Township changed ordinance rules for Airbnb, HELP!

[James Lauer]

Hello all,

I wanted to ask for everyone's help for a fairly large problem I am having for a rental I purchased. I purchased a duplex at a shore town in NJ. My township has changed the ordinance to 30 day MINIMUM for rentals. Although I can still get rentals for 1 month at a decent premium, it is not anywhere close to how much I can make through STR like airbnb/vrbo etc. Essentially my bottom line will likely be effected nearly 30-40% because of discounts I will have to give for longer stays.

I guess my questions are the following:

1. Has this happened to you? What did you do ? Did you sell, did you just continue to rent and accept fines/penalties, did you shift to mid term or long term rental?

2. Does anyone know if there is a way to remove public reviews on the Airbnb app, essentially the township zoning officer looks for properties in the town with more than a few reviews and that is how she determines if people are still renting the property out on a short term basis. I know this because I own another duplex and have ignored the rules the previous summer.

3. Has anyone hired attorneys or legal counsel to determine if what these towns are doing is actually legal, when it comes to enforcing STR rules?

This whole thing is very upsetting and silly as I see it to be a completely nonsensical rule change and not well thought out by my township.

Sorry if I rambled a bit, ANY HELP, is greatly appreciated!! Thank you so much

James

[Nathan Gesner]

You will have to bring this up to legislators and try to change the law. Good luck with that.

Hawaii did the same thing. They restricted short-term rentals to one guest per month, then they said only one guest every 90 days. A group of STR owners fought it and I believe they won, but only after a couple years and a lot of money. And the new rule only applies to legacy STR owners, not new investors.

Your best bet is to comply with the law and see if your investment still works. If not, sell it and move to another investment/market.

[John Underwood]

I agree with Nathan. 

Comply with the rules so you don't get in big trouble. Trying to not get caught is not the answer.

Convert to a MTR, LTR or sell.

[Bill Schrimpf]

@James Lauer - Ditto.  If your investment doesn't work, move on. 

In my market, these types of changes don't happen in a vacuum. Anyone interested in STR needs to add regulatory acceptance to their due diligence.

[Mike Grudzien]

James,

---spend a lot, change the law
---accept the situation and comply
---sneak around, get caught (not recommended)
---pull up stakes and reinvest elsewhere

My 2 cents,
Mike

[Roger Lee]

@James Lauer

This is why all STR hosts need to ban together, the sooner we unite, the faster we can respond to these laws and fight appropriately.

[Chris Seveney]

Quote from @James Lauer:

Hello all,

I wanted to ask for everyone's help for a fairly large problem I am having for a rental I purchased. I purchased a duplex at a shore town in NJ. My township has changed the ordinance to 30 day MINIMUM for rentals. Although I can still get rentals for 1 month at a decent premium, it is not anywhere close to how much I can make through STR like airbnb/vrbo etc. Essentially my bottom line will likely be effected nearly 30-40% because of discounts I will have to give for longer stays.

I guess my questions are the following:

1. Has this happened to you? What did you do ? Did you sell, did you just continue to rent and accept fines/penalties, did you shift to mid term or long term rental?

2. Does anyone know if there is a way to remove public reviews on the Airbnb app, essentially the township zoning officer looks for properties in the town with more than a few reviews and that is how she determines if people are still renting the property out on a short term basis. I know this because I own another duplex and have ignored the rules the previous summer.

3. Has anyone hired attorneys or legal counsel to determine if what these towns are doing is actually legal, when it comes to enforcing STR rules?

This whole thing is very upsetting and silly as I see it to be a completely nonsensical rule change and not well thought out by my township.

Sorry if I rambled a bit, ANY HELP, is greatly appreciated!! Thank you so much

James

This is why (and it has been mentioned here 1,000x) that when buying a STR, to make sure the numbers work based on other scenarios in case of this occurring.

[Jay Hinrichs]

Quote from @Nathan Gesner:

You will have to bring this up to legislators and try to change the law. Good luck with that.

Hawaii did the same thing. They restricted short-term rentals to one guest per month, then they said only one guest every 90 days. A group of STR owners fought it and I believe they won, but only after a couple years and a lot of money. And the new rule only applies to legacy STR owners, not new investors.

Your best bet is to comply with the law and see if your investment still works. If not, sell it and move to another investment/market.

I was in Honolulu last week and it was all over the news further tightening of Air bnb. part of the issues is the 9000 homeless after the Maui fire and owners not wanting to rent to those displaced..

Bottom line STR restrictions are just going to get tougher over the years so one needs to choose very carefully up front and also if your buying based on cash flow I would think you need to make sure your OK at long term market rent and base your buy on that.. if you get STR added revenue thats a Bonus.. there are areas of the country were STR will probably never get attacked like we are seeing in many markets.

[James Lauer]

hello everyone!

Thank you all so much for your insights and answers. The duplex will still work quite well if I need to pivot back to LTR and even mid term, but as stated before, the property is quite profitable when it was able to be done as STR.

I see these challenges as new opportunities to grow and continue to learn and improve my craft.

Thank you all,

James

[Michael Baum]

Good luck @James Lauer.

[Dan H.]

I had 2 STRs in service since 1999. Last year city implemented a quota on STRs. Only one of the 2 units got a STR permit.

We have a local STR organization that has filed suit against the STR quota implementation. so far it has yielded no concessions.

The unit that did not get the STR permitted was converted to MTR (30+ day furnished rental) the same time as ~200 other units in the area. The MTR rent is currently lower than the LRR rent even 1 year after the quota went into place. We are cash flow negative on this unit.

To compound things the unit with the STR permit is obtaining reduced revenue. It is the slowest offseason since the Great Recession (not including Covid close downs). It is on pace for maybe 60% of its 2019 revenue. Hopefully the high season does well. So it likely also is cash flow negative.

Fortunately over the years I have made a lot of money on this property.  It has appreciated nearly 400% (~$1.5m of anppreciation) and continues to appreciate.  It has had years with outstanding cash flow.  We enjoy using them on occasion.  So the negative cash flow is an inconvenience, but I plan on staying the course. 

Legal remedies can get costly. Big you go this route, join forces with other STR owners.

Good luck

[John Mason]

Best to have a  strategy of exit to LTR , so the property you buy should be reasonably worth for both

[Stuart Udis]

@James Lauer If the STR strategy is the only strategy that makes the property pencil, be sure to purchase in a market where (1) the use is allowed, (2) the use requirements are protected by in place permitting and licensing and (3) the permissions are transferable through a sale. If the property does not provide for all three, you should not underwrite or make investment decisions based on the property operating as an STR. It's that simple.

[Andrew Steffens]

Sorry to hear that!  as an NJ Native I am no fan of NJ politics.  That is why I like FL as there are still currently state level protections in place protecting owners.  Best of luck!

[Brian Jackson]

How much are the fines? What are the penalties?

[Jeremy Jareckyj]

Did you happen to have any permit or license to operate an STR prior to them changing the laws? I was going to say if that is the case your city my allow you to be grandfathered in.

only way to remove a review is to have the guest call in and remove it

[Todd Goedeke]

@James LauerDo all your bookings direct with no listings on Social Media platforms .

[Jassem A.]

Sounds like it's time to switch to mid term rentals or to 1031 somewhere else. Does abnb even let you enter in a 30 day minimum? Might have to switch to whatever platforms do allow this.

[Marlene Arabia]

James, 

I'd be happy to discuss your legal options with you. 

Best, 

[Sarah Kensinger]

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

[Jay Hinrichs]

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ?   folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have..  also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR.  so other side of the coin. 

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

[Sarah Kensinger]

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ?   folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have..  also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR.  so other side of the coin. 

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

Yes, but some of us deal with Karen and Karen so that changes everything. I'm surprised you're on this forum if that's how you feel about STR. Some of us are in vacation markets that only survive due to the visitors that frequent the area, and the STR that house all the guests. If someone decides to live there, that is their choice. I would happily live next to the homes we and other similar operators' run; much better than the guys that have the marshals show up and the house explodes! This is America with all the freedoms we are blessed to have, so that means some may do things to their properties that others don't appreciate. Including painting a home a brilliant yet hideous blue, and I'm not going to the authorities to complain or make a rule against it!

[Jay Hinrichs]

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ?   folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have..  also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR.  so other side of the coin. 

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

Yes, but some of us deal with Karen and Karen so that changes everything. I'm surprised you're on this forum if that's how you feel about STR. Some of us are in vacation markets that only survive due to the visitors that frequent the area, and the STR that houses all the guests. If someone decides to live there, that is their choice. I would happily live next to the homes we and other similar operators host, much better than the guys that have the marshals show up and the house explodes! This is America with all the freedoms we are blessed to have, so that means some may do things to their properties that others don't appreciate. 

like I said I was just playing devils advocate .. I have owned STR's myself. I dont particulary care to own them anymore i sold them.. too much work for me.. we moved to Mid term fully furnished I like that WAAAAY better. Perosnally.

[Sarah Kensinger]

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ?   folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have..  also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR.  so other side of the coin. 

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

Yes, but some of us deal with Karen and Karen so that changes everything. I'm surprised you're on this forum if that's how you feel about STR. Some of us are in vacation markets that only survive due to the visitors that frequent the area, and the STR that houses all the guests. If someone decides to live there, that is their choice. I would happily live next to the homes we and other similar operators host, much better than the guys that have the marshals show up and the house explodes! This is America with all the freedoms we are blessed to have, so that means some may do things to their properties that others don't appreciate. 

like I said I was just playing devils advocate .. I have owned STR's myself. I dont particulary care to own them anymore i sold them.. too much work for me.. we moved to Mid term fully furnished I like that WAAAAY better. Perosnally.

I'm sure the MTR forum would appreciate your insights since STR are awful.  

[Jay Hinrichs]

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ?   folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have..  also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR.  so other side of the coin. 

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

Yes, but some of us deal with Karen and Karen so that changes everything. I'm surprised you're on this forum if that's how you feel about STR. Some of us are in vacation markets that only survive due to the visitors that frequent the area, and the STR that houses all the guests. If someone decides to live there, that is their choice. I would happily live next to the homes we and other similar operators host, much better than the guys that have the marshals show up and the house explodes! This is America with all the freedoms we are blessed to have, so that means some may do things to their properties that others don't appreciate. 

like I said I was just playing devils advocate .. I have owned STR's myself. I dont particulary care to own them anymore i sold them.. too much work for me.. we moved to Mid term fully furnished I like that WAAAAY better. Perosnally.

I'm sure the MTR forum would appreciate your insights since STR are awful.  

 LOL  too funny..  I think its somewhat irresponsible though to be touting this when folks take on such risks that we are seeing where they think they are going to make a bunch of money then they get their hands slapped.. which is my point about being correctly zoned and permitted .. do you think that is a bad thing ??   

[Sarah Kensinger]

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

Quote from @Jay Hinrichs:

Quote from @Sarah Kensinger:

I feel your pain, very much so! It's great when a property cash-flows as a LTR as well as a STR, but it's a hard pill to shallow when you know the cash-flow could double or triple as a STR. But instead, a few people with their agenda pass policies that stand in the way.

to play devils advocate here.. What agenda ?   folks that paid a lot of money for an owner occ house and a stable neighborhood might have an issue with the property being run as a hotel?
Seems to me those are pretty fair agendas to have..  also Seems to me STR should be in areas ZONED for it and permitted for it so homeowners if they want to buy there know going in that there will be transient use next to them. Seems to me its only an Agenda because your in the bizz and or you dont have to live next to it.. I would be Uber pissed off if one of my neighbors started to use their house as a STR.  so other side of the coin. 

I know in Charleston SC were i built quite few homes downtown its highly regulated as it should be and if your zoned and permitted then the price reflects it on the purchase side they are sold as income props.

Yes, but some of us deal with Karen and Karen so that changes everything. I'm surprised you're on this forum if that's how you feel about STR. Some of us are in vacation markets that only survive due to the visitors that frequent the area, and the STR that houses all the guests. If someone decides to live there, that is their choice. I would happily live next to the homes we and other similar operators host, much better than the guys that have the marshals show up and the house explodes! This is America with all the freedoms we are blessed to have, so that means some may do things to their properties that others don't appreciate. 

like I said I was just playing devils advocate .. I have owned STR's myself. I dont particulary care to own them anymore i sold them.. too much work for me.. we moved to Mid term fully furnished I like that WAAAAY better. Perosnally.

I'm sure the MTR forum would appreciate your insights since STR are awful.  

 LOL  too funny..  I think its somewhat irresponsible though to be touting this when folks take on such risks that we are seeing where they think they are going to make a bunch of money then they get their hands slapped.. which is my point about being correctly zoned and permitted .. do you think that is a bad thing ??   

I have yet to see regulations in any aspect lead to good or an improved state of living. Not that it's anyone's concern, but what we're dealing with is certain people trying to push investors, LTR, MTR, STR, out of an HOA. Can't say there's going to be much good for anyone if it passes, and property values drop because only homeowners can live there. Not many can come up with money to purchase a property right now. Thankfully investors are a large chunk of the neighborhood, so fingers crossed it doesn't pass.

Lastly, we underwrite properties very well and I know inside and out how much one is going to make. This one easily would have crossed the 6-figure mark, not many LTR can do that unless it's an elite of the elite property. So, I wasn't touting anything, just stating a fact I know firsthand.