New investor - Basement for short-term renting

[Jamiru Mutebi]

Hi everyone,

After reading a good number of experienced investors' posts from different forums, my wife and I have decided to finish our basement for short-term renting. Having said that, we would like to ask for your advise on the following questions;  

Question 1. What are the pros and cons of short-term renting on a primary residence?

Question 2. Can we use our home equity for a project like this?

Question 3. What tax implications might arise from this kind of investment especially on a primary residence?

Thank you so much for your help, and advise in advance.

[Noah Laker]

Hey Jamiru, I'm a real estate broker and manage over 100 STR properties.

Pros of renting your primary: You can get around many restrictions depending on your area, and you can maintain control over the property and keep an eye on it. 

Cons are obvious, you'll have different guests all the time and you never know if they're gonna disturb you. Be sure to vet your guests for good review history.

Certainly you can talk to a lender about a HELOC or similar loan program if you're short on cash to complete the job. Make sure to run comps on Airbnb / VRBO and make sure the economics make sense.

As far as tax consequences, talk to a CPA. Always maintain records. 

Good luck and hope this helps!