Podcast 057 - What are the best cities for VRBOs?

Question

I just got done listening to the podcast with Matt Landau on vacation rentals.  It was filled with a lot of awesome information that was very helpful.  I wanted to start up a discussion on what cities are good to invest in and why?

I've actually been considering a vacation rental for a while now so this podcast was perfect timing!

I'll kick off the discussion with my top prospect so far:

Marco Island, FL

I like Marco Island because it's an upscale destination spot that can be visited year round.  A lot of vacation towns are seasonal, so competition out of season appears to heat up quite a bit which means higher vacancy and lower income for 50-75% of the year.  I checked out several rentals in Marco Island on VRBO.com and they seem to stay rented out well in advance pretty much year round.

I'd love to see what cities others are investing in or considering investing in and why.  If you recommend a city outside of the US, can you also comment on the financing environment in that locale and how difficult it would be for a US investor to make a purchase there?

Jose Maria Gomez · Answer

like Marco Island because it's an upscale destination spot that can be visited year round. A lot of vacation towns are seasonal, so competition out of season appears to heat up quite a bit which means higher vacancy

Evan R. · Answer

@Kevin Dickson an interesting aspect of the AirBnB Portland deal is the new AirBnB office in Portland.

On the 14th, word broke that AirBnB is hiring 160 employes for customer service and support for their 27,000 square foot office downtown. Link to article in the Oregonian.

While they aren't getting any incentives to locate in PDX, it comes on the heals of their 'sharing city' initiative.

Evan R. · Answer

I just got off the phone with a code enforcement office in Spoken, a city that's been "cracking down" on vacation rentals.

So far the complaints have been initiated by neighbors and registered BnB owners filling complaints with the code violations office. The city investigates, and sends notices to the airbnb hosts. The notices say that the planning department is reviewing the law around short term rentals, and there will be no enforcement until August.

Jon Klaus · Answer

I've used AirBnB for a few overnight stays in Austin.  In talking to the hosts, I learned occupancy can be very high there.  As high as 80%, if the location is close to down town.

David Rivera · Answer

The Washington Post recently published an article, where Airbnb suggests  Airbnb visitors tend to spend more money and at local businesses than hotel visitors.

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/03/25/why-airbnb-wants-you-to-know-how-much-its-users-are-spending/

Joe Sillaman · Answer

Should I mention Hawaii as a awesome vacation rental destination! I own and operate one and have never had to worry about not getting guests or making a healthy net profit. It is a higher entrance cost but well worth it!

Kevin Dickson · Answer

Well it looks like the money-taking will happen sooner than later.

Portland is teaming with Airbnb to encourage hosts to pay an 11.5% tax.

https://medium.com/life-learning/db9746750a3a

Sharing is the essence of a city and it's original raison d'etre.  So prohibiting short term rentals is out of the question.  The question is should the hosts be paying a city lodging tax.

Kevin Dickson · Answer

@Evan R. ,  thanks for  a great article.  I think it's pretty obvious that the current "best practice" for this industry is stealth mode.  Prevent parties, bad behavior, and work hard to keep neighbors happy.  I guarantee the average city  zoning enforcer isn't on the lookout for this stuff yet, and when they do get involved, it will be mainly to take money from the entrepreneurs.

Evan R. · Answer

@Kevin Dickson I was just commenting about the legal murkiness of Vacation Rentals in another thread.

In Monterey county, an ordinance approved by the board of supervisors allowing for vacation rentals in unincorporated communities was shown to not have been certified by the California Costal Commission, seven years after it was passed.  In the interim two cities passed ordinances approving short term rentals.

Landlords are expected to understand the inconsistencies in the city/county ordinances, and the California Costal Commission policies to operate short term rentals in Monterey county.

This artical in the Monterey Herald covers the sitiuation very well.

Kevin Dickson · Answer

Some of the biggest tourist destinations are just cities.

New York, San Francisco, and San Diego come to mind.

Oftentimes, a hotel room just doesn't cut it for certain visitors, so VRBO and Airbnb fill a real market need.

Unfortunately, many cities have laws on the books that prevent rentals of less than 30 days.  The logic behind these laws is murky at best.