Originally posted by @Dave Van Horn:
@Julie McCoy
Thanks for commenting. I love the disruption as a traveler too! And good point about the contradiction, they are kinda speaking out of both sides of their mouth with that one.
The same goes for when the article states Airbnb's success encourages commercial users but then they also say they've "worked with several cities to write rules that crack down on commercial users who try to turn their secondary residences into ersatz hotel rooms." I was wondering what the investor's take should be on that....even in terms of a risk management point of view. I think in your case with the destination towns you're safe either way but if they crack down on commercial users who've bought for the purpose of Airbnb-ing, I could see that being a major issue.
Oh, it's certainly a major issue! And the primary one that keeps me out of urban markets. Researching the local legislation regarding STRs - both existing and potential - is probably THE biggest thing I advise people considering STRs to do. Before you even crunch the numbers, you want to know the potential obstacles in a given market. There are markets I won't even think about because I know the regulation is too unfavorable or too onerous to work around (e.g. Las Vegas). I do hope that eventually I will find a more urban market that I like - one that will be a solid LTR venture if/when the STR market there gets too regulated. However, that's some ways down the road for me at this point.
For what it's worth, I'm of the school of thought that some regulation is a good thing for the STR market. It means this new business model is legitimized by doing something as simple as paying tax to the local government. For my California house in particular, I LOVE that there's a tax I pay because it means the local government (which is a fairly rural area) is kept fat and happy by mine and others' contributions - they aren't going to WANT to hinder our business, because they profit from it! And I feel it also encourages an acceptable minimum standard for doing business. Sure, there are always going to be some bad actors out there, but the regulation allows those bad actors to be penalized and forced to improve or leave more easily than if it was just a free-for-all.
Finally, I also don't mind regulation designed to impede a large-scale commercialization of STRs. This may be somewhat hypocritical of me, as I'm clearly investing for commercial purposes and scaling my business, and where is the line between a small-scale investor and large-scale investor? However, for the AirBNB model in particular (and, less directly, vacation rentals in general) there's a big emphasis on the personal touch/live-like-a-local experience. If some REIT decided to go buy an apartment building and make most/all the units STRs because the margins are awesome, well, I feel like that really DOES introduce the issues the Atlantic article was addressing. And, it shifts that personal experience into something a lot more commercial like a hotel - which could be damaging to the industry as a whole.
To conclude, I don't view regulation as uniformly bad - in fact, I believe it can have a lot of benefits to investors as well as the general public (of course, this depends on the regulation!). However, it does need to be carefully considered before investing in a given area, and has successfully kept me out of urban areas thus far.
(thanks for bringing this to the forum, by the way - it's fun to see you over here in our little corner, I've had an eye on your company for awhile and I like the model you've created re: note funds)
