Short-term rentals are furnished living spaces that are available for a limited time, ranging from a few days to several weeks. The city of Wilmington defines short-term lodging as a stay in a residence for a period of up to 29 days. Short term rentals are also referred to as vaction rentals and are considered an alternative to a traditional hotel.

Over the past decade sites like AirBnb and VRBO have become extremely popular and  allowed homeowners to rent out thier homes. The STR market has exploded worldwide with an estimated 74 billion in revenue in 2020. The increased amount a homeowner can charge per night for their STR has made this a very lucrative platform for rental property investors.

Although STRs have proven to be profitable, they come with increased workload to manage due to frequent turnovers and guest communication. Many municipalities have implemented restrictions, taxes, and fees on the STR rental industry that may be confusing for homeowners to navigate. Partnering with Carolina Vacays will ensure your STR is compliant with local regulations and provides guests with top notch customer service.

The profitability of short-term rentals is determined by several factors, including the kind of property you own, it’s location, local demand, and amount of local competition. Rental rates may also vary seasonally, impacting how you calculate your profits. In general, a vacation rental investment is significantly more profitable than long-term leases.

Although STR invesments can generate higher ROI, they require substanially more work to operate. Frequent turnovers, cleaning requirement, and constant guest communication requires a significant time investment. Hiring a professional STR management company will allow you to see increased annual rental income without personally having to invest the higher workload.

Homestay Lodging: An individual bedroom within a host’s home is the homestay lodging experience. During the rental period, the host lives and remains onsite. Accessory dwelling units are also included, as long as the host lives and works on the property full-time and remains present for the entire rental period.

Whole Home Lodging: An entire home, condo, apartment, or dwelling being rented without a host present. The City of Wilmington requires a local operator be within 25 miles and available 24 hours a day for whole home lodging.

Wilmington has eliminated the need for lodging providers to register for short-term rentals licenses or to comply with the ordinance’s cap and separation requirements as a result of a recent court decision.

Many homeowners that are interested in operating a STR are familiar with income tax but generally don’t have experience with lodging tax. 

Income Tax: Homeowners pay  income tax to the federal government and some state governments annually on “taxable” income, which is income after deducted expenses. STR income is considered taxable and needs to be paid directly to the appropriate governing bodies. 

Lodging Tax: Guests pay the lodging tax (occupancy tax or hotel tax) on a short-term rental, and the charge is added to the bill. The STR operater, however, is responsible for collecting the tax and paying it to the appropriate tax authority. Many of the major STR sites like AirBnb and VRBO will collect and pay these taxes for you.