How to Navigate Local Laws and Regulations for Short-Term Rentals

The rise in popularity of Airbnb and Vrbo has increased demand for short-term rentals. What’s even more surprising is that the potential annual income of rental property investments like a room or apartment has become enticingly high. Thus, one great way to earn passive real estate income is to run a short-term rental business.

However, just like any other business, short-term rentals are subject to numerous laws and regulations. But what are they, and how can you navigate through them? Let’s gain a deeper understanding of what a short-term rental is and the laws and regulations that adhere to it.

Short-Term Rental: What Does it Entail?

To accommodate visitors for shorter stays, private homes are often classified as short-term rentals (STR). The term "short-term rental" is commonly used to describe renting a fully furnished apartment for a brief period of time. Houses, apartments, condos, and even rooms can all fall under the STR umbrella, as long as the renter’s stay does not get past 6 months.

Renting out one's second or vacation home is a common way for its owners to make money while they're away. Passive real estate income, marketing digitization (via platforms like Airbnb), overall flexibility, and tax benefits all factor into homeowners' decisions to pursue short-term rental strategies. If the landlord wants to use the property for personal use, a short-term rental is more preferable than acquiring long-term rental agreements.

Experts from techvestor.com stated that the rules governing short-term rentals can vary by nation, region, and even city. The following are examples of possible STR regulations:

• Necessary licensing/registration steps

• Zoning and permit regulations

• local government communication include things like guest count and booking duration

• Legal mandates for worker safety

• Yearly nightly rental caps

• Requirements for Permanent Residence

• Vacation rentals may have occupancy limits

Missing even just one requirement could hurt your business, and even worse, you could find yourself in the middle of an unwanted lawsuit. With all of these in mind, when it comes to your rental property investment regulations and laws, how could you easily keep up?

Navigate Local Laws and Regulations for Short-Term Rentals

The last thing you want for your short-term rental property investment is for it to fail. But have you ever thought of it giving you a lot of headaches because of lawsuits and fines? While this scenario is relatively rare, it is best that you know how to work around it.

Here are some things you can do to familiarize yourself with and navigate local laws and regulations for your short-term rental.

1. Know the Kind of Short-Term Rental You Have

The concept of short-term rentals may appear simple, but in practice, there are a few more moving parts to consider. Your temporary housing options will typically fall into two categories: building type and duration of stay.

What constitutes a short-term rental's typical structure? This is not consistent across the 50 states, much less with all the cities around the globe. In some states, it could be classified as a furnished residence, housing complex, or other dwelling rented to the transient, traveling, or vacationing public. Meanwhile, some areas classify it as any rental property that has at most six rooms.

On the other hand, the duration of stay that determines if your rental property investment is short-term or not also depends on the location of the property. Some states categorize a short-term rental as a property that is leased out more than three times in a calendar year for stays of less than a month. Some states, such as Washington, define it as a home or portion of a home rented out for less than 30 nights at a time.

Clearly, knowing the kind of short-term rental property you have is important, as you’ll need it when filling out registration forms, etc. However, the structure and duration of the stay vary depending on local laws. Thus, it is best to know how short-term rentals are defined in your area.

2. Ask A Ton of Questions

Asking a lot of questions helps you understand how to work around local laws and regulations that apply to your short-term rental property. It is important that you know and cover all bases so that when problems arise, you will not be caught empty-handed.

In spite of assurances to the contrary, keep probing for answers, even if they claim there are no guidelines. You should be aware of the upcoming regulatory climate, including any rules that pertain to short-term rentals despite their apparent lack of such characteristics.

3. Make Sure to Get Complete Business License

The state will know you are operating a short-term rental business and that your home meets minimum health and safety standards if you have a license or permit. There are two types of permits that may be required before you can rent a property: a general business license and a specific business license (in this case, a short-term business license).

4. Maintain Property Safety at All Costs

In most cases, the short-term rental application process will require you to attest that the house is not only in compliance with health and safety regulations but also with building codes. You'll also have to prove that your nearby neighbors are aware that you're renting and that you're in compliance with zoning laws.

After proving that your property is safe to open for business and for people to stay there, local governments will usually award you with permits and certificates. Normally, these certificates must be posted in the property’s lobby.

However, it doesn’t stop there. After your opening, you must still ensure that your property is generally safe so that you can avoid being sued for not maintaining your short-term rental property. For instance, make sure that the fire exits and detectors work. You should also replace your fire extinguishers every few years, depending on your local regulations.

Conclusion

Managing a short-term rental property is no easy task. However, knowing the local laws and regulations and understanding how to navigate through them will help you do so.

Guest Contributor: Daniel Martin