Looking for advice on how to encourage HOAs to adopt Airbnb

14 Replies

We have recently encouraged our HOA to adopt Airbnb as a benefit to the condo building. Our thought is that it can actually be more desirable for some buyers, and also that the HOA could take a cut (say 5-10%) of the profits. Does anyone have experience with an HOA doing this? Any suggestions for how to sell it?

Casting at windmills.....hoa/condos won't want it, as they are mostly owner occupants and why would they want random additional traffic and outside people in and out.

I have a couple of thoughts:

1) Ground up - talk to neighbors and gauge what the interest is and if there are enough people interested the get the HOA to call a vote.

2) Some HOAs are small little pockets of power and will do only what is in there interests and if one board member refuses you are stuck. Giving the HOA a cut is a good idea but that money goes to the Association's use not the pockets of the "politicians". Could you offer to Host their properties and give the owner a cut or something to make it a benefit to the individuals?

I have a condo in a student area around UT Knoxville.  Virtually every unit is a NON-owner and we all rent to students.  In this situation more owners would see a benefit of AirBnb'ing the rooms during the summers as well.  If there were a lot of full time residents I could see a larger battle.

If I was a owner resident of a condo I would not want renters and definatly never want anyone operating Airbnb. It is extremely disrespectful to those that purchase condos as their primary residence. No one wants to spend all that money on a home only to end up living in a hotel environment.

Investors need to show greater respect for others.

@Thomas S.   Absolutely agree. 

HOA rules need to be taken into consideration prior to purchasing if you feel there is a chance you may want to rent out down the road. That said, the HOA is usually a "majority rules" proposition. So if you can get enough people on your side you can change the rules. However there isn't enough aspirin in the world to make me even want to think about that.

@Wayne Brooks - yeah, I think it's common for HOAs to be suspect of Airbnb and leery about the traffic they could bring in, but we are trying to change those perceptions. Bringing Airbnb to a building could make it more attractive to the right person, and in our experience, short-term renters have left our places in great condition. For an HOA with limited reserves, this could be an excellent way to increase funds.

@Ken Dillard - great points. I think the board is actually pretty open to the idea and sees it as a way to increase our limited reserves, but we need to have a broader conversation with the owners. The building trends younger, so I think that might help too. 

@Thomas S. - I understand the concern, but I think if more people understood the money making potential and the safeguards within Airbnb and VRBO, they might be more willing to do it.

Also, I'm talking about doing Airbnb in Denver, which has a primary residence rule. Because that rule requires people to live in the place, it would limit how much renting could actually be done. 

Hey @Erin Spradlin - I talk a little bit about this in my podcast (link below in my signature).  I sit on the boards of HOAs where I invest and when I read your initial post I kinda just laughed out loud.

First of all, there is a definite "Us Vs Them" mentality on the part of occupant homeowners against even traditional landlords.  Tenants are seen as uncaring of the property, the source of all behavior woes and generally horrible people.

We had a vandalism problem and everybody coming to the board meetings, including other board members, would make comments that "it's probably some renter" and "I hate that these people just come in and destroy our properties and then leave a year later and nobody cares, especially not the landlord".

Then, a couple of months later when the perpetrator was caught and discovered to be a homeowner, nobody apologized for their attitude, nobody had a change of heart and nobody was willing to stand up and state that they were wrong to accuse the landlords and their tenants.

Landlords are generally seen as greedy, money-grubbing jerks who just allow any old rando to ruin the lives of all the innocent owner occupants.

I'm exaggerating a little bit here, but not that much.

The concept that you would come in as not only a landlord but (gasp!) an AirBNB Landlord would send most of them into a tailspin, fanning their faces and clutching at pearls.  I already hear about all of the piles of dog poop that are left on every square inch of the community (complete with pictures sometimes).  I can only imagine what would happen the moment an AirBNB guest accidentally broke something, was unintentionally loud, arrived at 11:00 at night and made some noise or what have you.

Offering some dirty, filthy money in exchange for increased opportunities to make yourself even wealthier (like Scrooge McDuck doing the back stroke in a pile of gold coins), will not be received well.  

Again, I am exaggerating a little bit here, but as I close my eyes and see the pinched, uncomfortable faces of board members and home owners any time these types of topics come up, I can promise you that I'm really not that far off the mark.

Now, this is all reversed if you happen to have a board of directors that has a decent representation of investors on the board.  My boards have a 3-2 split on one board and a 5-4 split on the other as an investor/occupant ratio (yep, both are majority investor), but based on my discussions with other people, that is incredibly rare.

They may actually consider what you're asking, but depending on how their rules are written, may have to put it out to a homeowner vote where it is likely to fail for all the reasons I mention above.

The most important reason being that investors don't vote.  At annual meetings, the people who show up and vote (or vote by proxy) are predominantly owner occupants with investor/landlords either never opening the meeting notice or just opting not to show/send in their proxies for whatever reason.

Lastly, even if the board did opt to enact some profit sharing arrangement with AirBNB landlords, they are now opening themselves up to a whole host of practical problems.

1. The HOA is now participating in a business for which it is not chartered.

2.  The profits received are from a business venture, which makes them taxable.

3. The concept of an HOA opening themselves up to taxation is going to blow a lot of people's minds.

4.  In the somewhat likely (ish) event that income from the profit sharing from AirBNB rises to 20% of the HOAs total revenue, they could lose their non-profit status entirely.

While I love your out-of-the-box thinking on this, I think this is an idea that should probably be stuffed back in the box for now.

@Erin Spradlin You’d be in a short-term/long-term Catch-22. In the short-term it might be nice for the HOA to get some revenue, for you to get some of that STR cash. But what happens when you want to sell? Owner-occupants won’t want to live there. Investors will be your buyer pool and they all want a “deal”. So you get a condo-rental building and eventually the 50% owner occupant clauses get waived, the majority if people rent, and now future buyers can’t easily qualify for conventional financing, and you’re back to an investor-only marketplace.

There’s no guarantee this will happen but would want to share a wall with a vacation rental? I wouldn’t and most of the owner-occupants won’t either. So you’re effectively asking to trade off short-term marginal revenue increases for long-term value loss.

@Linda Weygant - thanks for your feedback. Made me chuckle as we see the same renter-hatin' around here as well. Everything must be a renter issue, when that's not necessarily the truth. Your points on non-profit status are interesting and should be thought through. 

@Andrew Johnson - I don't totally agree. I think there's some appeal in having an Airbnb rental building for the younger set and for investors. I think some education goes a long way here. 

@Erin Spradlin You don't have to agree but you have to understand the perspective of owners that actually want to live in their units.  The ones that bought a condo as a residence not as a business.  That group hopefully represents 51%+ of the ownership.  If it doesn't, well, welcome to financing for non-warrantable condos.  You have to think down the road, if this takes off then you have two possible outcomes:

1.) You're right and the younger set and investors come into the complex to buy.  It's all good until the ground figures out that their mortgage rate is higher because it's a non-warrantable condo.  If the mortgage rate (relative to another condo) goes up, purchase price will go down.  It will also impact you (or others) when you go to refinance (you know investors love to pull cash out) and have to do that at a higher interest rate. 

2.) 49% of the owners start using AirBnb and you have 51% of the owner-occupants that now either a.) don't love getting new neighbors on a weekly basis or b.) they become resentful that they can't take advantage of the "opportunity" to AirBnb.  So let's say that group sells, well you can't appeal to investors anymore because you've maxed out the number of non-owner-occupant condos for the complex.  So you're back to then only being able to appeal to a subset of buyers that want to live with transient neighbors.  

Short term rentals are not in the best interest of the HOAs in general.  Some have restrictions how many units can be non-owner occupied at any time.

Also check with your city/county tax assessor.  There could be tax collection hurdles that would make it unappealing for the community.  You're better off looking for vacation communities that are built around this.  Many exist in places like Hawaii.

@Andrew Johnson - keep in mind though that we live in Denver (see above post) and have a primary residence rule- which means that your place has to be where you live to rent. That prevents investors from coming in and buying up. 

Also, the loan officer I spoke to about this said financing would not be impacted if it was your primary residence being Airbnb'ed.