STR in California under SIP order - what is your strategy?

Question

Hi all, I am just about ready to post my first vacation rental, located on the north shore of Lake Tahoe, and I'm frustrated that the California Shelter-In-Place (SIP) order has no end date.  I'm unsure if I should:

1) list it as available starting in June (hoping we'll be in the clear by then), or

2) list it as available now, but include language that until further notice it is only available for essential workers or for Covid-19 isolation (see language I pulled from the Placer County website below) I imagine many people working from home in the SF bay area would love some isolation in the mountains...

It seems like many units in my area have been blocked as unavailable for May, but there are still many that show as available with no mention of restrictions.  The last thing I want is to get my rental permit revoked before I've made any revenue... but I also don't want to delay operations indefinitely.  How are other STR operators in California (or in other areas with restrictions in place) thinking about this?

Thank you!  - Melissa

•  To provide COVID-19 mitigation and containment measures (for example, isolation and quarantine or the housing of displaced persons or the homeless);
•  To provide housing for essential critical infrastructure workers; and
•  For use by the property owner and his/her immediate family members.

Shelby Pracht · Answer

Congrats, @Melissa Bovee

As one of these resort town full-time residents and as an STR operator, I would not list your unit as available or encourage Bay area residents to come up.

@Lee Ripma and @David VanWert Mammoth has announced they are not able to go into Phase 2 because of a recent increase in cases. We had no new cases at all for over 2 weeks, and then a huge increase in the last week, which likely means someone from out of town brought the virus back here. Check out the Mono Co. Health Dept. press release from yesterday.

Please don't encourage visitors or second home owners to come up to small resort towns! We don't have the same resources you do and want to get our case numbers down so that we can begin reopening safely. (Guideline for Phase 2 is 1 case per 10,000 residents in a 14-day period. Mono Co. has a population of 14,000 and we had 8 new cases last week, so we are well above the limit now.)

Jon Crosby · Answer

@Melissa Bovee

First off, congrats on your new property and business!  That's awesome so try not to let the looming situation take away from that accomplishment!

I own a property in Tahoe City and am currently feeling the pain and frustration you are looking to mitigate. The answer is, there really is no way to avoid it. There are a lot of phases to go thru until the restrictions are lifted and unfortunately, the Tahoe Basin has very limited hospital beds and probably a lot of locals that are not anxious to bring this unknown virus to them. North Lake Tahoe/Truckee has a few small hospitals but my sources have informed me that the hotels are actually offering discounted nightly stays for essential workers already, so I wouldn't plan on getting much traction with that group of potential customers. Also, everyone is already on Furnished Finder up there as it is, so competition is pretty thick for that limited pool. That being said, you should still put your property up on there for now but you will want to price it pretty low versus your normal STR rates.

I usually tell new STR owners to have 1 year operating expenses in savings if possible (6 months minimum) for black swan events such as this. Hopefully you have such a reserve and if so, you will just be leveraging it sooner than planned is all. If you have a mortgage, you can quickly apply for forbearance with a simple phone call that will delay your mortgage payments until September, however you MUST remember that that balance will all be due at that time and if you cannot make the lump sum payment you will have to ask for payment restructuring (which could affect your credit).

Those that are not playing by the rules may or may not get reprimanded, but for me personally, my advice is to not worry about what everyone else is doing and do what your conscious tells you to do. Do whatever gets you the most sleep at night. For me, I'm using my reserves (and the forbearance option) to weather the storm for now and working on optimizing my business model and complete the small projects I've been meaning to take care of (remotely with a trusted local general contractor). The demand will return once the restrictions are lifted and hopefully there will actually be a supply deficiency on your side for those that did not have reserves and had to either sell or convert to a long term rental.

Best of luck to you and wishing you health and safety!

David VanWert · Answer

@Shelby Pracht oh no! I hadn't heard that yet, that's not positive news. Very curious to see what this does to investors and second homeowners in the area. Going to be interesting to see what this does to the local market in the area, already starting to see a pretty big uptick on places hitting the market. Wonder how many distressed owners are going to start selling if this continues much longer.

Account Closed · Answer

@Melissa Bovee - Congrats on getting your STR set up! I'm sorry that the timing worked out this way -- I can imagine the frustration. I'm not sure about the number of healthcare workers/mid-long term rental market in the Tahoe area, but I have a STR in the SF Bay Area that we converted first to mid term rental (2 weeks, then 2 months) and now to a long-term rental that we just signed a lease for 12 months. We are lucky in that we are still able to cash flow quite comfortably with the 12 month lease, but I definitely did sweat over not being able to rent it out for a while!

Hope everything works out with you Tahoe rental and that you have enough reserves to float it for a couple of months. I imagine once the ban is lifted, there will be some demand coming from the Bay Area to safely social distance in the mountains/lakes -- you just have to make sure that your rental stands out as one of the best options in terms of photos/price so that regardless of if there are 1000 people looking to stay or 10, yours is among the first to be chosen. Good luck!!

Cliff H. · Answer

PS: received no less than 8 booking requests in a stretch of 6 hours on one booking platform yesterday after I opened availability for May with a very prominent disclaimer that you need to be an essential services provider to qualify to stay at the space. A couple observations:

State-state differences in restrictions is creating mass confusion among both hosts and guests about where and when guests can stay at a motel or STR. The fact that Hilton/Marriott can’t figure it out doesn’t give me much hope for us on the indie side. I’ve also had two international travelers reach out in the last few days with (understandably) no idea what’s allowed in my STR home state.

Most STR owners do not appear to care or be paying much attention at all to restrictions (and extensions of restrictions) at the state level, which is not terribly surprising given the logistics of whether state agencies could ever be expected to enforce something that requires both initiating booking requests across thousands of listings, but also finding out who the actual owner/entity that controls the STR is.

AirBnB continues to do little to help hosts in clarifying what rules/regulations are in place across different states/regions beyond linking to state-level orders that are (in my case) already superseded by subsequent updates/extensions.

Does anyone really expect any of this to end well? Seems like state level mandates precluding renting of STR properties are either fundamentally unenforceable at one end or entirely misunderstood at the other.

Melissa Bovee · Answer

Hi all, Thank you for your thoughtful input.  I have posted my place as available in June and so far I have 2 bookings in July.  The first line in my listing is prominent note about the current restrictions on STRs.  I state I will check in with confirmed guests as their travel dates approach to confirm we are in compliance with any restrictions in place.  My strategy is to accept future bookings, but be fully transparent about the potential need to cancel.  I figure this will allow me to maximize any legal and safe revenue this summer.

Lee Ripma · Answer

@David VanWert

I’m in this boat in Mammoth Lakes as well. June 1 the town is Phase 2 open but STR are Stage 3 so we still can’t do them at my complex. My place up there needed some renovations so I’m now working on those and will probably just use it a lot myself this summer. I am hoping the resort opens this winter. Certainly a lot of folks who won’t do well on STR in 2020!

David VanWert · Answer

We're in the same boat with a STR in Mammoth Lakes, rumors at June 1st but we will see. Unfortunately not much else you can do, can try for essential workers but sure the pool is pretty small. Fingers crossed we move into "Phase 3" by June 1st, hang in there!

Cliff H. · Answer

What approach have the Tahoe hotels/motels/BnBs taken (assuming they are similarly restricted)? Here in the northeast I’m seeing state-wide orders restricting STRs, but major local chains like Marriott and Hilton offer little more than a generic, non-specific disclaimer to “please check with your local state guidelines” while still fully allowing online booking (which is actually precluded by the state regulations).

John Underwood · Answer

Option 2 looks like only option right now.

STR in California under SIP order - what is your strategy?

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