Can I List My Condo on Airbnb?

Posted by Brian Enright on Thursday, March 7th, 2019 at 12:24pm.

 

One of the most common questions we are asked is whether or not a condo is able to be used as a short term rental, for AirBnb. AirBnb can be a great investment opportunity but so can more stable long term investments

If you decide that AirBnb is for you, the path forward isn't always simple. You'll likely deal with competitors, opposition from community organizations that have an interest in exclusivity, long-term tenancy or other factors. The positives are, you will have support from companies like Airbnb and HomeAway that facilitate the brokerage of short term rentals (STRs), if you learn their systems. Real estate brokers, hotels, home-owners' associations, management companies, state governments, insurance companies, zoning boards — everybody seems to have an interest in short term rentals in 2019.

Our goal in this article is to present multiple sides of this complex question. When you're checking links, remember that some sources may have an economic interest in persuading you to pursue either traditional real estate investing or vacation rentals. In any case, here's a quick summary before you dive in: 

  • People use similar data to support opposing views.
  • Short-term rental websites all have their own rules.
  • Traditional residential rentals can often make a solid ROI.
  • Agents are great sources of information, bound by ethics.
  • Some high-end condo properties have their own STR programs.
  • Running an STR is a hospitality venture; running a traditional rental is property management.
  • Condo association decisions, new local ordinances, and changes in state law may all affect your rights to rent.
  • STRs can make big returns.

Lucky for you, we were able to speak with some of the brightest condo specialists across the country to learn more, first hand information on the subject. What we found is that condo associations tend to reduce liability by prohibiting Airbnb investment — but there are some big exceptions.

Denver

The mile-high city is a bit of a wild west in terms of STRs. It's basically illegal to do short term rentals in Colorado Markets like Denver, Boulder or Aurora counties unless it's your primary residence. Most developments in the city write a one-month minimum for rentals into their bylaws. However, if you check on AirBnb for rentals in Denver, you'll find plenty.  So apparently some residents think the income is worth the risk of getting caught. 

Cleveland

The city that contains what's arguably Ohio's hottest real estate market is none too friendly to Airbnb investment. Only a select handful of condo properties in downtown Cleveland officially allow less than a six-month rental period.

Chicago

Most high-end, exclusive Loop buildings have strict rental guidelines. If you're interested in investing in a STR in the Windy City, you may want to look at Trump Tower or Raffaello Hotel Towers downtown.

Las Vegas, NV

Las Vegas is the perfect condo market for AirBNB buyers.  Because tourism is such a big part of the economy there are plenty of buildings that will allow nightly rentals, commonly referred to as "Condotels". The Signature MGM, Turnberry Place, Vdara and Palms Place are just a few of the buildings where you can own a condo for your personal use, and then rent it out nightly when you're away. The only issue with these building is that because they do operate as hotels it can be tough to secure financing, so you may have to use cash or a hard money loan to purchase one.  Our LV condo expert Bill Zinsser can fill you in on all the details.

Kansas City, MO

You may want to think twice about investing in an STR condo in KC if you're worried about association action. The attitude of most HOAs is not currently favorable. On the other hand, laws allowing the registration of STRs may indicate a change in the tide of opinion.

St. Louis

Similar to Kansas City, St. Louis is considering registration of short term rentals. Also, most buildings only allow long-term rentals in their bylaws — failing to follow the rules could put owners in conflict with the association.

Austin

Some Austin downtown condo properties, such as the Railyard, do allow Airbnb investment. However, there's often significant competition by investors over units when they come up for sale.  The rest of the buildings forbid it but when big festivals like SXSW and ACL are in full swing some owners have a hard time resisting the big payday their condo can bring.  But it's important to note that many HOA's monitor AirBNB for condos in their buildings, and if you're caught the penalties can be steep.

Houston

Most Houston condos have the similar boilerplate documentation restricting STRs as associations across the state and the country. A notable exception is Herrin Lofts near the downtown and EaDo neighborhoods, which carries extra insurance and documents Airbnb stays.

Dallas

Dallas is very restrictive when it comes to Airbnb regulations. However, you can see that there are definitely homes available when you check the city's listings on short-term rental sites.

Portland, OR

You could potentially stay within regulations if you aim for longer-term vacation rental condos in the Portland market. Here are some buildings that have seven-day rental minimums: 

Nashville

Nashville is showing some progressive development. The hot, upcoming Contralto condo tower allows owners to apply for a special type of Airbnb investment permit, making it one of the safer places to do STRs in the city.

Learning the Ropes

You've heard the success stories but the first thing you should know is that Airbnb wealth doesn't just happen. You'll have to do your homework first, researching the properties' prospective performance, the local regulatory atmosphere and the current outlook on short-term rentals.

The work doesn't stop there. At their core, these STRs are hospitality businesses. You'll probably have to do some of the guest-facing work yourself — that's a pretty big step, even if you have an extensive property management background.

The other option is to hand the hospitality side off to someone competent and reliable enough to interact with guests, deal with bookings and handle issues. Unlike rental property management companies, which is a bit of a niche market. 

Using the Social System

There's good news, too. People who do STRs right often see huge returns. The social systems that structure the online rental giants tend to create positive feedback loops. If you make a couple of guests happy, you get good reviews. Those reviews get other guests interested, bumping you up in the rankings. Eventually, you may even land on the front page for your city. If you can manage to stay focused on creating the best possible experience for your guests, you could really start to see some stellar ROI.

Listening to Your Agent 

Keep in mind that no licensed agents should ever recommend that you buy a property for a use that goes counter to laws, regulations or HOA bylaws. In the worst-case scenario, from an agent's perspective, advising clients to buy condo units for Airbnb investment in an anti-STR environment could lead to charges of fraud or deceptive business practices. You as a client could also get fined or sued in some cities — something that could reflect poorly on the agency. 

Most agents would advise you to go for fee-simple property instead of condo, and that counsel could be worth considering in many cases. It often solves the basic problem you're likely to face, especially with luxury high-rises: Everyone has to agree on how to use the property. You may still run into issues with local ordinance in a fee-simple townhome, but the restrictions are unlikely to be as strict as in a private condo. These uses are written into the HOA bylaws, and some of your ownership rights may depend on following all the rules.

Don't assume you're buying into boilerplate condo rules. Before you put wet ink on a contract, it is important that you and your agent examine all of the owner's materials from the HOA and it can't hurt to get a feeling for the building by speaking to some of the other owners or board members.

Looking for New Opportunities

Developers understand that people want units in hot downtown areas that they can rent out to short-term renters. In fact, as you may have noticed above, some cities have exciting new projects coming up that are set up for STR from the drawing board. However, with the higher insurance overhead and niche market premiums, your ROI for these official Airbnb investment units could end up being close to a standard investment property. 

Examining Your Goals 

What's your motivation for wanting to get into the Airbnb rental business? If you're looking for fast cash, you are probably going to be disappointed by the complexities of the process, learning the Airbnb system and keeping up constantly with relevant rules.

Are you a hybrid or traditional investor? Use this simple fallback: Buy into a building without a rental cap. That way, you can pivot to traditional leasing if it turns out that you don't really want to deal with the business environment that is the online STR game.

Identifying Real Opportunities

There is one way in which Airbnb can usually work out really well from an investment perspective, and that's covering the holding costs for your real estate portfolio. If that piques your interest, you probably fall into one of a few categories:

  • People with family property that nobody uses regularly
  • Nomads who spend a lot of time away from their primary residences
  • Travelers with family or business in multiple cities
  • Investors with sudden increases in liquidity 

Short-term rentals with relatively high per-diem rates can add up quickly. Even weekly or monthly rentals have slightly higher prices and slightly lower overhead. This revenue stream could offset any mortgage costs you may have, along with assessments and taxes for a condo investment. If you'll be away from your property during the times that people like to visit, even better. For high-risk investors, the freedom to liquidate at any time is also a major benefit.

Taking Your First Steps

When you've decided that Airbnb investment is a good fit for you, approach the process systematically. Here's a checklist of things you can do to prepare for success.

1. Learning the Booking System: Just like any other investment, you'll be able to perform a lot better if you know the system. How do you make your property available? How do you handle guest cancellation requests? What type of profile photos do users find most professional? How does the booking company handle regulations in the area where you're purchasing? When do you get paid for a reservation? 

2. Checking the Potential Performance of Your Property:You wouldn't skip the comparative value assessment when you're buying your property, so don't ignore research for your rental enterprise. Go beyond monthly rents in your target area. Use an analysis tool for short-term rentals. There are plenty of them online, most will give you a small amount of information and then give you a full report once you subscribe to their services. It's usually worth getting detailed analytics that could inform a major purchase. Pay a special level of attention to occupancy rates, hot times of year and, of course, the average daily rate for comparable units.

3. Gathering Advisors: It's a fact - There are a lot of rules they could affect the profitability of your Airbnb investment condo. Get some reliable professionals to weigh in on the legal issues, the insurance requirements and the property that you're considering. Bonus points if you can find real estate attorneys who are willing to keep you updated about relevant changes in the law. Your agent might even provide you with a referral.

4. Visiting Your Prospective Units as a Guest: Time to get down to the familiar real estate buying process. Most of your guests will probably be coming from out of town. Some of them may even want to use public transportation to get to your unit. Use a combination of in-person visits and transit mapping to get a holistic idea of the start-to-finish guest experience that's already built into your property. Ease of access could be just as important as how you decorate or deal with your guests.

5. Crafting your listing: Once you've signed on your property, it's time to create a listing that will give your unit a real advantage in the marketplace. One of the best ways to do this is with quality photos. If you don't know a professional photographer in your city, your real estate agent may be a great resource. Realtors often work with specialized property photographers who will be able to depict your unit in a favorable light for a reasonable cost.

Getting Updated Information

Airbnb is one of the most tenacious members of the sharing economy movement. If you are a true disruptor, you can probably take advantage of some favorable regulations in even the toughest Airbnb investment environments. Please browse the condo listing directory for ideas, and feel free to reach out to an agent once you've identified your target market.

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