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Big Money, Red Flags In Temporary Housing For Super Bowl Fans

Written by on Tuesday, 22 January 2013 6:00 pm

As New Orleans prepares for Super Bowl XLVII, Feb. 3, 2013, the Crescent City community is cashing in on an influx of football fans and visitors who are dining, shopping, partying and looking for shelter.

A shortage of temporary accommodations and higher temporary accommodations costs are common when a big event comes to town.

However, property owners looking to make a little moola on the side by renting out a primary residence, a room in their home or by sub-letting an apartment, open a Pandora's Box of risks that might not be worth the extra cash.

Before you rub your hands at the prospect of a short-term rental that could be enough to pay your mortgage or rent for a month or two, here are some factors to consider.

  • Homeowners insurance - For those considering moving in with their relatives, close friends or others and renting out their home, your homeowners insurance policy is underwritten with risk analysis based on the owner, you, occupying the home, not tenants.

    Effectively turning your home into a business property will likely require some adjustment to your insurance policy which may not otherwise provide benefits for claims arising from certain liabilities or losses.

    Also, if a short-term tenant damages your property, steals belongings or is injured and you don't have the proper coverage, you'll have to foot the bill or, worse, face the possibility of a negligence lawsuit. Always contact your insurance agent before renting your home.

    There could also be tax consequences to consider. Talk to your tax professional before making this move

  • Zoning, community, rental rules - Zoning issues and community rules could pose a problem. A growing number of communities have an outright ban on short-term rentals, others require that you obtain a license and pay a tax for the privilege. Violate the provisions of local law and you could be fined.

    Local occupancy ordinances may forbid too many people in a given structure and forbid certain uses, say setting up beds in garages, sheds or other facilities not legally designated for human habitation. Check your community rules.

    Homeowner associations that permit long term rentals may forbid short-term tenants and enforce the prohibition with hefty fines and in some extreme situations, you could lose your home. Get permission from your homeowner association's board of directors or management company.

    In some cases, sub-letting your apartment is forbidden by contract. Sublet and you could get evicted.

  • Fair housing - Fair housing laws forbid you from discriminating based on sex, race, religion and other factors. You are generally exempt from the law if you own the home you rent, but not if you have several other properties you'd like to rent.

    You are also exempt from federal fair housing laws if you rent a room in your home. And you are exempt from federal law if you rent to a minor, but that could open another can of worms over issues that concern minors.

    However, don't overlook state and local level fair housing laws, which can differ.

  • Screening - You can't rely upon gut feelings when it comes to letting strangers in your home or on your property. You'll need time to screen renters.

    You'll either have to hire a property manger or quickly learn the screening process, which could mean many pointed questions, a full application for short term rentals, a credit check, income check, proof of current residence check, past rental record check and more checks before you get that fat short term rental check.

    Legal experts also say if you open your home to short-term rentals, you should do so with a legal contract that defines the terms of your accommodations.

    An attorney can help you sort through your legal rights and responsibilities and make sure your rental agreement complies with local law.

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      About the author, Broderick Perkins

    Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.