I’m thinking of purchasing a home and using it as a vacation rental on the weekends. Do I need to have a license in order to do this in Missouri? What issues can I expect to encounter?
No, you don’t need a real estate license to buy a vacation home in Missouri, nor to rent it out. The general rule nationwide is that if it’s your own property, you can manage it how you see fit for yourself. As long as it is consistent with the law, you don’t need to have a real estate license to manage it.
You would only need a real estate license if you wanted to manage property for other people.
However, you do need a business license. The zip code you gave us puts you in Sunrise Beach, so you’ll have to find out whether your future property is within Camden or Morgan County, Missouri, because Sunrise Beach sits on the border between the two. Here’s a link to the Sunrise Beach zoning commission.
More broadly, though, you’ll need to check the zoning in the exact spot you plan to buy the property to see what the rules are for vacation rentals. Some areas will let you rent out a maximum of X weeks out of the year, for example, and some won’t let you do a rental at all – at least legally. So check this at both the city and county levels, wherever you choose to locate, before actually buying the property.
The last thing you want is to sign a mortgage and pay a real estate agent a big fat commission only to find out you can’t legally rent the place like you planned to (though you probably won’t have a problem renting a place long term, in a resort area, on 7-month leases or longer.)
Branson, Missouri, in particular, is known for having some onerous permit requirements for owners of vacation properties, but cities and counties can vary a lot. Generally, the more sought after the vacation area, the tighter the requirements.
The State of Missouri issues a commercial lodging license, but you don’t need one with less than five rooms, so for an ordinary vacation home you aren’t renting as an inn or bead and breakfast you should be ok.
You’ll want to have some specialized insurance coverage designed specifically for owners of vacation rentals. Your standard home insurance policy won’t cut it. In fact, if the home is primarily a rental, you may find that standard homeowners’ insurance specifically excludes it.
So a conversation with a good property and casualty insurance professional is in order. I’d recommend boosting your own personal liability protection, as well, perhaps with an umbrella policy.
Yes, cities can and do mandate the kind of parking you have to make available. In Sunrise Beach, you will have to have two spaces per dwelling unit plus one space per room rented out for rental units. If you have a bed and breakfast, you need two spaces for the resident unit plus a space per room to be rented out, plus additional parking for restaurants run on site.
If you delegate management of the vacation rental to a property management firm, make sure they understand how you intend to market the property. If you are having a different guest every week, and you need a maid service and cleanup between each guest, you need a very different level of service from a property manager than you would if you were renting the property all summer, for example, or on one-year leases.
Expect the property manager to tally up the man-hours they expect to need and charge you for it. So the rent you charge needs to cover this, as well. You’re going to want a property manager involved unless you live right nearby.
Remember, short-term vacation renters tend to be pretty high-maintenance, compared to long-term renters. Which is another good reason to hire a property manager – you might not want to be fielding calls every day from tenants wondering where the extra toilet paper is hiding.
The Internal Revenue Service has a number of very specific rules related to vacation rentals. To comply, you’re going to have to maintain very good records on your vacation rental property from the very beginning – and precisely track how much time you spend there, personally, versus how much time you have it rented out.
To read more, see Publication 527 – Residential Rental Real Estate. Note: The rules are very different for homes rented less than 15 days out of the year versus homes that are rented for more than 15 days.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.