Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
Does anyone on here do short term rentals in Duluth MN? What is has your experience been like? Do you have any property managers you can recommend? What are your 'seasons' like?
Investor · Duluth, MN · Member since 2017 · 52 posts · 83 votes
6y
Hey Amy - I'm late to the conversation but can probably add some additional useful information!
Vacation rentals in Duluth have a ton of potential in my opinion. I personally own 7 here - and as a company we manage 14 with 10 more in cue. There is a long winter, so the revenue is definitely seasonal. You can expect to get 1/3 in the winter months to that of the summer months. The net overall ROI for a quality property with some amenity (view, water access or proximity, etc) is about 2-3x that of long term rental rates. (plus you can use it in the off season - win!)
Every city has their own rules it seems - there were a few areas in the US that short term rentals had a massive impact on (pushing citizens completely out of areas) and that scared most city governments. Here is a rundown of the rules in Duluth:
R1-R2 neighborhoods are capped at 60 currently. As a planning commissioner for the city - its my opinion this isn't going to change. Increases have been proposed and shot down twice in the past few years.
Form Districts: There are 11 of these in the city and they are unlimited - but a maximum of 4 per structure. More than that, and it is considered a hotel and 24 hour staff is required.
Home Share Licenses: This is a separate classification but has some options. So if you owner occupy 1 unit in a duplex, or have 2 homes on a lot, you can vacation rental the other unit as a Home Share. This is unlimited as well.
Superior is unlimited - they are excited to have people staying over the bridge. Same goes for the other smaller cities around Duluth, except Duluth Township and Lakewood Township who both have their own governmental bodies and have instituted acreage requirements and permits.
Another lesser known ordinance - If you are not in a city or township that has a governmental body, St. Louis County requires a permit as well.
At Heirloom we do have a dedicated management team of 5 that handles bookings, guests and all aspects of cleaning, consumables and laundry. We don't advertise this service currently because the organic flow of new clients in this space have been plenty to keep us busy - and Covid kind of flipped this world over a bit.
Surprisingly - we are currently packed and are ahead of our pre-covid projected numbers for this summer. I guess - what else is there to do?!
Hope that helps, happy to connect if you need any more info!
Rental Property Investor · Portland, OR · Member since 2017 · 92 posts · 80 votes
6y
I've considered long term rental there before but not STR; although I'd be interested in an opportunity to go in on one, so I'm following this thread now.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
For long term duluth rentals search the bigger pockets podcast archives. I know there’s at least one guy I was going to look up but bought in the cities instead.
Does anyone on here do short term rentals in Duluth MN? What is has your experience been like? Do you have any property managers you can recommend? What are your 'seasons' like?
Our "Seasons", lol.
So, we have fall and that is the BIG tourist time for fall colors, that is about 2 maybe 4 weeks, depending on weather. Some years seems as if it's been 2-4 days.
Then we have the start of winter, pretty snow falls, it's so nice, for about a week.
Then we have "Holly Cr#p It's Cold" winter, this is where us Minnesotans do outside activities because we are attempting to convince ourselves that it's ok that we live in a giant blast freezer. This is about, 4-5 months of the year.
Then winter wraps up with a punch in the face, January comes and is moving into February and we can almost taste spring, and everyone is saying "oh dear God when will the sun come back out" and that's when God shows his humor, because now comes the Polar Vortex and it hit's -50, or worse, and -20 starts to feel almost warm.
Then spring, the best 7 days of the year, lol. But seriously, it feel like that because then we swing right into 90+ degree days at about 9,000% humidity. And then the bugs, oh so many bugs, mosquitos the size of taradactles, they actually wink at you as they are sucking you dry.
I joke, but as a born raised Minnesotan, it's more truth than fiction.
The thing to know is we have an extremely short tourist season, measured in days and weeks, so if doing anything tourism-based you gotta make sure it's a big bang during that time, because it will be a very small window of opportunity compared elsewhere.
If I were to invest in Duluth area I would look at more normalized year-round settings, and features.
Does anyone on here do short term rentals in Duluth MN? What is has your experience been like? Do you have any property managers you can recommend? What are your 'seasons' like?
So, look, I'm gonna say this as nicely as possible and of course to each their own: you can only invest every dollar once, you should invest it where you can make the absolute highest return, and that is certainly not Duluth Minnesota. And that is also why I don't invest in or near my hometown either. Because the highest ROI is about 1000 miles away from me where I own a number of properties that make a ton of money
I tend to buy in the Southern half of the US for 3 reasons:
1) you get much higher year-round occupancy rates in the South & it’s simply tough to earn a good ROI in the North if your place sits vacant for a big chunk of the year
2) Culturally, the Southern half of the US seems to be a lot more accepting of STRs regulation-wise. A lot of these southern beach & mountain towns have been supporting STR for 75+ years, long before Airbnb was a thing, so they're very comfortable with it and it's a built-in part of the community.
3) The Southern half of the US is more forgiving if your property is out of service for a couple months (a flood, property damage, coronavirus) bc you earn year-round revenue. People in the north can get really screwed if, for example, their property is out of service during the peak summer season when they would typically earn all of their revenue
A lot of Northern places are FREAKING OUT over STRs & STR regulations & they don’t seem to be very supportive of it. So, in the North, best case you’re fighting an uphill battle with a lot of uncertainty. Worst case, it gets outlawed in a town AFTER you’ve bought a place there & now you have to sell at a HUGE loss bc there’s no buyer demand once STR use is banned! I’ve seen it happen...
Anyway, there’s a great resource on the internet that shows the amazing numbers you can earn on STR down south. I used to post links to it as a courtesy to newbies bc it’s extremely helpful, but I’ve been asked by BP mods not to link to it any more (they thought I was getting paid a referral fee to recommend that data set but I wasn’t, I just recommended it bc it’s soooo helpful!). So you’ll have to google & try to find that data by yourself now.
Anyway, once you see the STR data on these various southern towns, you'll see that you simply can't get annual revenue, annual occupancy rates, annual net income, & annual ROI like this in the north
Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
6y
@Amy Ranae starting to look into it more. I have a few long term rentals currently but no short term. I don’t know of any companies who provide short term mgmt services and there’s a lot if restrictions from the city.
Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
6y
@James Hamling
Hahah James! I know about MN seasons, I live here too, just not up in Duluth. Was more interested in short term rental seasons, like you mentioned: fall colors, marathon weekend, etc.
Hahah James! I know about MN seasons, I live here too, just not up in Duluth. Was more interested in short term rental seasons, like you mentioned: fall colors, marathon weekend, etc.
Thanks for your insights:)
See, I think the seasons are longer than people are giving Duluth credit for. From January through March, Duluth hosts tons of hockey tournaments at the Heritage Center, the DECC, Mars Lakeview, etc. Obviously going to be a slower time, but not completely barren either. Spring break, is Duluth a top destination for most people? No, but for people on a budget, Duluth is a pretty affordable option.
Then you come to May, and you have a lot of families visiting for graduation weekends at St. Scholastica and UMD, plus Memorial Day weekend to kick off the summer season. June, July, August you'd be absolutely able to rent a place out every weekend. Events like Grandma's, Blues Fest, 4th of July fireworks, and more, you'd be able to probably charge a little more than normal.
Then September comes and you have move-in weekend for the colleges. In October the leaves start to change and people love coming to Duluth as a jumping off point to drive up the shore and take in the colors. You also have Homecoming and MEA weekends in there where Duluth gets busy again. November is likely to be a little slow, but starting with the Christmas City of the North Parade, Bentleyville opens up, and it gets busy again!
I think Duluth is probably one of the top short-term rental markets in Minnesota. The issue is working through the city's restrictions and finding a property manager. I'm starting this process myself, so if I come across anyone who does manage STR's, I'll be happy to refer them to you!
Superior, WI · Member since 2017 · 81 posts · 47 votes
6y
Try looking at the townships north and west of Duluth. there's opportunities there for STR's without the Duluth city council taking the hotel money to shut you down.
Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
6y
Valid point @@Kevin Mosier. The property I'm looking at is in a surrounding township, but I'm reading the ordinances on their website and it's not looking super friendly. From first review, it looks like you can have 1 short term rental per 30 day period, which would definitely not work for my budget. I have a call into their planning and zoning department for more info!
Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
6y
@Matt J. I'm completely on the same page with you! Just starting to explore the rules from the city. I think Duluth is a great destination, at least for Minnesotans but I think it has some events that draw year round visitors.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
I grew up in Duluth, so I'm curious about the answers here. I'd be kind of surprised if the hotel industry didn't quash the STR industry there. As a tourism town, the hotel industry would seem to run the STR housing situation.
Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
6y
@Anthony Wick
Both Duluth proper and Duluth twp responded to my inquiries quickly with a completely unclear answer to my questions haha!
It sounds like you basically need to get a conditional use permit in the twp, and they prefer 2 acres or more with 50’ setbacks.
The city looks like they have a cap on the permits which is perpetually filled.
This actually seems crazy to me. I read the minutes from one of the city planning meetings and it sounded like a bunch of grouchy old men: renters destroy everything...houses a stones throw away with make parties...we want community members to contribute, not transients....
To me, it seems like short term renters bring more money and commerce to an area, not less.
I followed up with the city and the twp width a few more questions. It sounds like if I’m planning to make this purchase I’ll need to be contingent on a conditional use permit approval. I’m bummed, but still going to look a bit further.
Real Estate Broker · Maple Grove, MN · Member since 2016 · 216 posts · 80 votes
6y
Ok just got off the phone with Duluth Twp. She said that unless you meet their VERY strict criteria, it's a hard no on a conditional use permit. Even if you get one, you have to renew every year so it's possible it would all go away and you'd be stuck with a house you can't short term rent.
Rental Property Investor · Duluth, MN · Member since 2020 · 7 posts · 14 votes
6y
Yea I'm not surprised by your findings. After living here for 15 years, it's really a small city trapped in a large town mentality. There are many progressive thinkers that are constantly working to make change but it takes a long time to shift public opinion. My business (not real estate) survives on tourism and I hope that will continue to grow, so thank you for working to create more accommodations for visitors.
It's interesting to hear about Duluth Township being so strict. I own land there and have been told it's much more relaxed with building permits compared to the City of Duluth.
Investor · Saint Paul, MN · Member since 2016 · 108 posts · 83 votes
6y
@Amy Ranae
We have a quadplex near one of the hospitals. We have considered renting furnished apartments month to month or doing 13 week rentals to travel nurses. There’s definitely and option for more spread with those models. However, we’ve just opted for yearlong leases at this point. The demand for housing really drops off in the winter time. It’s like night and day.
Minneapolis, MN · Member since 2017 · 35 posts · 18 votes
6y
We have a few college rentals in Duluth that do pretty well. We looked a lot into STR as we love the area and there really is potential for rental all year round. The city is likely to increase the number of STR licenses soon (check the news up there), however, they will probably go quickly as well. A lot of people want to be close to "canal park" area (enough to bike, walk, etc.) so I would be a little concerned about getting too far out from the city unless you get close to another attraction (Jay Cook State Park, Two Harbors, Gooseberry State Park, etc.). Superior, WI has some really well-priced homes and is much less strict on STR but unfortunately the "appeal" of Superior seems to be way less even though it is about 5 minutes from Duluth. Let me know if I can provide any further information as we have done a lot of research into this and like I said, we own a few properties up there. If you can find a nice place within 0.5 miles from UMD, that is another option as we have always had a TON of interest in our college rentals there. I heard they are really short on long-term rentals as well, so that's another option. Good luck.
Real Estate Broker · Saint Paul, MN · Member since 2013 · 21 posts · 18 votes
6y
I was pretty far along in a deal (property under contract) in a commercial form district before we had to back out. Go here to use the county's mapping service to find out where the form district properties are. There's a drop down menu in the top right, and go to Zoning and Land Use. Anything zoned from F-1 to F-7 has special rules that don't count towards the city's 60 STR rental licenses.
We were planning on putting 4 short term rental units in a larger building downtown and it would have been allowed. I worked with Chris Lee, a planner at the city, to confirm this.
As far as management, Heirloom Property Management has a dedicated short term rental manager. They've quoted me numbers for management fees and they have historical numbers for occupancy rates, etc.
Although the previous deal didn't work out, we recently purchased an 8-unit in Duluth's Lincoln Park, and it just so happens (not by coincidence) to be zoned F-5 which would allow STR's. It's a 1 block walk to Bent Paddle and all the other cool stuff in the neighborhood.
So, there is a workaround for STR's, but you've gotta know where to look. There are a couple of hoops to jump through at the city, but it is allowed in the right areas.