As the popularity of STR’s (Short Term Rentals) continues to increase, homeowners that have extra rooms or do not occupy their home full-time are wondering if this may be an untapped source of income. Airbnb, VRBO, Turnkey, Oasis and others have answered that question with a YES in bold letters. Their growth has been impressive. While these provide a good revenue stream and provide an alternative to hotels, some neighbors worry about the inevitable change that comes with constantly changing short term tenants that do not have an investment in the community. Is there a balance that can be achieved that maintains the character of a neighborhood where families feel comfortable yet allows owners to use their property as they see fit? The short term rental dimension of a community may also factor into a real estate purchase. Is there a balance? Continue reading.
Of all the restrictions that could affect a property, start with the home owners association. Any restrictions or will be spelled out in the Conditions, Covenants and Restrictions (CC&R’s) document or by-laws. In an effort to maintain a sense of community and restrict the constant flow of visitors that have no investment in the community, some HOA’s have incorporated language into the Bylaws and CC&R’s regarding short term rentals. I’ve reviewed many CC&R’s that stipulate a minimum rental period no shorter than one (1) month. When purchasing a property, a phone call to the HOA’s property manager would be time well spent if you plan on being a landlord. Describe to me your dream home!
Insurance Policy Considerations
Next, be aware that your standard owner occupied homeowner’s insurance will NOT cover short term rental situations. In fact, it excludes them. A Dwelling Fire policy is intended to cover non-owner properties where a tenant occupies the property 6 months or longer. Some companies will provide a modified Dwelling Fire policy for rentals shorter than 6 months. Many companies will not cover short term rentals. Do your homework.
Cities are exploring different ways to deal with short term rentals as their success continues and property owners find their neighborhoods changing. One city in California opted to requires licenses and subsequently limit the number of licenses as a means to regulate short term rentals. A city in Minnesota in 2017 adopted zoning and license ordinances to effectively regulate short term rentals and define a short term rental as a house, apartment, bedroom, or even couch rented for less than 30 days. Los Angeles is considering a bill that would cap the number of days an owner could rent their house to no more than 120 days. To exceed the 120 day limit, all neighbors within 100 feet would have to give their approval. Cities and town councils can adjust ordinances and regulations within a short period of time so what is legal today may not be in 6 months.
The concern for cities and towns is the commercialization of short-term rentals in residential dwellings and residential neighborhoods has the potential to reduce availability of long-term housing for owners and long term tenants. Municipalities are finding themselves at the intersection of property owners exercising their right to use their property as they wish and the collective good of the neighborhood. Feel free to leave your comments below.
Phoenix has a variety of real estate options; from waterfront to golf course homes and basements to horse property. Let me know what type of property you’re looking for by clicking on send me property listings. Be sure to describe in detail what gets you excited. When you want to know the value of your home, click on What’s My Home Worth?