Turning a house into a hotel - set up as LLC?

2 Replies

Hello, my wife and I own a house in a very popular and fast-growing area of our city. We currently rent out the main house as a long term rental and live in a separate home we built at the rear of the property. The short term rental business where we are is booming and our neighborhood is at the top of desirability for this type of tourism business, so we want to capitalize on this. Our property is zoned as multi-use so I have the idea of using it/getting it classified as a "boutique hotel" and renting out the rooms in the house.

With this type of classification I'm assuming the taxes would be higher, etc for this use, insurance would be of a more commercial nature, etc.

So should I try to setup the property as an LLC (to insulate it's operation from us legally)? Since it would be a business this seems the logical thing to do but just wanted to see if anyone has had this type of experience with their properties. Would we have to transfer ownership of the property to the LLC and then we would be "investors" into the LLC and employees? The upside potential of short term rental vs long term in my area is significant, which is why I'm looking at going this route. Thanks!

Absolutely need to limit your risk here by incorporating or protecting your personal assets in some other way.. umbrella insurance, etc. It only takes one bad person / troublemaker to prevent you from sleeping at night if you aren't properly protected.

As the news today demonstrated, there are lots of bad people out there. Need to stay protected even if you are a wonderful person and run an incredible business!

Thanks, I currently have a personal umbrella policy for liability purposes in connection with the current use as a long term rental, but my main motivation in turning the house into a "hotel" is to run it as a short term rental business vs. just running it as "AirBnB". AirBnB laws are strict and subject to change in a volatile environment where homeowners are seeking to limit them from neighborhoods but I have the advantage of living in a "mixed-use" neighborhood and therefore can run it as a business instead of a personal residence AirBnB rental. 

I just wondered if any board participants had experience turning a home into a lodging/hospitality business and what went along with this. Thanks.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you