All Forum Posts by: Cliff H.

Short-term rentals ban is a dodge from real cause of housing shortage: https://www.hawaiireporter.com/short-term-rentals-ban-is-a-dodge-from-real-cause-of-housing-shortage/

@Jonathan Snider absolutely. This strategy will also give you a far greater appreciation of traveling in off peak seasons, which as others have stated, is the only time you’re traveling to your vacation homes for “free.”

@James Carlson well there's always NYC, Hawaii, and some of the largest vacation rental communities on the planet. 

Outside of that in smaller municipalities that are closer to me in New England we're seeing a delayed tax and ordinance response to what's largely viewed as a negative impact to neighborhoods and community. 

For example, Vermont's recently proposed a 10% surcharge specifically targeted to STRs and not hotels, while other proposals have sought an outright ban on non-occupied short term rentals. New Hampshire has fought off municipal bans on STRs, but did not go so far as "banning the ban" given the state history of local control, which is illustrated by Laconia NH's ban on STRs outside of designated zones and others. 

More regionally, Boston's STR regulations have gotten more stringent, moving from earlier proposals that would have allowed out of state rentals, to its current form allowing only home share or owner-adjacent rentals. 

As many of us have said all along, outside of the designated rental communities with a long history of permitting and licensing STRs, no city, state, or region should consider itself free from the threat of future municipal regulation. 

Moreover, as we see happening in Vermont, you might see legislatures aware that pursuing aggressive measure less from the perspective of outright bans that de facto bans through excessive, targeted state and municipal taxes. Ex: combined with VT's already high 9% M&R tax, 1% local options tax, and (pending) 9% STR tax you're looking at a 20% rental tax atop an already limited 4-6 months of real world vacancy based on longer spring/fall shoulder seasons.

TL;DR: the threat is real, be aware. 

Great points Colin. The market will need to correct itself and the low hanging fruit is certainly over-saturated markets. However, for many parts of the country, there’s a 7th bullet that will blindside folks who got in too late: regulation. The hotel lobby is real and over-saturation of markets cuts many ways, including pissed off neighbors with greater time to show up, run for local offices, and lobby politicians to regulate STRs in their communities than anyone operating out of state. Yes, we can all agree there’s historic vacation communities where STRs have an informal historic precedent or maintain a supply/demand advantage that makes regulation unattractive to local municipalities, but there’s plenty of others where the investors have overbought, managed properties poorly, and are now part of a perception problem that’s driving bad legislation atop stupid headlines of irresponsible investors who think they’re operating in an ATM industry versus hospitality. 

@Corey Hassan 100% agree. I think in New England people need to accept that most towns will be pursuing a very similar max days/year strategy to distinguish between second home owners renting out their place for part of the year and professional investors chasing a fantasy of higher cash flow than traditional markets without actually doing the work needed to create a truly unique guest experience necessary to be competitive in today’s saturated marketplace. 

It doesn’t help that we keep talking in terms of “gross income” versus net cash flow.  STRs much higher carrying costs, overhead, and variable vacancy rates are just not something many who coming from traditional markets are fully appreciating. As you say, things are so incredibly seasonal here in New England that it’s tough to make a play unless you can pull a profit in 3-6 months out of the year. 

@Zachary McHugh the best research you could do in New England is attending a few local selectman committee meetings to hear, first hand, how such small committees operate and how quickly they can enact de facto STR bans within their community. As you know from being in the area, New England is a region of 10k communities, each looking over their shoulders to decide on municipal direction to take because each community alone lacks the legal and logistical resources alone to enact categorical change. So as one community passes an ordinance, many more soon follow given the legal and logistics precedents established. New England is a period of rapid change in the STR space so it's foolish for any one person or entity to provide an accurate list of "STR safe spaces" where regulation would not occur in short order.

STR ordinances are coming hard and fast across our region and it's happening because investors are following COVID-era narratives in thinking there's still massive margin in a space that's changing faster than anyone here individually can keep up with. Add in the inherent seasonability of New England's rental market and we're mostly talking about 3-6 month seasons in the rental space, in real-world contrast to the inflated and inaccurate data that somehow makes it way into AirDNA and dashboards for our region. I run an incredibly tight ship with my STRs and I've never made anything close to the level of profitability promised in those dashboards.

Mind you, nothing against other communities where STRs have a long history and legal precedent for continued existence, but here in New England that's most often not the case. Look at what's happened in Laconia, Boston, Newport or others like PTown in progress. Those are communities that make headlines and occupy the larger debate. The smaller the community the more likely they are to look to those touristy destinations for precedent, while viewing mass-investment through tactics like arbitrage as a clear and present danger to their quality of life and move to categorically tax or ban all STRs out of existence. 

Ask me how I know this. 

@Brandon Taylor nothing wrong with process and standards, in most states formal written qualifications standards are required anyway. The challenge here is the details. I've had/used similar standardized processes as RentRedi has made for years and with great results, processes that helped me FSBO my house from two states away without ever meeting buyers/agents in person.

However, the devil's in the details. You should absolutely have an exception processes in place to ensure folks without an email or online connection who may be older or disabled can still apply and be on even footing with the de factos. 

Ultimately screening is about having formal written standards documented and leveraging a repeatable, auditable process to ensure your housing meets Fair Housing standards and not discriminating based on a protected class. We can all debate over whether email is a proxy for a protected class, but in a world of $1k/hour attorneys the best defense is always being proactive and avoiding even the appearance of discriminatory behavior that sends countless DIY landlords down a path of litigation benefiting no one except the lawyers. A great resource here are any of the NoLo series of books on landlord-tenant law. They have a knack for simplifying law in a way I've rarely seen elsewhere. 

You want to exclude yourself from working with the majority of great tenants because the majority of your applicant base don't use email well? This feels backwards. Finding a great tenant is a numbers game. It's a sale funnel. You should be thinking about how to get more applicants through your funnel, not less.