If you've been thinking about ways to turn your assets into Cashflow, short-term rental properties might be a profitable solution for you.

Of course, like all ventures, there are certain do's and don't's. In this article, we'll start out by covering the following:

  • How home location can impact short-term rental regulations
  • How the type of rental property can impact regulations
  • Why the rental term (time rented) matters
  • Some examples of cities and states and regulations or restrictions on short-term rental properties

Once we've gone through all the potential regulations relating to renting out your property for the short term, we'll transition into how to find out which rules and regulations might apply to you.

Are you ready to get started? Here we go!

What determines how many short-term rental properties you can have?

You might be tempted to start renting properties short-term and keep going. More properties mean more renters, which can mean more profit, right?

Not necessarily. If you're violating regulations, you could get slammed with fines, which can seriously cut into your profit margin.

In some places, the question is how many short-term rental properties can you have? In other places, the key question is can you even have them? 

The good news is that no matter which of those questions you're asking, we're here to help. 

Where is your rental property?

Believe it or not, there are places that don't allow short-term rental properties. They often cite possible disturbances as the reason, but there can be a number of reasons why they restrict short-term rentals. 

You'll want to read about our example in Texas to see legislation about this in action.

Other cities or states allow only a certain number of rental properties–some more than others. Our Portland, Maine example will show you how this works. 

For municipalities that allow short-term rentals, property owners may have to take a few steps before they can begin legally renting out that property.

Register with Your Municipality

Some cities require property owners to register properties they want to rent on a short-term basis. 

In these places, you may be required to obtain a special license or permit. Our New Orleans, LA example will show you what you might need in order to obtain such a permit.

You may also have to pay some fees or taxes–but trust us, these will be less than fines assessed if you're found to be renting out property illegally.

It's worth to keep everything above board to maximize your profit opportunities.

What type of property do you plan to rent?

Do you plan to rent a commercial property? Residential? The type of property can affect how many short-term rentals you can offer.

For residential properties, there may be additional regulations. Consider the following examples:

  • If you have a condo, association, or co-op board, they may impose regulations that restrict or prohibit short-term rentals.
  • If you rent an apartment, your landlord may or may not allow you to rent out part or all of your space.

Remember that any legal documents you sign may take precedence over your desire to rent out your space. Even if you own a condo, for example, you may have signed an agreement not to rent that property out.

Additionally, some municipalities allow you to rent out a property you don't own, and some do not.

How long do you want to rent your property?

Believe it or not, there's no hard-and-fast definition for short-term rentals. 

In some places, short-term means as many as 90 days. In others, it can mean a few weeks tops. 

If you are allowed to invite others to rent your property, make sure you're not offering it for longer than you're allowed.

Short-Term Rental Regulation Examples

Now that you have an idea of what may be required of you in a short-term rental situation, we'd like to show you some examples from different areas of the United States, where cities and states are beginning to regulate or deregulate short-term rentals.

Welcome to Portland, ME

Portland, Maine had a bit of a problem. The municipality did not know how many people were renting out properties on a short-term basis. 

Why was this a problem? 

What municipality would want to miss out on an opportunity to charge fees and taxes? 

There's a silver lining in regulations too though–they keep things fair.

They came up with a solution.

With rental properties in Portland, ME, you can rent out a maximum of 300 non-owner occupied buildings.

We think that number is pretty generous, but it's important to know what restrictions exist.

In addition to limiting the number of short-term rentals, the property owner must pay fees to register properties with the Housing Safety Office.

 Welcome to New Orleans, LA

Moving further south (because almost the rest of the United States is south of Maine) to Louisiana–specifically New Orleans–we find a different situation.

Rather than limit the number of short-term rental properties, the city of New Orleans will regulate how permits to rent properties are granted.

Beginning May 15, 2017, rental properties in New Orleans, LA can legally be rented with one of three types of permits:

Accessory Permits

Property owners holding these permits can welcome renters to their owner-occupied homes. This is a solution for anyone wanting to rent out an extra bedroom, for example. 

There aren't limits on the number of annual renters.

Temporary Permits

As the name suggests, this type of permit limits how long someone can rent–specifically, for 90 days.

Unlike the accessory permit, the owner doesn't have to live on the rented premises.

Commercial Permits

New Orleans doesn't limit the number of commercial rentals. Likewise, there isn't the time limit imposed by the temporary permit. The owner needn't occupy the property.

In New Orleans, property owners need to have a number of things on hand in order to apply for any of the above permits. These requirements include:

  • The property owner must have liability insurance for at least $500,000.
  • The property must be up to code (including smoke detector quantity and placement) and meet zoning requirements.
  • There can be no taxes or liens on the property.
  • Fire escape floor plans and emergency contact information must be posted at rental properties.
  • The property owner must prove that s/he has attempted to inform adjoining property owners that s/he is applying to offer a short-term rental.

As you can see, New Orleans has specific regulations and guidelines. This is a great example of why it's important to know what your own city's rules are.

 Welcome to Texas?

Yes, we meant the question mark. That's because Texas introduced a new senate bill in January 2017 that would prevent cities from restricting short-term rental properties.

It's called Texas Senate Bill 451, and we don't know yet if it will pass, but it's a great example of how states and cities can have different regulations, and how they can change.

Which cities are restricting short-term rentals?

Not every city in Texas is restricting short-term rentals, but this bill would prevent those restrictions statewide. 

Some of the cities that currently do restrict or regulate short-term rentals include:

  • Austin
  • San Antonio
  • Fort Worth

Those who want the bill to pass want to protect private property rights–or maybe they want to rent out their own properties. Either way, this bill is worth watching.

Now that you understand what sort of rules might apply, we'd like to give you some pointers on how to find out whether there are rules that might apply to your rental properties.

Where to Find the Rules

Rules are no good if they're hidden! Short-term rental regulations aren't kept secret, but you do need to know where to look.

If you're ready to make money with short-term rental properties, you'll want to consider the following:

If You Don't Own Your Property

You'll want to start with checking your apartment lease. Then, once you've thoroughly read any stipulations on what is basically subletting (look for that term), have a chat with your landlord.

If You Have a Condo, Co-op, or Neighborhood Association

You own your property, but there might still be rules or restrictions. Start out by checking covenants, conditions, and restrictions (CC&Rs) if you have that.

You can also look at bylaws.

Like with apartments, you'll want to get some face time in. Talk to your board or association before moving forward.

If You Own Your House, Commercial Property, or Get the Go-Ahead for your Apartment, Condo, or Co-op

Once you get permission from landlords, boards, or associations (if necessary), you'll want to head to your municipal office to check the local administrative code.

Find your local municipal office to get started with your short-term rental.

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