Buying an Airbnb investment property is one of the best strategies to make money in real estate investing. But Airbnb legal issues have been popping up across US cities and counties that either ban or restrict renting out on Airbnb. In this blog, we will discuss the most common Airbnb legal challenges and provide you with a list of US cities with the least Airbnb legal issues.
What Are the Most Common Airbnb Legal Issues?
Checking the legal requirements of operating an Airbnb rental is important to avoid paying fines. So before we talk about the cities with the best investment environment for short-term rental investors, let us go over the most common short-term rental laws in the US housing market.
#1. Zoning Laws
Many cities have zoning laws that allow Airbnb landlords to operate only in restricted areas. Zoning Airbnb legal issues in some cities don’t allow the operation of an Airbnb rental property in residential areas, for example.
#2. Non-Owner-Occupied Property Restrictions
In cities like Las Vegas and New York, an Airbnb real estate investor is not allowed to rent out his/her non-owner-occupied property on vacation rental websites. The property must be your primary residence.
#3. Extreme Permits
Most cities require some kind of business permit to operate an Airbnb rental. However, some cities ask for extreme permits and registration requirements. These can be very expensive and even hard to obtain or qualify for depending on the location.
#4. Restricting Short-Term Rental Investments
Some cities limit the number of Airbnb rental properties that you can list at the same time. Such Airbnb regulations are not favorable for real estate investors who wish to invest in several Airbnb investment properties.
Where Is Best to Buy a Short-Term Rental?
To avoid such restrictions and invest in Airbnb property with ease, consider buying a short-term rental in one of the following cities:
#1. Dallas, Texas
Tourism is a leading industry in Dallas. The city welcomes around 25 million visitors every year, making it a great place to invest in Airbnb. Besides affordability and profitability, Dallas has no strict Airbnb regulations, making it a perfect market to invest in short-term rentals.
- Median Property Price: $431,031
- Occupancy Rate: 51.14%
- Airbnb Rental Income: $2,650
- Airbnb Cash on Cash Return: 1.9%
#2. El Paso, Texas
El Paso is another city in the Texas real estate market with friendly Airbnb laws. The short-term rental market in El Paso has been stable for years and it offers affordable properties for sale with high cash on cash return. El Paso is located in an international metropolitan area. That along with the nonexistent Airbnb legal issues make it an ideal city to invest in a short-term rental.
- Median Property Price: $213,151
- Occupancy Rate: 56.97%
- Airbnb Rental Income: $1,837
- Airbnb Cash on Cash Return: 2.6%
#3. San Antonio, Texas
Similar to other cities in Texas, San Antonio does not have Airbnb legal issues when it comes to owning an Airbnb rental property. However, a new short-term regulation was passed in November 2018 that requires Airbnb landlords to register with the city council and pay a $100 fee that has to be renewed every three years.
- Median Property Price: $300,612
- Occupancy Rate: 50.56%
- Airbnb Rental Income: $2,236
- Airbnb Cash on Cash Return: 2.7%
#4. Mesa, Arizona
Since January 2017, Arizona State declared that cities, towns, and counties cannot set Airbnb restrictions on short-term rental properties. Moreover, Senate Bill 1382 (which passed in April 2018) states that Airbnb landlords do not need to pay for short-term rental taxes. Rather the online services will be responsible for collecting taxes from renters and making payments to the state and local authorities.
Thanks to these laws, Arizona is one of the states with the least Airbnb legal issues. In this list, we included Mesa, Tempe, and Phoenix as the best cities to invest in Airbnb in Arizona.
- Median Property Price: $328,613
- Occupancy Rate: 49.37%
- Airbnb Rental Income: $2,002
- Airbnb Cash on Cash Return: 2.5%
#5. Tempe, Arizona
- Median Property Price: $335,159
- Occupancy Rate: 51.53%
- Airbnb Rental Income: $2,479
- Airbnb Cash on Cash Return: 3.3%
#6. Phoenix, Arizona
- Median Property Price: $389,277
- Occupancy Rate: 48.84%
- Airbnb Rental Income: $2,389
- Airbnb Cash on Cash Return: 2.6%
#7. Indianapolis, Indiana
Last year, a historic short-term rental bill passed Indiana’s legislature that prohibits municipalities from banning short-term rentals or home sharing. Indianapolis does, however, require real estate investors to get an initial permit for a $150 fee.
- Median Property Price: $218,565
- Occupancy Rate: 48.59%
- Airbnb Rental Income: $2,038
- Airbnb Cash on Cash Return: 4.8%
#8. Columbus, Ohio
Ohio is another state with the least Airbnb legal issues. Both Cleveland and Columbus are great cities for Airbnb investors. The city of Columbus has begun regulating Airbnb rentals since January 2019. The new regulation requires short-term rental owners to apply for a permit in order to operate.
- Median Property Price: $241,114
- Occupancy rate: 52.7%
- Airbnb rental income: $2,142
- Airbnb cash on cash return: 4.5%
#9. Cleveland, Ohio
- Median Property Price: $181,966
- Occupancy Rate: 47.6%
- Airbnb Rental Income: $1,993
- Airbnb Cash on Cash Return: 4.9%
#10. Louisville, Kentucky
Louisville has little Airbnb legal issues which makes it ideal to invest in short-term rental properties here. However, the city requires Airbnb hosts to register the investment properties for a $100 fee and limits the number of guests to two times the number of bedrooms plus two. For example, in a 2-bedroom rental property, you can rent it out to 6 guests max.
- Median Property Price: $315,740
- Occupancy Rate: 44.41%
- Airbnb Rental Income: $1,898
- Airbnb Cash on Cash Return: 2.9%
#11. Kissimmee, Florida
Investing in Airbnb Florida is probably the most appealing strategy in the US housing market due to its affordability and high rental income. Cities in Florida require a business license to operate an Airbnb rental property. Some cities in Florida like Fort Lauderdale require investment properties to undergo a home inspection as well.
- Median Property Price: $250,287
- Occupancy Rate: 73.47%
- Airbnb Rental Income: $2,833
- Airbnb Cash on Cash Return: 4.9%
#12. Davenport, Florida
- Median Property Price: $238,793
- Occupancy Rate: 68.59%
- Airbnb Rental Income: $2,458
- Airbnb Cash on Cash Return: 4.4%
#13. Fort Lauderdale, Florida
- Median Price: $689,682
- Occupancy Rate: 54.86%
- Airbnb Rental Income: $2,799
- Airbnb Cash on Cash Return: 1.6%
If you think that investing in a short term rental property in any of these locations is the right choice for you, you should learn how to become an Airbnb host.
The Bottom Line
Now that you know which cities have the least Airbnb legal issues, it is time to start looking for an investment property in those cities. An Airbnb profit calculator will provide you with the Airbnb occupancy rate, rental income, and return on investment metrics. Knowing these real estate metrics is important to make investment decisions. You can find this tool here at Mashvisor.
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