Investor · Pleasant Hill, CA · Member since 2017 · 37 posts · 5 votes
Does anyone know what it might take to be able to legally split a rental property to rent the completely separate In Law unit which is attached to the primary home? Even keep it open for Airbnb perhaps? I'm sure there a ton of laws and requirements on this but thought I'd ask.
Anybody doing this?
Thx!
Jared
@Colin Smith Absolutely. Whether it's in Colorado Springs or Denver, I tell any of my clients who are looking to buy a pure investment property for Airbnb to run the numbers as if it was going to be a long-term rental. If they work with that, then you know you have a backup plan should the laws change.
@Jared MontBlanc call your city or county (whichever you're in) and see what the property is zoned for. If it's zoned multi-family 2 or more you're good to go.
@Jared MontBlanc Before heading off to legally divide your spaces, check your local Airbnb laws. If renting a mother-in-law suite on a short-term basis is something you want to do, be sure you know how legally separating a space will affect it.
Here's a good example right here from Colorado. In Denver, you can only rent your primary residence on Airbnb, and you cannot rent an investment property. Just a few hours south in Colorado Springs, you can only rent an investment property on Airbnb but -- at least according to the planning department woman I spoke with -- can NOT rent out your primary residence. (I'm trying to confirm that now.)
My point is just that you don't want to go through the work of legally separating a mother-in-law suite if doing so would in fact prevent you from pursuing the rental model in which you're most interested.
@James Carlson I just received a mailing flyer in the mail from a Colorado Springs attorney office detailing AirBNB law in Colorado Springs. It stated that Personal Residence was all you could rent out on AirBNB for Co. Springs as well. I'm no legal expert though and it was just a flyer, but I have been reading a lot on the local push from the hotel associations to strictly enforce the AirBNB law. It states that you require a business license number as well which has to be on your posting. If you do not comply it is a $100 fine each time, but may escalate with each additional fine.
@Bryan Wilson Well, that's interesting. Would you mind taking a photo of that mailer and sending it to me? (My email is in my bio.) As I said above, I'm a little leery of what I've been told by the city of Colorado Springs. The one person my wife and business partner talked to was not super helpful.
@James Carlson Just try communicating with their zoning/planning division. :) I've been trying for a week and a half to get an answer from city of Colorado Springs on a house and cottage on the same lot with commercial (C5) zoning. Then they finally sent us a form to fill out that says it will take us a minimum of 7 days to get a response on rebuild/non-conforming zoning compliance.
thx for the inputs. It seems the Airbnb laws vary considerably by city. If you google the most friendly cities, you can see that some are better than others based on legislation. Its a constant battle, even in Tahoe where we have a vacation rental but needed a permit to do so and collect and pay tourist tax as well. The city is making a killing on the rentals, but it comes at the expense of community. I get it. In Walnut creek where I live, I'm currently getting $1200mth for the in-law unit, so can just rent it separately without Airbnb and then rent the primary if I can get it zoned properly for multifamily. I assume this may require fireproofing, possibly separate metering, etc. need to look into whether this makes sense or not.
@James Carlson unfortunately, I no longer have the flyer. This was a few weeks ago. I was incorrect in thinking it was a business license it is a sales tax license that is required. You have to collect and pay appropriate sales tax fees and list that license number in your AirBNB listing. You'll have to collect sales (2.5%) and lodging tax (2%) for any stay under 30 days. Although I believe AirBNB might be collecting and passing this through now.
Looking at the city website doesn't seem to mention primary residence, but seems like it is still a gray area. https://coloradosprings.gov/planning/page/dab-405-short-term-rentals
@Bryan Wilson Great info, thanks. I'll have to nail down the laws again, but the planning person I spoke with said explicitly that renting out your primary residence in Colorado Springs as an Airbnb-style short-term rental is not allowed but that renting out an investment property is allowed. That seems counterintuitive, but I will give another shout to the city and figure this out. The Airbnb bulletin put out by the city doesn't address the issue.
About taxes, Airbnb is collecting the taxes on behalf of hosts and remitting them to the city.
@James Carlson, I'm very interested in what you find out from the city of Colorado Springs. Could you please keep us up-to-date on the forum and let us know what the city has to say? Thanks!
I just got off the phone with someone in the planning department in Colorado Springs. As I have said in the past, unlike Denver, Colorado Springs does NOT have an Airbnb law. Because of that, I know of people who have bought a separate place down there and are Airbnbing it full-time with great results. BUT! In the parlance of business, I'd say Colorado Springs provides an "uncertain regulatory environment" when it comes to Airbnb and other short-term rentals.
The woman I spoke with said "technically, yes" (as if anything other than the technical law matters), you can rent out a home as a short-term rental. It does not have to be your primary residence, though you can do that.
You have to follow certain code requirements, such as :
you can't house more than five unrelated individuals at a time
you have to abide by all noise ordinances and parking ordinances
you cannot serve breakfast or else you fall under the B&B laws
To the question I would have and I imagine others have, Can you buy a property down there and rent it full-time? Right now, there's nothing stopping you. Could you buy a fourplex and do STRs in all of them. "Well, that doesn't seem right," the woman said. She said there is talk of passing some sort of ordinance, though nothing on the calendar at all to even begin discussions.
Big picture? Right now, you can do a lot in Colorado Springs. There's no law allowing short-term rentals but there's no law disallowing it either. It sounds like they are getting a few more complaints from neighborhood associations, so will this Wild West mentality come to an end? Maybe. I will be speaking to the planning director sometime this week and will host a happy hour event in the Springs on Monday to talk about what I know.
Thank you for the following up with us on this. I would imagine the city will eventually put regulations in place but like most new laws in this town, they are slow to get approved and something to be weary of for future airbnb investments.
@Colin Smith Absolutely. Whether it's in Colorado Springs or Denver, I tell any of my clients who are looking to buy a pure investment property for Airbnb to run the numbers as if it was going to be a long-term rental. If they work with that, then you know you have a backup plan should the laws change.
thx for the inputs. It seems the Airbnb laws vary considerably by city. If you google the most friendly cities, you can see that some are better than others based on legislation. Its a constant battle, even in Tahoe where we have a vacation rental but needed a permit to do so and collect and pay tourist tax as well. The city is making a killing on the rentals, but it comes at the expense of community. I get it. In Walnut creek where I live, I'm currently getting $1200mth for the in-law unit, so can just rent it separately without Airbnb and then rent the primary if I can get it zoned properly for multifamily. I assume this may require fireproofing, possibly separate metering, etc. need to look into whether this makes sense or not.
So, you're talking about a property in Walnut Creek? You can probably find the zoning rules online for the city/county. When I owned a condo in Davis, the city changed the rules about converting mother in law units and even garages, to allow them as rentals, because the housing shortage was severe for UCD students. So, who knows, maybe it's allowed.
Your tenants in the main house might not like having AirBnB guests in their backyard, though - unless you use them as your managers and/or give them an incentive or something like that.
What you might consider, is renting the entire property out, including the MIL unit to corporate housing, like housing for traveling nurses. It's been awhile since I looked into that, but if you do some googling, you should find the companies that rent properties for that purpose. I was approached at one point to rent one of the units I managed as corporate housing for traveling nurses. The owner and I decided not to do it, as we wanted to keep control over all tenants in the building because of the close proximity of tenants, etc. But, it might work out nicely for you, with the Kaiser facility there.