What You Need to Know About Buying a Home as a Nightly Rental in Park City
Owning property in a city with a lively tourist industry has major perks. Even if you only spend a few weeks there per year, you have your own space to call home in an exciting area full of incredible amenities, events, and fun. But what do you do with the property when you are not there? Do you let it sit unused? For many luxury vacation homeowners in Park City and across Utah, the answer lies in turning your home into a nightly rental.
So how do you get started with this type of investment? What do you need to know about nightly rentals and buying a home to use as a vacation rental?
Here’s a quick guide to help you get started:
Popular Park City Property Types
If a ski-in, ski-out property is your dream, there’s nothing better than fueling your passion than owning property in Park City. There are a plethora of condos and properties available for those looking to own a slice of ski-heaven, like the Waldorf Astoria Park City and YotelPAD. These properties feature significant amenities and often come with homeowner association fees ranging from $450-$2,500 or more depending on the size and available amenities.
Benefits of Having a Nightly Rental
For many Park City homeowners and those in the surrounding area, buying a home with the intention of using it as a nightly rental is appealing for a few reasons.
First, in many cases, the homes people buy around here are usually second or third properties that are not always occupied. Renting it helps to offset some of the costs associated with owning such a property.
Homeowners can make extra money to supplement the mortgage payments or offset the cost of insurance, taxes, and repairs. Additionally, when you have an investment property, there are many expenses and fees you can write off for the property, for example, lawn care, snow removal, everyday supplies, and more.
You can also treat your vacation property as a nest egg of sorts, it could be something that your entire family benefits from in the future.
Want to learn more about owning a home in Park City? Read our Park City Community Guide right here.
What are the Disadvantages of Having a Nightly Rental Property?
Although the perks are pretty obvious, there are some things you need to consider before diving into buying a home as a nightly rental. For starters, you will be making more money, but you will also have more expenses and more responsibilities.
A nightly rental also needs to be marketed and occupied to make money, which can be a challenge sometimes.
Property Management in Park City
In addition to the challenges that come with marketing the home and ensuring occupation, you also have to consider property management. Items like keeping the place clean when you’re away, restocking towels, changing the sheets, etc. There is a big property management industry in Utah because many residents are not here full-time. Many homeowners might hire a property management company to take care of maintenance items, however, remember that this comes at a cost and will also eat away at your rental profits.
They Aren’t Allowed Everywhere
Another factor to consider when buying a home with the intention to rent is that short-term vacation rentals are not actually permitted everywhere. For example, in Park City, there are many subdivisions and communities that don’t allow nightly rentals at all.
For example, many outlying residential neighborhoods like Park Meadows might have beautiful luxury homes with expansive views that would make a great second or third property. However, in order to preserve the integrity of the neighborhood, many of these communities have actually banned nightly rentals.
It’s important to do your research and find a neighborhood that will allow you to rent out your home if that’s your plan. Working with an experienced Park City real estate agent is a great first step in better understanding the local micro-markets, rules, and regulations.
Thinking about relocating to Park City? Here are a few things you need to know before you get started.
Consider the Tourist Season
In Park City, the busy tourist season typically goes from December to March. This encompasses the busy ski season in the region as well as many exciting events like the Sundance Film Festival and the NCAA Ski Championships.
It’s important to be aware of the high season as well as your personal schedule and wants. You don’t want to make the mistake of booking your home as a rental on the night that you want to stay there!
Although Park City is booming during the winter tourist season. There’s plenty to do all year round. Check out some of our blogs on the most exciting activities in Park City:
How Do Short-Term Rentals Impact Property Value?
Although there has been research published that suggests using your home as a nightly rental will decrease its property value, there’s actually other research that suggests the opposite is true. The result is more of a grey area that would probably depend a lot on the location, property type, and condition of the property. However, it’s still something to consider and to consult with your agent before making a purchase.
What About the Taxes?
If you’re renting your property out as a nightly rental, it’s important to consider the tax implications. You will need to declare any revenue you make on the property as income and pay appropriate taxes. Additionally, if you ever decide to sell the home, you may be required to pay more capital gains taxes, as the laws for capital gains on vacation properties are different. However, it does depend on whether or not your property is owner-occupied or not, meaning, if you live in the property before selling, you won’t be impacted as much by the differences in capital gains.
Regular property taxes are also different for vacation rentals. For example, Park City charges a higher tax rate of 1.130% on secondary residences, while primary residences are charged 0.55%. This increase in tax rate can be primarily attributed to the increase in the quality of public transportation, trails, and city services in areas where luxury vacation rentals are more popular.
Interested in learning more about owning a nightly rental property in Park City? You can learn more about getting the process started on our Buying with Us page right here.