where land is at a premium. You’ll benefit from a lower price than a comparable single family home, and some maintenance and common landscaping is provided. You won’t have a yard however, and typically stricter HOA’s may limit pets and have noise restrictions. Townhomes are a good balance overall and offer lots of space while still being located in more urban parts of town.
  • Single Family Homes give your corporate tenants more privacy, and may feel more like home. Executives, especially traveling with their family, will insist on the additional space. If you’re targeting long-term tenants, locating near a good school district could be important. Amenities are private, and yards tend to be larger. Single-family homes tend to have covenant or HOA agreements as well, which limit variety.

Remember that the kind of property can depend on the location. For example, a city without a well developed downtown wouldn’t be a place to buy a downtown loft. A city like Austin, on the other hand, has a hip urban central area and urban condos and townhomes are more desirable. Also try to look for properties with amenities that go hand in hand with the area or climate. A lake house should have a dock; a home in a hot, humid city should have a pool, etc.

These guidelines are a good starting point for basing your decision where to locate your furnished corporate rental. The CHBO Handbook can help you navigate your way in the successful world of corporate rentals.  Have more questions? Feel free to call CHBO and get expert help toll free at 877.333.2426 today!