A step-by-step guide to renting your home for the Kentucky Derby or PGA events.
The Kentucky Derby is Louisville’s most significant annual event, bringing visitors from around the world. The economic impact on the community is a staggering $400 Million! Restaurants and hotels benefit significantly from this annual event. Many residents have also received large sums for leaving their house for a few days and renting it to a Derby guest. And many more residents become interested in renting their home for Derby each year.
What are the laws around renting my house for Derby?
If you want to rent your home for the Derby, you WILL need to register your property with Louisville Metro Government as an owner-occupied short-term rental.
Suppose you are interested in renting your house this Derby season on home-sharing websites like Airbnb or VRBO. In that case, you'll want to know the Louisville short-term rental ordinances, which require you to register with the city before listing your home for rent or making it available for lease for less than 30 consecutive days. If you list your property without a valid registration, you may receive a fine from the city.
The process is simple. Complete a short-term rental registration form indicating this is your primary residence and pay a $100 annual registration fee. You will receive a registration number from the city, valid for one year. Short-term rental websites require a valid registration number to be posted on your listing.
Click here for instructions for registering your short-term rental.
Do I need a permit (CUP) to rent my house for Derby?
If you live in the property you wish to rent for Derby, you do NOT need a conditional use permit (CUP). That's because owner-occupied short-term rentals, where the house is the host's primary residence, are exempt from needing a permit.
Do you live in Old Louisville? Read this before listing your house!
If you live in Old Louisville or Limerick and want to rent your house for Derby, the process is more involved than in other parts of the city. You will need to apply for and obtain a CUP to rent your house for Derby, even if it is owner-occupied. The permit will cost around $650 in application fees and may take up to three months to complete. A non-owner-occupied CUP will only transfer with the sale of the property to a new owner if they also plan to occupy the property as their primary residence.
An owner-occupied CUP in Old Louisville can never be used in the same manner as a non-owner-occupied CUP.
Make sure your availability and pricing are correct.
When opening your rental calendar, it is essential to double-check that
you have selected the correct dates and pricing. Once a booking is confirmed, the expectation is that you will honor the reservation. Suppose you accidentally leave your calendar open and receive a reservation you cannot keep. In that case, you could be charged penalties from listing platforms for canceling, which might impact your ability to rent your property for the Derby. People are always looking for deals, so make sure your calendar and pricing are correct when you list.
Frequently Asked Questions about renting your House for Derby
Q: What is the cost of registration?
A: The cost of registering your property for the year is just $100, and it comes with the requirement that you file a monthly form with Louisville Metro Revenue, even if you don't rent your property during that month. You can choose to obtain the registration when you list your property and then cancel it after Derby, so you don't need to report monthly to Louisville Metro Revenue. If you decide to rent your property again, you can always obtain a new registration in the next year.
Q: How much can I make renting my house for the Kentucky Derby?
A: Renting out a property can be a great way to make money, and the rates for doing so can vary widely depending on a few factors. Location, amenities, style, and size are all essential elements to consider when determining rental rates. Generally speaking, the more luxurious the property and the more bedrooms it has, the higher the rental rate. To give you an idea of what to expect, we've included a chart below with the properties we rented out in 2022 and their respective rates.
Q: Where do I advertise my property for rent?
A: Renting your house through Airbnb and VRBO is the easiest and most secure way. Both platforms collect the money for you and offer protection in case of any issues. During peak rental times, like Derby, fees for using these platforms can be high for the consumer, so it can be tempting to rent directly. If you find yourself in this situation, consider reducing your rate to offset the fees or ask the potential renter to check back with you later. You may be willing to negotiate if you have yet to rent the property.
Q: Do I need to pay taxes to the city?
A: When you rent your property through Airbnb, you don't have to worry about tax collection and remittance to the city and the state - Airbnb will handle that for you! VRBO will collect and
handle state payments but not the city. If you rent through VRBO, you'll want to collect 8.5% from the guest to pay the City’s bed tax. Otherwise, you can pay that amount from the rental proceeds.
Click here for more information on this topic
Q: When should I list my property?
A: Listing your property as early as possible is the best way to guarantee a large audience. Don't be discouraged if you don't get immediate attention. People are always looking for properties up until the last minute, and those who look early are often willing to pay more. Even last-minute bookings can be lucrative if there is limited inventory. So, no matter when you list your property, there is potential for success!
Q: What if my HOA or Condo Association does not allow short-term rentals?
A: Many HOAs and condo associations limit the rental of properties. Some limitations forbid short-term rentals altogether. Often, this refers to full-time short-term rentals or non-owner-occupied short-term rentals. Before listing your property for Derby, read your bylaws and check with the HOA Board for clarity. If they do not allow event rentals, consider attending the next HOA meeting to start a discussion.
Q: How do I prepare my house?
A: Derby guests are some of the best guests you’ll ever have - because they pay! Show your southern hospitality and welcome them in the best way possible to your home. Consider clearing a space in the closet and drawers in the chest so they can store their clothes and hats. Make a list of things people may not know about your home, and consider using labels to identify switches and doors that may be complicated. Consider making a guide for your guests to tell them about the area. Don’t expect your guest to spend all their free time at the track or eating out.
Q: Do I have to pay income tax on my earnings?
A: The IRS states that no income tax is due on the earnings if you rent your residence for less than 15 days in a calendar year. However, you also cannot make any deductions. Please consult your CPA for tax strategy and advice.