Drawing from my background in regulatory compliance for global financial institutions, I have developed an appreciation for the intent of regulations that strive to safeguard public interests. 

Regulations are not limited to finance—as you may be aware, short-term rental (STR) laws are a hot topic. As cities aim to refine STR laws to suit their unique community needs, the landscape and laws continue to evolve. 

In this article, I will share my experiences and offer actionable advice for navigating these changing regulatory environments.

1. Maintain Flexibility in Your Income Strategy

STR laws are not just set at the city level but also by homeowners associations (HOAs). This was a key lesson from my early foray into STRs. 

My first STR was in an HOA community. I was all set up and thriving—and then the HOA unexpectedly updated their rules, prohibiting leases of less than 12 months. This led me to adapt quickly, transitioning my STR into a long-term rental that was still profitable.

This shift highlighted for me the critical need for flexibility in real estate strategies. When analyzing deals, it’s important to consider properties that can adapt to both STR and long-term rental models. 

While finding a property that can profitably function as both an STR and a long-term rental isn’t always feasible, it’s essential to assess your willingness to take on certain levels of risk. In my experience, I lean toward STRs located outside of HOA communities to avoid the risk associated with potential bylaw changes. 

2. Educating Homeowners: The Key to Harmonious STR Hosting and Equitable Lawmaking

Homeowners’ concerns about STRs are not limited to immediate issues like noise and parking disturbances. There’s also a growing concern regarding the impact of STRs on the broader community, such as potentially increasing rental rates and reducing housing availability for locals. 

These concerns, whether widespread or localized, deserve serious attention and dialogue. Effective management of these issues requires STR hosts to engage proactively and thoughtfully with their communities. Open communication with neighbors is crucial, not just to address immediate nuisances but also to participate in discussions about the economic and social implications of STRs.

Working with homeowners and the community, STR hosts can help develop balanced and fair STR regulations. 

3. Strategically Adapting Your STR Portfolio to New Laws

Enforcement of STR laws has been known to vary significantly by city. This variability puts the onus on the STR owner to decide how you choose to operate with new information and regulations. Adhering to new laws as soon as they are enacted is often considered the safest, most responsible approach for any business to ensure compliance and minimize legal and financial risks. 

That being said, when faced with new laws, you have two primary options: adapt immediately to the changes or take a “wait-and-see” approach if you anticipate further amendments. One example of the latter is if new laws come out and you think your city will add a grandfather clause in the next iteration.

Deciding whether to comply immediately or to observe for potential evolution in the laws involves assessing both risks and potential benefits. Your decision should align with your risk tolerance, values, and the unique circumstances of your properties.

Final Thoughts

Successful STR management hinges on adaptability and informed decision-making. Staying current with evolving regulations and assessing how they impact your strategy is very important. 

By balancing compliance with strategic flexibility, STR owners can navigate the complexities of the market while maintaining profitable, responsible operations.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.