Short-term rental property sales are trending right now, and we get a lot of questions from people wondering if they should list their rental investment on sites like Airbnb or if they should look into renting long-term.
While there are pros and cons to both, new regulations in the short-term industry do make it slightly more of a risk for investors and it’s something to consider if you’re deciding between becoming a long-term landlord or renting out your property on a short-term basis.
Until recently, listing all or part of a home as a place for travelers to briefly stay was a relatively easy thing to do. All it required was listing the property online and waiting for people to respond. Unfortunately, it’s no longer that simple. More than ever, those who are considering temporarily renting their space need to beware of new regulations.
Things are rapidly changing in the short-term rental industry (generally, a rental is considered short-term if it is offered for anything less than a 30-day stay). An increasing number of communities now have regulations that make things a little tougher for part-time landlords, and many more have new laws in the works. Here’s what you need to know before you decide to advertise your space for rent:
The Reasons for Change
Just like month-to-month rentals and long-term leases, short-term rentals aren’t perfect. Transactions don’t always go smoothly, and renters don’t always behave. A great number of short-term rentals are popping up in quiet residential communities, and some neighborhoods are being disrupted. Some of the regulations put in place are a direct result of resident complaints about issues such as excessive noise and lack of parking.
Governments say that other reasons why they regulate the short-term rental industry are to ensure public safety and maintain property values.
Regulations regarding short-term rentals vary widely among municipalities, but common ones may require you to:
- Open your home up for scheduled inspections
- Pay for a short-term rental permit or license
- Collect hospitality taxes
- Provide adequate parking
- Post basic safety information for guests
- Leave guests a local contact number
- Make sure your home meets all local building and safety codes
- Pay fines for violating regulations
In some areas, short-term rentals may even be banned altogether. For example, Miami Beach (no doubt ahead of the curve due to dealing with an annual onslaught of spring breakers for years) has had a ban on short-term rentals in residential neighborhoods in effect since 2008 and, on May 24, 2018, the City of New Orleans implemented a moratorium on whole-home, short-term rental permits.
Penalties for Noncompliance
The penalties for violating local short-term rental laws also vary, but they can be quite steep. For example, in San Francisco, noncompliance ensures a fine of at least $484 per day, according to the city’s Office of Short-Term Rentals. And, in New Orleans, ignoring the laws entirely could get you fined a whopping $15,000.
Despite regulation, the short-term rental industry isn’t going away anytime soon. The bottom line is that if you want to profit from this popular craze, you need to find out what’s going on in your area. Even if there is no current regulation where you live, it may soon be coming, as more and more municipalities are adopting laws.
You may still find it worthwhile to rent out your home if you’re willing to abide by the rules. Or you may discover you can’t live with the regulations that would apply. Research the local ordinances already in existence and any that may be pending before making any decisions. Knowing what to expect will make it that much easier to implement should you decide to go forward with sharing your home.