Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
The business model for AirBnB & VBRO is becoming more and more risky every day.
The problem is various cities are intervening with new codes restricting what is know as Short Term Rentals(str). Length of stay may vary from city to city and some are declaring anything less than a full month as STR.
So if today there is no such restriction(s) and it is a viable business model for you now, how long can you assume that will continue and if it changes, can you survive the change.
Investor · Black Diamond, WA · Member since 2016 · 123 posts · 127 votes
10y
I have a 6 bedroom house here in Seattle that I use exclusively as a vacation rental. I rent it from some investor friends of mine; we have an agreement set up where I pay rent slightly below market value and give him a profit share in our vacation rental. This month we are on track to profit over $10k, so it has been extremely successful, especially in the summer.
We knew that the city was working on proposal to restrict these sort of rentals, so we factored that in to our lease in case the city made it illegal for us to proceed. Since our house is very large, we have considered licensing it with the city as a legal Bed and Breakfast, so that is another option we are looking into if this legislation goes through.
Our long term plan is to purchase rural properties (cabins) in the mountains, and rent them as short term vacation rentals. While the cash flow won't be as high, the small mountain towns rely quite a bit on tourism, so we don't anticipate any regulations being placed in those areas that would prohibit us from continuing.
This is definitely a topic that I am very interesting in keeping tabs on and discussing further, so I'd love to hear what others have to say.
Rental Property Investor · Littleton, CO · Member since 2015 · 252 posts · 164 votes
10y
Surviving the change should not be hard. If anything, the easy exit strategy is to simply convert to long term rentals.
The reason many municipalities consider the possibility of regulating short term rentals is because there is not enough local inventory, and therefore less rentals for those that want/need to live in the area. Right now short term rentals is a very profitable gig. In the future, it may simply be a profitable gig. I don't believe the change is inevitable, nor would it be difficult to survive.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
Moving from Short Term(ST) to Long Term(LT) may kill the assumed Cash Flow from your due diligence.
ST income can be 3 and sometime 4 times that of LT and in high value vacation locales, may be necessary for any profits. Hate to see someone suffer shock & awe from an overnite City ordinance change that destroys their investment (aka the motivation for this topic).
Investor · Black Diamond, WA · Member since 2016 · 123 posts · 127 votes
10y
I have a 6 bedroom house here in Seattle that I use exclusively as a vacation rental. I rent it from some investor friends of mine; we have an agreement set up where I pay rent slightly below market value and give him a profit share in our vacation rental. This month we are on track to profit over $10k, so it has been extremely successful, especially in the summer.
We knew that the city was working on proposal to restrict these sort of rentals, so we factored that in to our lease in case the city made it illegal for us to proceed. Since our house is very large, we have considered licensing it with the city as a legal Bed and Breakfast, so that is another option we are looking into if this legislation goes through.
Our long term plan is to purchase rural properties (cabins) in the mountains, and rent them as short term vacation rentals. While the cash flow won't be as high, the small mountain towns rely quite a bit on tourism, so we don't anticipate any regulations being placed in those areas that would prohibit us from continuing.
This is definitely a topic that I am very interesting in keeping tabs on and discussing further, so I'd love to hear what others have to say.
Investor · Cedarburg, WI · Member since 2013 · 439 posts · 150 votes
10y
Andy, one thing to consider is if the city can enforce something after you have started doing it. In our case we use Airbnb for a spare bedroom in our personal house. We had been sent a letter asking us to stop because we are not in the appropriate zoned district. After playing dump with a city admin I found out they changed the zoning code as AFTER we started renting so it turns out we were grandfathered in. Certainly a unique instance that also involved a court case with some other long term rentals nearby, but turned out well for us. As long as we don't stop, we can continue to rent short term legally.
Good luck!
Real Estate Agent · Orlando, FL · Member since 2016 · 139 posts · 80 votes
10y
@Jeff B. I spoke with Matt Curtis (the director of government relations at Homeaway) in May about this in detail. According to him, there is no city exempt or safe from future VR restrictions and bans so nothing is ever guaranteed with vacation rentals and you should always keep that in mind. I will say that there are cities that seems to be more VR friendly than others (such as Sedona and Orlando) and I prefer to invest in those areas vs. areas that are already having issues.
A couple people mentioned a back up plan, I couldn't agree more. If your heart is set on investing in a location where the future of short term rentals is up in the area, definitely make sure you're prepared to convert is to a long term rental or sell it and move your money into something else more profitable.
Nobody can guarantee anything but there's truly never been a better time to invest in vacation rentals than right now. It's a huge boom and sites like Airbnb have changed the industry forever.
Investor · Parker, CO · Member since 2013 · 47 posts · 28 votes
10y
I do a niche of the niche. I do short term rentals and gear my advertising toward working professionals like travel nurses and other business travelers. I do this with 8 units in CA and TX. We primarily buy 1br condos with low HOA dues. Also, with an average stay of about 3 months, it keeps us under the radar unlike the Airbnb host who pumps new folks through their apartment every 3 days. Also, if a city passes ordinances requiring minimum leases of 30, 60, or even 90 days, our business model would not be affected.
Investor · Tampa, FL · Member since 2013 · 54 posts · 6 votes
10y
I know a few HOAs here in Tampa are modifying their condo docs to restrict new owners from long term renting the property out for 1-2 years. They are also prohibiting short term rentals of less than 3 months. Are you experiencing this? Are you staying away from condos with HOAs all together?
Real Estate Agent · Orlando, FL · Member since 2016 · 139 posts · 80 votes
10y
@JW Franz There's quite a few places here that are doing that also but the Kissimmee, Clermont and Davenport locations all remain very VR friendly because of Disney. I don't think that will ever change, it could but it would cripple our local market. Most people feel pretty safe investing in VR's here.
I'm sure Florida is different, but the left coast Disney (aka Anaheim) just gave STR's 18 months to cease operations. Apparently the hotels ganged up with the teachers unions to get this pushed through the city council. The unions got involved because they want more kids living in the neighborhoods, which equals more school funding. I have an acquaintance that has been doing STR's in this area for decades, long before the likes of AirBnB were around, and this has got to be devastating for him. Well, the houses he owns have appreciated handsomely over that time, so I guess it's not all bad.
Real Estate Agent · Redlands, CA · Member since 2016 · 253 posts · 115 votes
10y
Brian Payne . We do the same thing in Loma Linda CA with 8 rentals. We rent short term for a month to 3-4 months. Mostly to patients at the local hospital or traveling nurses ect. It's a great sustainable model as leases longer than 30 days are fine.
Investor · Portland, OR · Member since 2015 · 23 posts · 9 votes
7y
@Kiersten Vance -- how do you connect with patients at the local hospital? I've heard about the visiting nurses website. How do patients find you (or you find them)?
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