Over the last decade, the sharing economy has transformed the way we eat and travel. Sharing services such as Lyft, Uber and DoorDash have become ubiquitous in communities throughout America. At the same time, these concepts have infiltrated the real estate market in some compelling and disruptive ways.
Consumer and B2B Rental Lodging
These days, more and more individuals and companies are using Airbnb services to book temporary lodging. In most cases, patrons use these sharing services for short-term stays in place of traditional hotels. Other people use them as a replacement for apartment rentals for long-term lodging.
While many real estate owners use Airbnb platforms to make extra money from unused properties or even bedrooms; some real estate investors are making millions from their properties.
Escalating Home Prices
In many cities, the sharing economy has played a role in driving up home prices. In places with limited inventory, for instance, it can be hard on local buyers when real estate investors buy up properties to use them as short-term rentals for tourists. This is one of the reasons many communities have implemented laws requiring that short-term rental properties be owned by local residents.
Commercial Short-Term Rentals
Leveraging the same concepts used in short-term travel rentals, some real estate investors are using the sharing economy to make commercial offices a more profitable investment. Instead of leasing or buying office space, freelancers, entrepreneurs and small businesses are being invited to participate in co-office arrangements. These shared work offices come with amenities, furniture, utilities, internet access, and sometimes even P.O. boxes and mailing addresses to help startups appear more professional. Some larger corporations even use them for traveling or remote employees.
It’s Not a Free-for-all
While that sharing economy has brought lucrative opportunities to many, it isn’t for everyone. Property owners should be aware that many cities have implemented rules governing Airbnb services. While it may sound relatively straightforward, the legal definition of a short-term rental can vary based on the county or city. Some places have surprising laws relating to length of stay, while others have very stringent rules relating to structure types.
In addition to regulating structure types and lengths of stay, many local governments also impose legal restrictions on short-stay rental businesses. To keep real estate investors from renting an entire unit or property as a short-term rental, many cities require that the home be owned by a local primary resident. On the other hand, some cities, such as San Diego for instance, completely prohibit any type of short-term rental; while others regard short-term rentals as “hotels” that are only allowed in designated zones.
Since these types of regulations can vary significantly, it’s important for property owners to check with local institutions to find out what qualifies as a short-term rental and which types of licenses and permits are needed. In Colorado Springs, for instance, there are some pretty clear regulations and licensing requirements for anyone who wants to use their property as a short-term rental for BNB services.
Things to Consider
While it can be disruptive in certain instances, the sharing economy brings good opportunities to the real estate market. For investment buyers, it can be a lucrative way to ensure a greater ROI, as long as the property exists in an area that attracts tourists or business travelers.
For ordinary homeowners, the concept provides an opportunity to earn extra money and help reduce the overall costs of a mortgage payment. Still, to fully take advantage of opportunities, it’s important for buyers to have an ally who can educate them on the local laws and regulations that govern short-term rental properties in and around the local community.
While rules and regulations can vary, most cities and counties demand that all buyers acquire – at minimum – short-term rental licenses and general business licenses. Applications typically require owners to affirm that their properties meet safety and health requirements, are up to code and compliant with local zoning laws. Owners are also usually required to notify neighbors that they plan to use a home as a short-term rental. Property owners may also be required to provide evidence that the property is a primary or secondary residence.
With more than six decades of collective experience, The Wheaton Team provides invaluable guidance and expert advice for home buyers and sellers. Specializing in residential real estate throughout all of Colorado Springs, our team can guide you through the complex selling, buying and financing process. Contact our knowledgeable real estate professionals to learn more.