Short-term rentals, including those offered on platforms like Vrbo and Airbnb, have become a popular way for people to monetize their real estate holdings. Instead of looking for a tenant to commit to a year-long lease or more, landlords can list their properties on a night-by-night basis to visitors.
The short-term rental market has faced some pushback from consumers, local neighborhood associations and government entities. Both the state of Massachusetts and individual municipalities, including the city of Boston, have established rules regulating short-term rentals and imposing certain requirements on property owners renting out homes to individuals on a daily or similar short-term basis.
Owners must register properties and pay appropriate taxes
Registration as a short-term rental property owner is a crucial step for legal compliance in Massachusetts. Some municipalities may also require local registration. The state needs to know that an individual will rent out their property on a short-term basis. They will typically need to provide proof of appropriate insurance as well.
Additionally, there will be tax obligations passed to property owners engaging in short-term rental arrangements. There is an excise tax that will cut into someone’s profit margins when renting out a home. There are excise tax exceptions in some cases for those who do not rent out their property for 14 days or more each year.
There are also restrictions on what types of units people can rent to others on a short-term basis. Generally speaking, such properties usually need to be single-family homes or two or three-family homes where the landlord renting the property occupies one of the units. Renting out individual apartments in a large complex on a short-term basis would likely run afoul of state and local regulations.
Provided that someone rents a property for two weeks or more in a given year, they will likely need to abide by all state and local requirements. Small mistakes regarding registration, insurance and tax payments could end up costing a landlord more than they generate through short-term rentals. As a result, ensuring that one is familiar with the Massachusetts rules for such rental arrangements will be of the utmost importance for those looking to maximize the revenue that they generate with the real property they own.