Have a camera sitting in the closet collecting dust? Need a camera for a special event but don't want to spend the money to buy one? Peer-to-peer renting might be the ticket for you, but you need to beware of some pitfalls.
How It Works
With peer-to-peer renting, people offer items for rent on a specialty website. Anything from a camera to a car might be offered on the website, at a rental price. It's typically a per-day price. Someone finds the item and agrees to rent it from the owner.
Depending on the service or website you use, rental payments may be made online through the site or payment may be made in person after the renter returns the property. The website or service usually charges a fee to the owner or the renter. Some websites let owners and renters leave feedback about each other.
It's easy to see how a deal like this can be a win-win for both sides. Beware, though:
- As the property owner, rental payments you get are income for tax purposes, so you have to report that money on your federal and state tax returns.
- If you make a living from renting your personal property, you're probably engaged in a business as far as the IRS is concerned. This opens you up to self-employment taxes, and maybe even the obligation to collect and pay other taxes, like state sales and use taxes.
- Even if you get a security deposit, you run the risk of damage to or loss of your property. You might not be able to find a an exact replacement.
- If a renter is injured using your property, you could face a personal injury lawsuit, especially if you didn't warn the renter about a problem or defect with the item that you knew about.
- Renting your car or other vehicle might cancel or void your auto insurance because the rental might make it commercial use, and not the personal use the policy was written for.
- You should always consider personal safety issues when dealing with strangers, especially if you plan to meet in person.
What You Can Do
You can still enjoy a win-win deal if you're careful:
- Check out any reviews or ratings on a property owner, renter, or item before agreeing to a deal.
- Make sure you set security deposits high enough to cover the complete loss of your item.
- Take pictures of any item before you rent it out or take possession of it, and make a written note, in each other's presence, of any damage to the item. You both should sign and date it. Get a copy, too.
- Consider asking the renter to sign a waiver or release to protect you against lawsuits if the renter is injured. Check with a lawyer in your area to see what types of waivers, if any, are valid in your state.
- Owners and renters should contact their insurance companies to see which policy, if any, covers a car being rented. You might also consider talking to an insurance lawyer.
- Talk to professional tax preparer or a tax lawyer if you have any questions about how to treat rental payments on your tax returns.
- Be wary when dealing with people you don't know. Take necessary precautions to ensure your personal safety if you plan on meeting the owner/renter in person. Meet in a public place and don't give out too much personal information.
Don't rush into a deal blindly. You can protect yourself, and perhaps make or save money, if you go about peer-to-peer rentals with your eyes open.
Questions for Your Attorney
- Are liability waivers valid in my state? How much will you charge to write one for me?
- How can the IRS find out if I'm paid rent for my personal property?
- Can I get into legal trouble if an item I pay to rent for turns out to be stolen property?