Yes! You CAN list your house on Airbnb if you have a mortgage. I have three different homes listed on Airbnb right now and all three have mortgages. And we’ve leveraged these investments to replace my wife Kate’s full time income.
However, your mortgage may have wording that requires you to inform or obtain permission before you do. Here’s everything you need to know to make sure you’re in the clear to list your home.
Do I Need To Tell My Mortgage Company?
Probably. Most mortgages agreements will have language that requires permission to be given before a residence can be rented.
You could find yourself in a few different situations.
Listing a primary residence
I you bought the house years ago and recently decided you’re interested in listing your house on Airbnb, you will want to get in touch with your lender and inform them of your plans.
Kate and I did this. We planned to rent out the bottom floor of our home. It had a separate entrance and we built some walls to close off the bottom floor from the rest of the house.
If you’re still planning to live in the home while listing a portion of your home, chances are your mortgage company will have no issues with this arrangement.
However, if you plan to move out of the house and list the entire property, your mortgage company may take issue with this. When they issued you the loan to buy your house, they did so with the assumption that the wages from your full time job would pay for the loan.
So of course, check with your lender, but also seriously consider continuing to live in the home to increase your chances of approval.
Listing a second home (non-primary residence)
If you already have a second home and you’re considering listing the property, then again, you need to get in touch with your lender. They will likely have a similar response to someone looking to list a primary residence.
But if you’re looking to buy a home specifically to list on Airbnb, then you should talk to your lenders about your plans before buying.
Here’s what we did.
Get permission from your lender before buying
Kate and I called up 10 banks in our area and asked to speak with a loan officer. Then we told the loan officer that we wanted to buy a house and rent it out on Airbnb. Then we asked if they would be willing to work with us. And if not, then we asked if there was anyone else at the bank who might be.
We also scheduled times when we could come in and actually talk with the lender. This helped establish an actual connection with the loan officer and makes it much easier to ask for a loan the next time we are ready to buy.
We’ve found that local banks are much more willing to work with us than the national banks. If you start calling Bank of America and Citigroup, you won’t get very far. You need to find a lender who lives in your city and work directly with them.
This way you don’t even have to worry about whether or not it’s OK to list the property on Airbnb, because your bank already knows. You told them before they ever agreed to loan you the money.
What Are The Other Caveats?
Hopefully you have what you need now to ensure that you don’t break the terms of your mortgage when you list your property on Airbnb. I wanted to bring up a couple other items that can trip up new property owners.
Property Insurance
There are insurance providers specifically structured to insure homes that are short term rentals. They cover things like damage caused by guests and claims by guests against the owner.
These things are not covered by normal home insurance, and when you change the use of a home, your insurance may not be protecting you from some of your biggest risks.
So if you decide to list on Airbnb you should also be contacting your current home insurance provider. They can let you know if they have a plan that better protects you with your new business. And if they don’t, then it’s probably time to go shopping for another provider.
Airbnb does technically provide insurance for their hosts, but I don’t believe this is enough for hosts to fully protect their investment. Airbnb can claim a breach of contract by the host and refuse to insure, and they require (sometimes impossible) standards for proving that the guest caused the damage.
For these reasons, Kate and I have chosen to get our home insurance coverage through a provider that specializes short term rentals.
Although, I’ve heard that some of these companies may not have coverage for hosts that live in the home they are listing on Airbnb. Regardless, you’ll want to do your research on home insurance when you list.
Local City Ordinances
Another problem that can arise is local city ordinances. My home town has recently had several meetings regarding new ordinances that are being put in place for short term rental hosts.
With Airbnb becoming such a huge market for travelers, some cities are seeing property prices skyrocket. This has the citizens of these places unhappy, and in some cases they are fighting to make Airbnb illegal.
So you first step is to do some homework and check your local laws. Make sure your city allows Airbnb listings. Some cities require anyone listing a property to have a permit that is registered with the city. The second step is to plan your investment strategy around the possibility of local ordinances changing and your business changing.
One way Kate and I prepare for this possibility is by looking at potential properties as a long term rental and a short term rental. We try to at least set a purchase price that allows us to break even if we end up having to switch to the traditional long term rental strategy.
Another strategy Kate and I are starting think about is investing in short term rentals across a handful of cities. That way, if one city decides to pass a law making our business illegal, we’ll still have the properties operating in the other cities.
Conclusion
Yes, you can absolutely list a property on Airbnb if it has a mortgage, but you should verify with your lender before doing so to make sure you don’t breach your mortgage contract.
If you’re like me, then you see the possibility to increase your personal income by listing a primary residence or investment property on vacation rental websites like Airbnb. In fact, most of my investment income today is from Airbnb, and all those investments have mortgages.
Get in touch with your lender, then contact your home insurance provider, and don’t forget to verify the laws in your city. Then list your property and start making some money!
Happy investing.
