Are You Considering Renting Out Your Breckenridge or Frisco Home?

Are You Considering Renting Out Your Breckenridge or Frisco Home?

Have you thought about renting out your home in the Breckenridge or Frisco area? Many second homeowners consider the opportunity to generate income by renting their homes when they aren’t using them. This can be a benefit to help offset the costs of owning the home and there could even be additional income left over. 

Of course, many mountain towns support rentals on a seasonal basis. This means that there could be blocks of time when your home sits empty and is not generating an income. It’s also important to remember that the IRS considers an income property a business that has tax ramifications. I suggest discussing this with a financial advisor before making any rental decisions for your property. But in the meantime, here are some of the things I tell my clients to think about when they are considering renting out their second home. 

When Will You Be Staying At The Home?

When will you use your home? Holidays? Christmas to New Year? 4th of July? What about Spring Break? These are fun times in Breckenridge and Frisco! But then you have to remember, it’s also a peak time to visit. Meaning there could be high demand to rent out your house. There are many variables that go into the financial equation and you’ll need to decide how much you will use your home personally.

Marketing and Management

Will you be doing all of the marketing and management yourself? You could use a platform such as Airbnb or Vrbo to market your home and manage rentals. The downside to this is it can be very time-consuming and more “hands-on” than some might expect. You will need to do everything from taking photos and advertising the property to booking renters and cleaning the home between bookings.

Another option would be to use a broker. Most brokers will charge 20-50% of the gross rental income for their services. The upside is this means that they will be managing all aspects of renting your home.

Ownership and Liability 

Should you own the rental home or an entity? What if you get personally sued? It’s recommended to separate your business liability and your personal finances, as well as get liability coverage to protect you. Anybody can sue you at any time. If this were to happen you would likely have to hire an attorney to defend you. You can prepare for the worst-case scenario in advance by having an attorney set up an entity that will shield your personal assets from a potential lawsuit. I recommend doing this before you start renting out your Breckenridge or Frisco area home.

Insuring Your Home as a Rental

You will also need to get a vacation home insurance policy because most homeowners’ policies exclude income properties. Second homes tend to be riskier since no one lives there full time. This could mean that premiums may be higher. Potential serious issues for second homes can include water damage (frozen pipes), fires, or vandalism. What if the door to your home did not get locked and it blows open and your pipes freeze? What if no one notices a problem in your home until a week later? You may need to install a security system that detects water levels under your sink, next to the toilet, and your water heater to help detect problems while you aren’t there. Fire alarms and CO2 detectors are also required. You will need to talk with your insurance company and make sure you have everything covered before you start marketing your home. 

Personal Liability or Commercial Liability?

A regular homeowner’s policy and a vacation home policy may cover personal liability, but personal liability coverage (or a personal umbrella policy) will not cover business activities. Renting your second home is a business activity. Personal liability is intended to cover you in the event that someone claims that you have caused them bodily injury, or damaged their property as a result of your personal actions.

Commercial liability coverage, on the other hand, is specifically designed for “business activities” like your second home rental business. Liability coverage protects you if someone slips on an icy sidewalk and you are sued for damages. If there is severe damage to your second home and it cannot be rented, you may also want to ensure that your lost rental income is also covered.

How Can I Help?

I hope that you’ve found this informative. If you have additional questions about renting out your second home or want more information on what the Breckenridge-Frisco area Real Estate Market is like right now don’t hesitate to reach out. I can provide you with a detailed market report

My goal is to provide my clients with relevant and up-to-date information that pertains to the local area and real estate topics. 

Scott Lerner
Managing Broker
Coldwell Banker Mountain Properties