Apps are everywhere these days. You want a ride? Get an Uber. Single? Swipe right on Tinder. Traveling to Hawaii for a week? Be a couchsurfer. Or if you want a better short term accommodation, look for an AirBnB rental. The possibilities are endless and many modern innovators are taking advantage of the demand to design and market new apps.
But as legislations are often slower to come to terms with these changes, there are bound to be problems, such as with the common short-term rentals sported by apps as HomeAway, AirBnB, VRBO, and many new app market players.
State Laws on Rentals
Many state and local laws are stringent on honoring income-generating spaces on a short term basis. Many hosts are either unaware of these laws, or simply do not care – until trouble comes knocking at their door.
A home that is converted into a rental which hauls in income means taxes. And where taxes are concerned, the state or the local government takes part. So it is best to consult with your local attorneys on what arrangements are to be made for your supposed income-generating activity to not become a tax disaster. You do not want to mess with the IRS.
On the Decision to Refinance
True, short term rentals may give you extra income and more money is indeed appealing to the eyes of your lender. But this rental income may not be honored if it has not been reported and reflected in your tax records.
Another thing to consider is that they may not be taxable. Depending on how strong your short term rental business is, taxes may vary. It is recommended that you speak with a tax professional to get acquainted with the necessary details.
If you are planning a refinance and you have faulty details in your income records, it may prevent you from getting that much needed approval. Before you push through with the decision, see to it that all the legal concerns are ironed out and that you have met with the right people to straighten problems with your financial records.
In today’s climate of rising interest rates, experts predict rates may not be as low as it is now for a long time. Locking in on a rate today will help you save on interest payments throughout the life of the loan, so make sure a little glitch in your income will not pose a problem in getting your loan approved as soon as possible.