Part 3 of our Series Starting a Short-Term Rental Business

As part of your research, and search, into finding a great short-term rental property, it’s important to understand the local regulations in that locale. Short-term vacation rentals have skyrocketed in popularity thanks to websites like Airbnb and VRBO, but they’ve also garnered negative attention from local governments and residents. This has resulted in a patchwork of laws and regulations that can vary greatly from one city or town to the next.

In this article, we’ll take a closer look at how local regulations affect short-term vacation rentals and what you should be looking for. We’ll discuss some of the common challenges investors face, as well as some of the creative solutions that have emerged in response.

Understanding Short-Term Rental Zoning Laws

One of the first things to consider when investing in a short-term vacation rental is the zoning laws in your property’s area. Zoning laws determine the types of properties that can be used for different purposes, such as commercial, residential or mixed-use. Many cities and towns have specific zoning requirements for short-term vacation rentals, which may restrict them to certain areas or limit the number of units per block. In addition, zoning might limit the number of times a property can be rented, or even for how long.

Conversely, some towns have no regulations or simply have not addressed the issue yet. One quick way to confirm if short-term rentals are allowed in an area is to check platforms such as Airbnb, VRBO or Google Vacation Rentals. Use the map function to find the area you are considering. If you see properties listed, click on them and read the description to see if there are minimum stay requirements, etc.

But, having said that, before investing in a property, it’s important to research the local zoning laws and make sure your rental is compliant. This can help you avoid expensive fines or legal issues down the road.

Let’s take a look at how to find out what the zoning laws are for the location you are interested in.

Finding Out Local Zoning Laws

To understand the local zoning laws in your area of interest, there are several steps you can take. Firstly, visit the local government or municipality’s website. Most towns and cities have their zoning ordinances and maps posted online. Look for sections that specifically mention short-term rentals, vacation rentals or transient rentals.

If the information is not readily available online, consider contacting the local zoning or planning department directly. They can provide specific details on whether short-term rentals are allowed in certain zones or neighborhoods, any restrictions, and the process to obtain necessary permits if required.

Finally, consider consulting with a local real estate attorney or other real estate professionals like property managers who are experienced in the short-term rental market. They often have a deep understanding of the local laws and can provide valuable advice. Remember, understanding the local zoning laws is crucial before investing in a short-term rental property to ensure compliance and avoid potential legal issues.

Obtaining Proper Licenses

In addition to zoning laws, many cities and towns (or states) have licensing requirements for short-term vacation rentals. This may include obtaining a business license, a short-term rental permit, or a hotel license, depending on the area.

Licensing requirements can vary greatly from one place to another, so it’s important to do your research and make sure you’re complying with all applicable regulations. Some cities require hosts to collect occupancy taxes or obtain liability insurance, while others may have restrictions on the length of stays or the number of guests allowed.

Keep in mind that licensing requirements may also change over time, as local governments grapple with the growing popularity of short-term vacation rentals. It’s important to stay up-to-date on any changes and ensure your rental is properly licensed at all times.

Dealing with HOAs

If you’re considering investing in a short-term vacation rental in a community governed by a homeowners association (HOA), it’s important to understand that you may face additional challenges. Many HOAs have rules and regulations that specifically prohibit short-term rentals, or may require owners to obtain approval from the association before renting out their property.

Now, we currently own several short-term rental properties in condominium complexes, and we can tell you it’s not all that bad. The key thing is to check in advance with your realtor or the HOA itself to see if a complex allows short-term rentals. We’ve found this to be the quickest and easiest way to disqualify properties before spending time on them.

In some rare cases, HOAs may impose fines or take legal action against owners who violate these rules. It’s important to review your HOA’s covenants, conditions, and restrictions (CC&Rs) before investing in a property, and to communicate openly with your board or association to ensure compliance with all applicable regulations.

Addressing Community Concerns

One of the biggest challenges facing short-term vacation rentals is the negative attention they can attract from local residents and officials. Neighbors may be concerned about noise, parking, and security issues, while local governments may be worried about the impact on affordable housing or hotel industries.

To address these concerns, some investors have developed creative solutions. For example, some cities have established “good neighbor” policies that require hosts to adhere to certain standards of behavior, such as limiting the number of guests allowed or posting emergency contact information. Others have created short-term rental enforcement units to investigate complaints and ensure compliance with local regulations.

Our experience in the real world of short-term rentals has been mostly positive with all of our locations. The platforms, particularly Airbnb, have made great technological strides in helping hosts identify potential parties or large gatherings, before they occur. That combined with posting clear rules and guidelines for guests further reduces the chances for disturbing neighbors or inviting unwanted scrutiny.

Staying Ahead of Regulatory Changes

Finally, it’s important to stay up-to-date on regulatory changes and developments in your area. Short-term vacation rentals are a rapidly evolving industry, and laws and regulations can change quickly. For example, New York City just recently updated its regulations, thus making short-term rentals an almost impossible endeavor.

However, it’s not as bad as it sounds. There are still many, many locations and areas that thrive on short-term rentals and welcome them. These rentals help stimulate the local economy, help to create local jobs and add to the tax base.

As a real estate investor, it’s important to be aware of any new regulations or requirements that may affect your property, and to make adjustments as needed.

Conclusion:

Short-term vacation rentals can be a lucrative investment option for real estate investors, but they also come with their fair share of challenges. Understanding the local regulations that govern your area is critical to avoiding legal issues and ensuring compliance with all applicable laws. By doing your research, obtaining proper licenses, and addressing community concerns, you can build a successful short-term vacation rental business while also being a good neighbor and citizen in your community.