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3 tips for navigating the expanding short-term rental real estate niche

By March 6, 2015 One Comment

There is a movement across America in city governance, municipalities, townships, homeowners’ associations, condo associations — in fact, anywhere that can impose legislation and regulation — and it’s growing. This expansion impacts second-home buyers everywhere, and it’s something real estate professionals need to understand.

The short-term rental market is no longer the domain of popular vacation destinations. In fact, the number of properties being made available for rentals of less than 30 days has increased in cities, towns and communities across the country during the past five years.

So, when Warren Buffet recently endorsed monster listing site Airbnb by suggesting that attendees at the company’s annual meeting stay in apartments rather than hotels, that demand sparked a flurry of new listings.

This highlights a concern in many areas — that the expansion in this market is contributing to a housing shortage, because there is the potential that units traditionally rented long-term may be turned over to this more lucrative income stream.

It also generates arguments between residents who want to maintain a sense of community on one side and owners who want the right to create income from their properties on the other.

Cities such as New York and San Francisco have been entangled in legalities over short-term rentals for years, with the office of New York’s attorney general releasing a report in October 2014 that laid out the issues. Airbnb In the City outlines the impact of this growth in private short-term rentals and the impact on the residential housing supply, and it makes for interesting reading:

“In 2013, over 4,600 unique units were each booked as private short-term rentals for three months of the year or more. Of these, nearly 2,000 units were each booked as private short-term rentals on Airbnb for at least 182 days — or half the year. While generating $72.4 million in revenue for hosts, this rendered the units largely unavailable for use by long-term residents.”

Other cities are working on licensing and permits for the industry, including Chicago, Nashville, Portland, Savannah and smaller communities such as Palo Alto, California; Moses Lake, Washington; and Lake George, New York. As the industry grows, this trend toward regulating will be felt in every area, so it’s worth acquiring a solid understanding of what’s happening where you sell.

The Short Term Rental Advocacy Centre website is a useful resource for current information.

So what does all this mean for Realtors?

1. There will be more investors coming into every real estate market who want to know about short-term rental potential. They want information about expected occupancy, rates, guest expectations and property management options.

2. Your knowledge of current and pending rental legislation will be crucial to their buying decisions. This means knowing what areas permit rentals, any licensing and permit requirements, specific community restrictions, and zoning limitation that may be buried deep in by-laws (and could be applied at any time).

3. Investors in this type of property are typically multi-property purchasers, so landing a great deal on the first property purchase means they will come back to you for the next … and the next.

From an investor’s viewpoint, working with a Realtor who really knows the short-term rental market has huge benefits, so doing the research to understand this niche market is worthwhile.

Heather Bayer is a vacation home investor and the co-founder of

Email Heather Bayer.

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