Should I start an STR in a City that Might Ban Them?

Question

I recently moved to Fort Worth, TX from Portland, OR to get to a freer state. Imagine my surprise when I discovered that the City of FTW isn't exactly a fan of airBNB's. To my knowledge they don't have any codes prohibiting STR's on the books *yet*, but it's a marked possibility that they will attempt to ban or regulate them in the not-so-distant future.

So my question to for y'all is this:

Is the fact that the political future of STR's in Fort Worth is uncertain reason enough to move to other markets, or is it a golden opportunity to get in before the door is slammed shut and have less competition down the road?

As an addendum, does not being explicitly allowed or disallowed by city code affect financing, be it hard, conventional, or commercial? I don't know if this kind of uncertainty makes investors or banks more leery or not.

Thanks!

John Underwood · Answer

I would not buy in a market where I was worried about a future STR ban.

Bruce Woodruff · Answer

I love it. There is always a 'work-around' for Government overreach isn't there? :-)

Jason Howell · Answer

I am definitely not an expert in STR in Fort Worth, but my understanding is that they are only allowed in Commercial zoned areas, not Residential.  Arlington limits them to within a couple miles from the entertainment district.  Some of the surrounding towns don't regulate STR, at least not yet.

Regardless, if you purchase a property in any good size city that you intend to use as a STR, I would suggest you purchase it such that you have multiple exits.  You never know when the local city council can shut your business down with the stroke of a pen.  From what I've heard, vacation destinations are your safest locations if you are worried about over-regulation since they have had STRs for many years and have already established regulations that the community is comfortable with.

Take this with a grain of salt.  I own no STRs in Fort Worth, or anywhere else.  Hopefully a local expert with chime in.

Alex S. · Answer

Hospitable.com has a feature called "Stealth Mode."  It removes your listing during normal government hours and then puts it back on all the sites after 5pm (city enforcers go home for the day and normal people start booking).  I'm just saying...that exists.

STR regulation is in-progress or possible in every single community in America.  It is a significant risk, but also not deadly if you buy right.  Just turn it into a LTR or sell it.

As to your first question...assuming we are talking about residential houses for STR, the bank doesn't care about that.  A commercial loan might.

Collin Hays · Answer

Regardless of the city, if you are operating a STR in a residential-only area (typically called R-1), you are breaking code.  Your neighbors probably don't like you, either.

If you are operating a STR in an area that allows for short term rentals, by all means do it.  If code is silent, then you can presume it is allowed.  Typically, code in a large city will be very specific, however.

The process of changing zoning and prohibiting STRs is arduous, and not at the top of a city or county's list of to-dos. Furthermore, you would likely be grandfathered.

Kyle Mccaw · Answer

@Paul Leavitt it was a pleasure visiting with you the other day. Lots of good advice in the previous responses. No matter what you decide, any time you invest always have a plan b. For example, when buying a flip be prepared to hold as a rental or owner finance. When buying a STR be able to sale retail or convert to a LTR.

Bruce Lynn · Answer

@Paul Leavitt   As far as I know they DO have laws on the books that prohibit AirBnB/STR in residential areas.  That's a little different.  There are people that do it, but subject to fines and shutdown.   STR as far as I know in Ft. Worth are only allowed in commercial areas.   By the way....everyone seems to know the second you start operating.

Personally I don't like to roll the dice like that with my investment money.  If you are risk agnostic, just put it in Bitcoin.

The other idea is make sure the property will work as a LTR financially.  Don't just buy on the STR ROI.  Then if you get shut down, just switcharoo to LTR.

https://communityimpact.com/da...

Seems like almost every city around Ft. Worth does not like STR.  If they don't have an ordinance, they're probably discussing it.  One solution is to buy outside of the city limits.

Bruce Woodruff · Answer

If you like Ft Worth otherwise, I would get in now. My understanding (doublecheck) is that existing STRs are usually 'grandfathered' in most cities. That would give you a golden opportunity. As long as they don't ban them altogether later on.

I see the onus surrounding STRs lessening as time goes by. The party thing is already being dealt with by AIR, VRBO, and cities themselves. At least in one case myself, the neighbors were thrilled to have a couple of STRs go in on the block, it took the area from a C to B almost instantly.....

Should I start an STR in a City that Might Ban Them?

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