Where Are the Best Places to Own an Airbnb?

By Realty Times Published Jul 2, 2019 03:17 pm Updated Jul 25, 2019 12:11 pm

Count Los Angeles as the latest city to impose new restrictions on Airbnb rentals. Owners must now register their property with the city and also pay a fee of $89.

In addition, “Hosts can only register one property with the city at a time and the property must be their primary residence (where they live at least six months out of the year),” said Curbed. “Rentals are limited to a 120-day annual cap, and rent-stabilized units are no longer allowed to be used for home-sharing—even if the host owns the unit.”

It’s not the first city to move to regulate short-term rentals, nor is it the most restrictive.

If you’re looking to buy an investment property to turn into an Airbnb—especially if it’s out of state—you’ll want to pay attention not just to the potential revenue, but also the stringent laws that have been enacted in many popular cities. We’re checking out a few of the most interesting cities in terms of their bottom line and the red tape you have to navigate as an owner.

Sonora, CA
In 2016 a deal was made with the board of Airbnb for the online service to collect Tuolumne county’s 10 percent Transient Occupancy Tax (TOT) on short-term rental or lodging facilities, not the owners of the property. Read more about it here.

Palm Springs, CA
This city in the California desert topped Investopedia’s list of 5 Best and Worst Cities for Airbnb Renting—this despite being “one of the most strictly regulated vacation rental markets in the country,” said VRM intel. “Vacation rental owners must apply for and renew a vacation rental registration certificate annually for $923, as well as submit a transient occupancy tax permit application, pool compliance statement, and HOA letter (if applicable) to the city’s Vacation Rental Compliance Department before the home can be advertised or rented. Registrations are limited to one home per owner.”

Still, home prices are relatively low, and Investopedia calculates the potential for profit at nearly $63,000 per year.

Lahaina, HI
The draw of Maui is obvious, and, according to Scott Shatford, co-founder and CEO of Airdna, the Airbnb analytics firm that crunched the numbers for the Investopedia piece, short-term rentals give visitors a more affordable option than the high-end resorts in the area. The average home value in Lahaina is almost double that of Palm Springs, but the potential upside is huge thanks to the higher rental rate. Buy an investment property to turn into an Airbnb here and you could make a profit of almost $56,000 per year.

However, “The Hawaii Senate has passed a bill that would require hosting platforms such as Airbnb and HomeAway to collect lodging taxes from guests of short-term rentals,” said Avalara. If signed by Governor David Ige, the bill will require “vacation rental operators to register with the state Department of Taxation and to include state registration numbers in all advertisements. It changes the penalty for violation of state short-term rental law from a criminal misdemeanor to a citation process, with fines starting at $500 per day for a first offense.”

Additionally, “On Maui, voters approved a ballot initiative last year that dramatically increases penalties for short-term rentals operating illegally.”

Las Vegas, NV
Vegas is one of the most visited cities in the country, with an average of 42.9 million annual visitors. And, despite the vast number of hotel rooms, the city has a robust short-term rental market. However, new regulations around short-term rentals may just kill its burgeoning business.

“Las Vegas real estate investors will no longer be permitted to rent out for less than 31 days in the city,” said Mashvisor. “The new Airbnb laws will only allow for property owners who personally reside in the rental to operate legally. Even then, these Airbnb rentals are required to renew a permit with the city every 6 months to avoid any fines or issues with the law. These new Las Vegas Airbnb laws will likely put 98% of the short-term rentals operating under legal permits in the city out of practice as only 2% of those are primary residences.”

Scottsdale, AZ
Scottsdale can act as a case study for an investor looking to make money in a location that is popular year-round, but that also has a couple of special annual events that draw an inordinate number of visitors, which could allow said investor to charge a premium (Think: New Orleans for Mardi Gras and cities hosting upcoming sports events like the Super Bowl or Final Four).

In Scottsdale’s case, not only is it “a hotbed for American corporate elites looking for a weekend getaway full of mountain biking, golf, and hiking,” said realtor.com, but the city also hots “15 Major League Baseball teams, including the Chicago Cubs and Los Angeles Dodgers” for spring training—many of them, and the fans who travel to see the team, preferring to rent a home over a hotel room. The “average daily rate” for a short-term rental in the city is $301, but, in a luxury home with resort-style amenities, you could command $1,000 a night, they said.

Scottsdale also has some of the most lenient regulations in the nation when it comes to short-term rentals. “An effort to curb cramming too many people in vacation rentals didn’t make it through the state Legislature, but such a rule might not have done much good anyway if Scottsdale’s experience is any indicator,” said the Arizona Republic. “Scottsdale city code already limits short-term rentals to no more than six adults and their children. But the local law is not easily enforced, a city official said.”

Orlando, FL
Orlando would seem like an easy target given the theme parks, and, according to Airdna’s data, the average daily rate on a short-term rental is $193 on a home with a median list price of just over $300,000—numbers that tip in favor of the investor. But, there are a slew of rules owners have to follow.

A new ordinance “allows homeowners to rent out part of their home — as long as the homeowner stays on site while guests are present,” said Avalara. “The new law limits short-term rental hosts to one booking at a time, a maximum of two people per room, and no more than four non-family members in a short-term rental at one time.”

Operators also have to register with the city, pay a $275 fee for the first year and $125 every year thereafter, and collect lodging taxes from guests. “These taxes include a 6 percent state transient rental tax and 0.5 percent county discretionary sales surtax that are collected by the state, as well as a 6 percent Tourist Development Tax that is collected by Orange County.”

New Orleans, LA
The good news for investors who want to buy in New Orleans: Airdna’s data as reported on realtor.com shows a median list price of $350,100, an average daily rate of $230 for short-term rentals, and an occupancy rate of 78%.

The bad news: Airbnb rentals are now banned in both the Garden District and the French Quarter. Short-term rentals are still allowed in the Central Business District and other commercial areas of the city.

Miami, FL
This tourist haven has upwards of 10,000 active short-term rentals, but, new laws are making it harder for investors to collect. Operators can typically make an average of about $200 a night—but vacation rentals are now outlawed “in residential neighborhoods outside the core Miami Beach downtown communities,” said realtor.com.

The New York Times reported that code compliance officers were going door to door in search of illegal short-term rentals; rule-breakers can be fined up to $20,000.