This content was created by MARK KOHLER. This content was uploaded by MARK KOHLER. This YouTube video titled "Vacation Rentals with AirBnb and VRBO - 2017 Update" (published Oct 10, 2017) features Mark Kohler delivering a solo presentation about converting traditional rental properties into short‑term vacation rentals (Airbnb/VRBO). Kohler explains the business, legal, and tax considerations: treat short‑term rentals as a business and track expenses (QuickBooks), review local municipal regulations and potential bans, address increased liability and the typical use of an LLC or other entity for protection, and understand tax reporting distinctions (Schedule E vs. Schedule C, implications for self‑employment tax, and potential S‑corp strategies). He repeatedly recommends consulting an attorney and accountant, and he promotes his tax/legal resources, QuickBooks training, newsletter, and YouTube channel.
Chapters
Hi, Mark Kohler here. Now let's talk about an important strategy that's taking the country by storm. It's been around for a few years, but it's just getting more and more popular. And that's the Airbnb VRBO vacation rental, daily rental. And I have a lot of clients that are going from a standard single family home rental property strategy. Buy a home, rent it out monthly, annually, something like that, and turning it into a vacation rental, putting it in one of these service programs where they can be rented on a daily, weekly basis. A lot of times they're seeing three to four times what they would get in monthly rent in the form of daily rent. Well, let's talk about some of the tax and legal issues, see if we can help that make this a big success for you. Number one, keep in mind, this is a business. I want you to treat it like a business. I want you to track all your expenses related to it. It's going to be a great tax write off, but you're going to have to report all this income you're earning. And also keep in mind with a business there's risks involved. Sometimes having a single family home rental or a duplex or a fourplex with nice steady monthly or annual renters can be safe and comfortable. These vacation rentals, one bump in the market and your rent can take a nosedive. You want to be careful thinking that you're going to have all this extra cash flow when maybe 3 or 4 of the rentals down the street dominate the rental market in that area and you get nothing. So really, do your homework, treat it like a business, do your homework in advance, do your due diligence and make sure converting it to a daily rental is going to be in your best interest. Number two, another important legal issue, and that is looking at the local regulations, the municipalities and cities and counties. Some cities are not excited about having another vacation rental on a street. Neighbors may not like the extra traffic and believe me, hotels and motels in the area don't like it either because it cuts into their business. So some cities are banning these vacation VRBO Airbnb type rentals in their area because they think it hurts businesses and hurts neighborhoods. Other places it's wide open. So you want to look at the area you're going to buy this rental or where you already have a rental and make sure it's going to work as a vacation rental before you jump off that cliff too. Number three, before we get to taxes, let's talk one more legal issue and that's protection guys, you're going to probably have more exposure with a vacation rental than you would a standard monthly or annual rental. The standard renters, they're not there to party, they're not there on vacation, they're not maybe having as much fun. They're just living there. And so vacation tenants can be harder on the property. They can also get hurt, have more activities going on that could create exposure to you. This is where the llc, the limited liability company, comes into play, which is going to be the standard entity to hold this vacation rental. Now, before you rush to LegalZoom and click, click, click and set up your entity, you might want to consult with a lawyer to see which entity fits you best in your state. Where's the rental? Where do you live? And how many rentals you're going to put in an llc. There's a lot of questions here and for a few extra hundred bucks you can talk to a real lawyer and get the right entity for your situation. Look at my information below to talk to someone in our law firm. Just an aside, but you've got to be careful just setting up, we think is the best entity for this without getting a consult. But think protection and make sure you have an entity between you and the property. Now finally, let's talk taxes. My favorite part. I want you to make money and I want you to pay as little taxes as possible. So you've got to know what to expect here. Again, remember my first point. You're a business. I I want you tracking all your expenses. You're going to probably get going on some sort of QuickBooks strategy and maybe just more than Excel tracking your expenses. Do the best you can to track everything. Next, remember, you're going to have to pay taxes on this income you're earning. And even though we're deducting depreciation and mortgage interest and cell phones, travel, dining, entertainment, all those other videos and things I love to talk about, you're going to be writing all those off, but you're going to probably have taxable income because you're getting three, four times rent what you would on a monthly or annual rental. So be ready to pay some taxes now. The newest issue here from an IRS perspective is that when it's a vacation rental, as long as you're not acting like a hotel, doing things like changing linen daily, cleaning daily, providing concierge services, providing breakfast, lunch or dinner, or some sort of happy hour, if you're not acting like a hotel, then you're going to be able to report it on a Schedule E like a standard rental which means no self employment tax. But if you're acting like a bed and breakfast or a hotel or motel, you're going to have to report it on a Schedule C, which means self employment tax, which means I'm probably going to put this in an S corporation or have an S Corp manager llc. Right? It just got crazy all of a sudden. Again, why? You probably want to get a consultant with an attorney accountant before you dive into this and make sure your accountant understands what you're trying to accomplish. Bottom line, this is a great strategy and I love it. I love to use vacation rentals myself when I travel and I love to have rental property making more money. Right? Makes sense. Well, keep working on this strategy, look at your options, do your due diligence, and I hope that we can be of service at our accounting firm and law firm as you go down the path. And remember, the American Dream is real time. Give up, keep trying, keep investing and realize real estate can be a great path to your success. Thanks so much for watching and if you found that helpful, please look in the description below. I've got links to my tax and legal library, my QuickBooks, training videos, how to start a small business, 50, 60, 70 videos, some as long as 30 minutes, explaining more information on tax and legal strategies that will change your life. Also, if you'd like to subscribe to my newsletter or check out my social media links, please please click here. There are weekly free tips and strategies and articles that you'll find extremely helpful and I would appreciate it if you'd subscribe to my channel. I've got so many videos here. I produce every week on my YouTube channel and I'd love to give you a ping every time I shoot a new video. Thanks so much and keep living the American Dream.
