5 risks for Airbnb, Vrbo® and other property rental hosts

If you own a home you're not living in, odds are you've considered turning it into a rental property or even a vacation rental.

Short-term rental sites like Airbnb, Vrbo and others have made it easy for homeowners to rent out their properties, or even just individual rooms, all while making a little extra cash.

If you're new to the world of home sharing, you might feel apprehensive about opening your home to strangers. What are the risks of Airbnb and similar hosting sites, and how can you avoid common pitfalls? Perhaps more importantly, how can you avoid the financial consequences of liability?

In this article, we'll walk you through five of the biggest risks that property owners face and offer suggestions of how to prevent and overcome these challenges as you operate your short-term rental property.

1. Property damage to your Airbnb or Vrbo

Even if the potential rewards of owning a short-term rental are exciting, there's always risk involved. One is property damage. Normal wear and tear is expected, but many owners worry their guests will do more severe damage to the property — from breaking furniture to causing water damage.

Sometimes guests will throw unauthorized house parties or other "disruptive events" at the rental property. This can create more opportunities for damage and increase your liability as more people enter your home.

Fortunately, most short-term rental platforms offer two-way reviews. That is, your guests have the opportunity to review their stay on your property. You also have the opportunity to review your guests, and if unauthorized events are a no-no in the company's handbook, you can easily report the offending guests.

But what if the incident is a bit bigger and harder to resolve?

For a couple in Sonoma Valley, California, a nightmare became reality when Airbnb guests accidentally burned down their three-story home. The estimated rebuild cost was $1.8 million.

But the bigger challenge was getting the vacation rental company to reimburse the property owner under their protection policy. It took over 16 months (and calling in some reinforcements) to settle their claim.

While short-term rental sites may offer some protection or "insurance" for owners or hosts who list their property, they're not an insurance company and often refer you to a third party for an insurance policy. That means you may be working with a company that may not know your overall financial picture. You also could have a policy that may not align to your overall insurance picture for things like liability limits or policy types.

2. Preventing guest injuries at your Airbnb rental

As a vacation rental owner, a big concern is guest injuries or fatalities on your property. Even if you weren't present on the property at the time of the incident, you could still be held legally responsible for the accident. And the medical bills can add up quickly.

Unfortunately, many of the things that make your property appealing to potential guests can also increase the risk of accidental injury or death. Some of the most common "attractive nuisances" and other dangers can include:

• Pool or hot tub
• Trampoline
• Sporting equipment, such as bicycles or motorized scooters
• Stove or outdoor grill
• Uneven or slippery surfaces
• Fireplaces
• Scalding water

To avoid accidents and liability concerns, it's smart to take additional safety precautions, especially if there will be small children on the property. For example, you may want to fence or cover your pool and place any maintenance chemicals out of reach.

It's also a smart idea to have liability insurance for Airbnb, Vrbo and other rental properties. This can provide you with better financial protection if you're held legally responsible for an accident, injury or fatality.

3. Theft of personal belongings

As a rental host, you do everything you can to create a warm, welcoming environment for your guests. But if one of them decides that your towels, artwork or television are too good to say goodbye to, you might become a victim of theft.

Short-term rental sites like Airbnb and Vrbo typically have conduct policies that guests must agree to before making a reservation. So, if one of your guests has sticky fingers, it's fairly simple to report their misconduct to the platform

That said, there's no guarantee they'll resolve your case or recover any stolen property, which means you'll probably need to pay out of pocket to replace it. Or you can make a claim with your rental property insurance.

4. Squatters in your rental

The whole concept of squatters rights can be a little tricky to understand, but for property owners, it's an important one.

A squatter is an unauthorized occupant residing on a property. Believe it or not, most states have laws that protect squatters rights. For example, they have the right to go through an eviction process. It's even possible for them to claim the title of a property if the rightful owner doesn't act within a certain timeframe.

Some vacation rental owners have had to learn this the hard way. In 2014, a pair of brothers overstayed their welcome in a Palm Springs, California, condo they rented through Airbnb. Although they only paid for 30 days, they ended up staying for 44 before being kicked out.

The crux of the problem? By staying for 30 days, the brothers legally became tenants of the property according to California's Adverse Possession Law. As a result, the property owner had to jump through hoops to reclaim her condo and get rid of the squatters.

So how do you prevent your guests from morphing into squatters?

One of the easiest tips is to limit your maximum rental period to 29 days (or the equivalent, depending on adverse possession and tenant laws in your state). If you have to deal with a squatter, don't wait to do something about it. Consult a legal professional to review your options so you can get your property back sooner.

5. Loss of use can equate to loss of income

It's hard enough when your personal home is unlivable due to an incident and subsequent repairs. But it's more frustrating when your property is also a source of passive income and can't be rented out while things are being fixed.

There is good news: You may have income replacement to help cover losses if you have rental property insurance. However, not all providers offer this special coverage when insuring short-term rental properties. If you depend on income from your rental properties, loss of income or loss of use coverage can provide significant peace of mind.

Make sure your rental is covered

Whether you're a seasoned host or new to the short-term rental game, it's important to understand the unique risks that come with being a property host. Talk with your insurer to learn how you can protect yourself, your finances and your future rental income effectively.