Can neighborhood shutdown my AirBNB?

Question

My current objective is the "house hack." I've been hoping for a 4-plex. However, I see an interesting opportunity in an A neighborhood in Birmingham, AL, Crestwood North. Most of these homes have been flipped, and it is that cute neighborhood your wife would love to live in. Well, there's a beautiful 5B 2BA two story HUD home there with 2800 sqft not including half finished basement unit and back studio+carport unit (which actually used to be a carriage house-SUCH a cool property; historic credit or something, beautiful 1900 house). For the purpose of us moving in, I would probably not address the basement and back studio, as theyre basically efficiency units that wouldn't pull MUCH income and need A LOT of work compared to the house.. I would 203k that guy, just the main 2800 sqft of the 2-story house. It's got 5 beds, with some more rooms that could become beds. It has a gorgeous upstairs living room and balcony, but no kitchen upstairs, just a bath. It even has a side entrance that leads directly upstairs.

I'm thinking... those 3 upstairs beds are perfect for AirBNB. If I was visiting Bham, I would enjoy staying in the area.

I had a local investor friend tell me that the 501c3 who regulates the neighborhood would definitely frown on renting it out, I'd be the a**hole of the neighborhood, and they'd probably shut me down.

Is that possible? Can a neighborhood committee dictate what I do with the bedrooms in my own house? I would think no, but want some input before I structure a deal around it...

Thanks BPers!

I'm thinking... those 3 upstairs beds are perfect for AirBNB. If I was visiting Bham, I would enjoy staying in the area.

I had a local investor friend tell me that the 501c3 who regulates the neighborhood would definitely frown on renting it out, I'd be the a**hole of the neighborhood, and they'd probably shut me down.

Is that possible? Can a neighborhood committee dictate what I do with the bedrooms in my own house? I would think no, but want some input before I structure a deal around it...

Thanks BPers!

Greg H. · Answer

Several potential issues with the strategy:

203K on a HUD home is about most difficult of a financing process to attempt.  Hud allows 60 day closings for a 203k .  I would not even attempt unless your agent has completed one(very few have) , lender has closed several 203K loans on a HUD home(Not just a 203k loan) and you have pre-selected a contractor that has closed several and meets all the insurance requirements

Many cities can and have limited or banned the Airbnb model. Additionally, an HOA, neighborhood association or even County restrictions may exist

Jeff Keller · Answer

So far what I've seen in Silicon Valley is neighbors complaining about the traffic and cars that comes with Airbnb. Locally most building code enforcement comes as a result of neighbors complaining. We sold a house for a client who had used it for Airbnb. One of the neighbors contacted us and said something to the effect that we had to disclose that it had been used as an Airbnb, which isn't true. She was trying to cost the owner additional expense. Turns out much of the traffic was due to a different neighbor.

Taxes on hotels are very high. Basically local residents don't see increases in those taxes affecting themselves, so they often approve increases. Sooner or later the city will see Airbnb rentals as a goldmine.

James Rodgers · Answer

@Cooper B. I used my brain for a second and just looked on Airbnb. People are doing it successfully, so yea I'm not going to worry about it. If an ordinance was passed and I had already gotten into the house well, I could definitely sell and net a profit.

Cooper B. · Answer

Is the neighborhood association you are referring to Greater Crestwood Inc.?  I don't know for sure but I wouldn't think they would have the direct ability to dictate what you do with your extra bedrooms.  I do know that there are a number of airbnb rentals in Crestwood currently.  The contact info for the officers of the neighborhood association are easily accessible on their website, so it certainly wouldn't hurt to ask them about it directly.

The city could pass an ordinance to prevent short term rentals, which is what Homewood did to combat Airbnb.

Bill Rich · Answer

@James Rodgers

203K's are the perfect loan for what you are attempting to do.  Having worked on many a 203K in my career I can tell you as @Greg H. mentioned you want to make sure you have a team in place who is familiar with the process and understands how to administer the 203K.  It is not a loan that any old lender can do.  I cannot speak to the local codes though as to what you can do with the rooms.  If you have any questions about the 203K process please feel free to ask.

Thomas S. · Answer

Yes they can, there are plenty of communities across the nation that prevent short term rentals but you should visit your local Municipal building department first to get the answer for the specific neighbourhood. They will have it on record if the committee has been blocking rentals.

Residential communities frown on rental properties of any sort as they devalue the house prices in the area when tenants start to take over. I would be speaking with my government representative to prevent them in my community.

Can neighborhood shutdown my AirBNB?

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