Home Share as a loop hole to STR Zoning limitations

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

2y

I know nothing of Virginia Beach and its rules. But I have some thoughts on the overall plan.

- what does underwriting show for return doing STR by room over the duration of your current orders?

- I have rented STR in the residents living space and never had any issues. However, I still look for own separate living space every time. Only if I can not find separate living areas do I consider an STR of a bedroom. STR of a bedroom (whether it includes own bathroom or not) has much lower rent point that separate living space. In summary higher vacancy and lower rent.
- what do you plan to do with the property when your orders are complete? Make it an LTR and manage from afar? Note even with a PM, you are still the asset manager. Residential RE is not passive even using a PM.
- if you plan to sell, have you calculated in 7% to 10% selling costs?
- have you considered long term rent by the room? I suspect a much lower vacancy that STE by room so the income may not be that significant.
- what happens if the rules do change? What is plan b?

My opinion is long term rent (LTR) by room is much more work than whole unit LTR STR is more work than LTR. You are combining the two.

good luck

0 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

Quote from @Darian McMillan:

Good Afternoon BP Traffic,

I am posting from San Diego right now. I am a military member with fresh orders to Norfolk. After looking around the area with my Fiance we discovered that the rental rate is very low. (~1.2$ / SQFT) in most neighborhoods. Additionally, there are no shortage of homes that are in disrepair. We were initially looking for a home that could serve in the midterm as a primary residence for myself and a LTR / MTR after my orders are completed in the area. We found it possible to do, but fairly unprofitable given the long term costs (flood insurance primarily). We had almost given up then..

We found a home just outside of Norfolk in Virginia Beach that has the ability to become a STR given its proximity to the Airport and Neighborhood. We never thought we would entertain STR's as a strategy due to the time cost. Additionally, Virginia Beach does not allow STR at this location due to zoning. This brings us to Home Share...

Our realtor, Chris, has advised us that Virginia Beach allows homeowners that live in a property to "Share" the property with what the market would call ST Renters. This strategy would allow me to live in one of the rooms of the property during my time in the area and execute an ABNB / VRBO / ETC. in the other rooms of the home. After crunching the numbers the property could very easily cash flow. This is where we need your input...

What do you know about Home Sharing? Do you know anything about Virginia Beach having any upcoming changes to this policy or STR rules in the future? What problems do you see that I might not be thinking about? and/or What other thoughts do you have? please let us know!

Thank you,

Elias and Darian

Just realize you are not investing but starting a new business career when you do homeshare or short term rentals unless you hire someone to do everything. But if you are living also in the property any issues they will go right to you for. Just realize this. This is the furthest thing from being passive and is more of running a business than investing.

7e investments53 Reviews

Website View Page

0 Reply

Sean HudginsPro Member

Real Estate Agent · Chesapeake Va · Member since 2019 · 150 posts · 100 votes

2y

@Darian McMillan , this strategy is definitely viable in VB and, honestly, in most areas, even in the strictest STR regions. I do have a couple of thoughts for you regarding the strategy.

Let's just assume you follow the STR Home Share method. Have you considered that if you purchase in VB (not in one of the STR zones), all the hard work you will have put into getting your ABNB/VRBO rating up to 5 stars will be thrown out the door when you PCS out of the area? Notionally, you are stationed here for three years, likely right about when you hit your groove. You will PCS to a new location (depending... I liked it here and was able to stay for three tours personally). Either way, as soon as you move out, you will need to pivot to a new strategy unless there are significant changes in STR rules, and I don't see that happening in the next four years. And that means that your efforts to perfect your business systems for STR home share will be useless.

Now Norfolk is less strict, and you could find something in that area that would be STR viable (watch out for the Aircraft Crash Zones). The flood insurance can be worked around depending on what area you are looking at; believe it or not, some of Norfolk does not need expensive flood insurance.

Beyond all of that, I do agree with others that starting a Home Share or any STR is a Business. You should also have a solid plan for deployments if you're on sea duty.

[email protected]757-844-8215

0 Reply

Jacob SloopBusiness Member

Rental Property Investor · Virginia Beach, VA · Member since 2020 · 274 posts · 111 votes

2y

@Darian McMillan

I’m a Virginia Beach investor , let’s chat sometime !

[email protected]757-235-0369

Jacob Sloop538 Reviews

Website View Page

0 Reply

Darian McMillan

OP

Member since 2023 · 5 posts · 0 votes

2y

Quote from @Dan H.:

I know nothing of Virginia Beach and its rules. But I have some thoughts on the overall plan.

- what does underwriting show for return doing STR by room over the duration of your current orders?

- I have rented STR in the residents living space and never had any issues. However, I still look for own separate living space every time. Only if I can not find separate living areas do I consider an STR of a bedroom. STR of a bedroom (whether it includes own bathroom or not) has much lower rent point that separate living space. In summary higher vacancy and lower rent.
- what do you plan to do with the property when your orders are complete? Make it an LTR and manage from afar? Note even with a PM, you are still the asset manager. Residential RE is not passive even using a PM.
- if you plan to sell, have you calculated in 7% to 10% selling costs?
- have you considered long term rent by the room? I suspect a much lower vacancy that STE by room so the income may not be that significant.
- what happens if the rules do change? What is plan b?

My opinion is long term rent (LTR) by room is much more work than whole unit LTR STR is more work than LTR. You are combining the two.

good luck

Not sure what you mean by "underwriting" in this context as I am New to this. I did an analysis using $4500 / Month at 15% Vacancy just now. That is given 3 rooms at 50$ a night which is the lowest in the area by Comps. Should My analysis be different than this?

I did look for other options where I can live in a sperate unit however. Most currently Marketed properties have Poor return for LTR given Rehab costs. The room I intend to stay in is a Full Room Over the Garage (FROG) leaving the remaining 3 Beds, 4 Full Baths, Kitchen, and Laundry in the downstairs. I am also entertaining STR Marketing the whole downstairs. MTR might also work out since the Navy has a few schools in the area with Military Members needing a place for 4-6 Months.

My plan is either to Sell and hope the ARV of 615k Holds for 27 months, A gamble. (Offer Price is set at 425K right now) OR to transition the property into a LTR as I exit the area. I think this is less likely as I can't imagine many folks being interested in having 5 Full Baths.

I have accounted for the selling costs. If the Market holds for 27 Months assuming I do nothing with the property but fix it and live in it. I should net ~27k in from equity based on ARV.

If the Rules change and Homeshare is eliminated then I will transition into a MTR / LTR Strategy. Vacancy is a higher risk in MTR but there is a higher premium (rental rate).

My ultimate desire here is to offset the forced cost of my displacement from San Diego to Virginia to Net 0 If I can while learning in the process. If I can make a profit then that is a bonus. Still Inherently better than renting myself.

Thank you for all of your questions and input!

Elias and Darian.

0 Reply

Darian McMillan

OP

Member since 2023 · 5 posts · 0 votes

2y

Quote from @Chris Seveney:

Quote from @Darian McMillan:

Good Afternoon BP Traffic,

I am posting from San Diego right now. I am a military member with fresh orders to Norfolk. After looking around the area with my Fiance we discovered that the rental rate is very low. (~1.2$ / SQFT) in most neighborhoods. Additionally, there are no shortage of homes that are in disrepair. We were initially looking for a home that could serve in the midterm as a primary residence for myself and a LTR / MTR after my orders are completed in the area. We found it possible to do, but fairly unprofitable given the long term costs (flood insurance primarily). We had almost given up then..

We found a home just outside of Norfolk in Virginia Beach that has the ability to become a STR given its proximity to the Airport and Neighborhood. We never thought we would entertain STR's as a strategy due to the time cost. Additionally, Virginia Beach does not allow STR at this location due to zoning. This brings us to Home Share...

Our realtor, Chris, has advised us that Virginia Beach allows homeowners that live in a property to "Share" the property with what the market would call ST Renters. This strategy would allow me to live in one of the rooms of the property during my time in the area and execute an ABNB / VRBO / ETC. in the other rooms of the home. After crunching the numbers the property could very easily cash flow. This is where we need your input...

What do you know about Home Sharing? Do you know anything about Virginia Beach having any upcoming changes to this policy or STR rules in the future? What problems do you see that I might not be thinking about? and/or What other thoughts do you have? please let us know!

Thank you,

Elias and Darian

Just realize you are not investing but starting a new business career when you do homeshare or short term rentals unless you hire someone to do everything. But if you are living also in the property any issues they will go right to you for. Just realize this. This is the furthest thing from being passive and is more of running a business than investing.

I intend to Hire a cleaning company. Otherwise I will manage the property and flex new business muscles. I have been W-2 for too Long and am hoping to develop. I appreciate the warning.

Given it is a business, Do you have any advice from that perspective?

0 Reply

Darian McMillan

OP

Member since 2023 · 5 posts · 0 votes

2y

Quote from @Sean Hudgins:

@Darian McMillan , this strategy is definitely viable in VB and, honestly, in most areas, even in the strictest STR regions. I do have a couple of thoughts for you regarding the strategy.

Let's just assume you follow the STR Home Share method. Have you considered that if you purchase in VB (not in one of the STR zones), all the hard work you will have put into getting your ABNB/VRBO rating up to 5 stars will be thrown out the door when you PCS out of the area? Notionally, you are stationed here for three years, likely right about when you hit your groove. You will PCS to a new location (depending... I liked it here and was able to stay for three tours personally). Either way, as soon as you move out, you will need to pivot to a new strategy unless there are significant changes in STR rules, and I don't see that happening in the next four years. And that means that your efforts to perfect your business systems for STR home share will be useless.

Now Norfolk is less strict, and you could find something in that area that would be STR viable (watch out for the Aircraft Crash Zones). The flood insurance can be worked around depending on what area you are looking at; believe it or not, some of Norfolk does not need expensive flood insurance.

Beyond all of that, I do agree with others that starting a Home Share or any STR is a Business. You should also have a solid plan for deployments if you're on sea duty.

I have not considered until I read this the ABNB or VRBO rating. I have only ever been focused on the grind to make this property highly selected. I know nothing of what that takes however I will start looking into that.

Insofar as getting to a 5 star rating and then "throwing it out the door". I personally think the value of learning how to get a property that 5 star rating is more important than any particular properties 5 star rating. Right now I know nothing and I need a place to stay in the area. I hope that my biggest problem in 27 months is having to sell something that is making a lot of money. Otherwise thinking a transition to LTR for the property or sale for ARV.

Norfolk is much less strict. We did see a few STR Viable spots however the homes either required a large cost prohibitive renovation in the short to mid term (I don't want to spend any of my Cash right now, Given economic conditions) OR They were in area's that were undesirable for renters and my Spouse to live.

I will be on a "Shore" tour so I will be here for 27 Months and the Least with minor travel.

Thank you for your Reply Sean!

0 Reply

Darian McMillan

OP

Member since 2023 · 5 posts · 0 votes

2y

Quote from @Jacob Sloop:

@Darian McMillan

I’m a Virginia Beach investor , let’s chat sometime !

I added you as a connection. Stay in touch!

Merry Christmas!

0 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

2y

Quote from @Darian McMillan:

Quote from @Dan H.:

I know nothing of Virginia Beach and its rules. But I have some thoughts on the overall plan.

- what does underwriting show for return doing STR by room over the duration of your current orders?

- I have rented STR in the residents living space and never had any issues. However, I still look for own separate living space every time. Only if I can not find separate living areas do I consider an STR of a bedroom. STR of a bedroom (whether it includes own bathroom or not) has much lower rent point that separate living space. In summary higher vacancy and lower rent.
- what do you plan to do with the property when your orders are complete? Make it an LTR and manage from afar? Note even with a PM, you are still the asset manager. Residential RE is not passive even using a PM.
- if you plan to sell, have you calculated in 7% to 10% selling costs?
- have you considered long term rent by the room? I suspect a much lower vacancy that STE by room so the income may not be that significant.
- what happens if the rules do change? What is plan b?

My opinion is long term rent (LTR) by room is much more work than whole unit LTR STR is more work than LTR. You are combining the two.

good luck

Not sure what you mean by "underwriting" in this context as I am New to this. I did an analysis using $4500 / Month at 15% Vacancy just now. That is given 3 rooms at 50$ a night which is the lowest in the area by Comps. Should My analysis be different than this?

I did look for other options where I can live in a sperate unit however. Most currently Marketed properties have Poor return for LTR given Rehab costs. The room I intend to stay in is a Full Room Over the Garage (FROG) leaving the remaining 3 Beds, 4 Full Baths, Kitchen, and Laundry in the downstairs. I am also entertaining STR Marketing the whole downstairs. MTR might also work out since the Navy has a few schools in the area with Military Members needing a place for 4-6 Months.

My plan is either to Sell and hope the ARV of 615k Holds for 27 months, A gamble. (Offer Price is set at 425K right now) OR to transition the property into a LTR as I exit the area. I think this is less likely as I can't imagine many folks being interested in having 5 Full Baths.

I have accounted for the selling costs. If the Market holds for 27 Months assuming I do nothing with the property but fix it and live in it. I should net ~27k in from equity based on ARV.

If the Rules change and Homeshare is eliminated then I will transition into a MTR / LTR Strategy. Vacancy is a higher risk in MTR but there is a higher premium (rental rate).

My ultimate desire here is to offset the forced cost of my displacement from San Diego to Virginia to Net 0 If I can while learning in the process. If I can make a profit then that is a bonus. Still Inherently better than renting myself.

Thank you for all of your questions and input!

Elias and Darian.

>15% Vacancy just now.

I have 4 STRs/MTRs in San Diego. Only one had vacancy as low or lower that 15%. That one has been an STR for many years, is ~100’ from the beach, and is a whole unit rental. My 2 newer (~1.5 years) whole unit STRs had occupancy just under 50%. I suspect 15% vacancy rate is far too low when trying STR by the room. I would be surprised f you get as high as 50% occupancy.

for $425k purchase, what is the cost to obtain the $615k ARV and what is the amount of time it will take? Do you have quotes from a contractor (preferably more than 1 well vetted, recommended contractor)? My concern is that the current RE market is very competitive. In my market, this means that MLS rehab value adds do not have much margin of profit. I do not do rehabs unless it adds value at least 2x the cost of rehab and these are very difficult to find on the MLS in my market. My last 4 purchases have all been off market purchases.

Rehabs are work and have risk. Be certain to account for both of these in your underwriting.

good luck

0 Reply

Home Share as a loop hole to STR Zoning limitations - Virginia Beach.

Home Share as a loop hole to STR Zoning limitations - Virginia Beach.

9 Replies