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!
Cheers!
Yes, I second the recommendation for Heirloom in Duluth. They're very professionally managed and have good historical numbers to help you analyze a deal. @Michael Schraepfer is your guy to start the conversation.
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!
Cheers!
Hey Mike, I meant to ask this on our call, but if you were to pick up a place in a form district, or in Superior or any town that doesn't have a cap on STRs, how do you finance it? For example if I picked up a fixer-upper, could I use hard money or a construction loan then refinance it to a 30-year investment property loan, similar to a traditional single family or multi-family place?
Thanks for sharing all that information; you're a wealth of knowledge!
@Matt J. Hey! It was fun to connect the other day! Yea from my experience the banks really don't discern what type of rental it is. I do have a modified monthly pro-forma for STR's that breaks out essentially weekly and weekend rates with different occupancy in peak season and off season to arrive at a gross annual income. I've used this when getting financing but I'm not sure if they really looked that close. From what I gather income is income from the banks perspective and STR doesn't matter that much. Actually, I've seen 2 multi-family appraisals get bumped up higher because of higher rents due to an STR. The appraiser didn't seem to discount the income source at all.
I would just treat the STR deal like any other when it comes to financing. I'm curious if you hear different - let me know what you experience!
@Michael Schraepfer thanks so much for that, definitely gives me a better idea on how to go about this. I'll keep you posted as I go along!
The STR conversation is heating back up.
https://www.duluthnewstribune....
Our property makes a cameo appearance in the 2nd half of the article with a very flattering picture as well. If you're planning on a short term rental in Duluth, the rules might be changing soon.
Hey Eric,
Funny, I just read that article again. I'm always curious if there is any data that shows short term rentals create more issues for the city and neighbors. We have stayed in many STRs throughout the US and they always seem to be very well maintained. I'd think people would be more concerned by college rentals in Duluth. I do understand the need for affordable housing in Duluth, but I'm amazed at the resistance to STRs in Duluth since its economy is so driven by tourism. Good luck!!
Hey Eric,
Funny, I just read that article again. I'm always curious if there is any data that shows short term rentals create more issues for the city and neighbors. We have stayed in many STRs throughout the US and they always seem to be very well maintained. I'd think people would be more concerned by college rentals in Duluth. I do understand the need for affordable housing in Duluth, but I'm amazed at the resistance to STRs in Duluth since its economy is so driven by tourism. Good luck!!
I doubt there's much data. The real reason, that they won't outwardly admit, is that the hotel owners have HUGE sway over what the city council decides to do. More STRs mean more competition for the hotel owners, who can charge exorbitant prices with the status quo. There's been concern about the college rentals near campus, but that's an issue that probably won't go away and the city has more or less resigned to that fact.
Hey guys!
Ha, what a subject. So actually there is data! There has not been a police call or citation issued to a vacation rental yet in Duluth Police's to date. It's a great talking point though for councilors who want to get some bandwidth in supporting their voters. Neighbors always worry about a new vacation rental next door and the councilors have to lather up about it or they will seem unconcerned. There have literally been reports to the lack of police calls. There also have been zero vacation licenses revoked after issue because of issuing complaints from concerned neighbors - none and that has been reported. The last talking point they like to drum is the impact on our affordable housing stock - which several planning commissioners have asked for data to support as logically by their nature vacation rentals not be in the affordable long term rental category.
At the end of the day, with any change - neighbors will almost always have a "NIMBY" approach as its known. "Not In My Back Yard" is the acronym. Neighbors will say they like it, but my neighborhood is different. If councilors don't lather up, regardless how baseless the issue they won't get reelected. Drives me crazy.