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The Kitchen Table

? about renting a vacation house

13 years ago

A friend set up a vacation rental in the Outer Banks, NC in October. The house is set at an off-season rate, the admin. fee is $75, the taxes are 12.75% (2 diff taxes make this up). There is also a hurricane insurance fee of 7% which I was told is taxed on the entire sum of the rental including all the fees above. So, as an example, let's say with all the rates above, the sum comes to $3000 including the taxes, they are charging us 7% of the $3000 for the hurricane insurance.

I would think the 7% would be charged just on the house rental and MAYBE the admin fee, but not the taxes we're paying for the house. Is it even legal to charge us a fee on the taxes we're paying?

For those of you who rent out vacation homes or even rent them for yourselves, what's your experience with this insurance fee in terms of being charged a percentage even on the taxes you are paying to rent the place?

Thanks.

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Comments (5)

swimmer22
13 years ago
The hurricane insurance is to resolve your total investment of the $3,000 in the event a hurricane displaces your vacation plans. So, the cost is based on insuring your total expense of $3,000.

The established fee (7%) is based on the total amount insured. The cost to insure against a $3,000 loss would be $210. I hope I explained that well enough.
monica_pa Grieves
13 years ago
You have an enumeration of all the costs involved in occupying the house for a certain period of time.
You pay all the costs to the owner, and it becomes income to the owner, which is taxable.

Because the property is in a hurricane area, I am wondering if the purpose of the insurance is not for the property itself, but for return of money lost in the rental, if you vacation is interrupted by a storm, and your rental is refunded by the owner - in other words...lost income to the owner?

Does your contract for the rental spell out what happens to the rent if your vacation cannot occur or is interrupted by a hurricane?
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lynn_d
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Debi, is the hurricane insurance a trip cancellation insurance? To refund you in the event you cannot make the trip? If so, then the insurance should be based on the cost of the rental not including the taxes. Should you have to cancel the trip, regardless of the reason, the taxes should be fully refundable. Little known fact, even the taxes on a non-refundable airline ticket are refundable if you write the airline and ask for them.
bigfoot_liz
13 years ago
sounds like that is hurricane trip insurance... hurricane insurance costs are astronomical, heck deductibles are $5000-10000 on private, non-rental property. ~ liz
chisue
13 years ago
If you want trip insurance, it's up to you to buy it. It probably doesn't cover 'Acts of God'. Is that the purpose of 'huricane insurance'? Does the owner have a policy that would reimburse them/you if the house is uninhabitable?

We rent our Maui condo in the months we aren't using it. Of course we have insurance on the condo, but that's part of our expense in owning it. We have expenses for real estate tax, condo association fees, a cleaner, and we pay an agency to set up keys and parking passes and be on-call for guests.

Guests pay us a nightly rate plus the county and state taxes (13.42% total), which we forward to those bodies.

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