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Excerpt from How to Rent Vacation Properties by Owner by Christine Hrib Karpinski.

September 28, 2010

Below is an excerpt from How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment (Kinney Pollack Press, © 2007, ISBN: 0-9748249-9-2, $26.00). Used by permission of the author, Christine Hrib Karpinski

Vacation property owners all around the world are facing impending laws restricting the ability to rent their homes on a transient basis.  If you think that your area is immune, think again.  Communities in many states including Arizona, California, Florida, Hawaii, Maine, Nevada, New Mexico, New York, Oregon, Pennsylvania and even parts of Canada, Europe and Australia have imposed restrictions and outright bans on vacation rentals.

There are 3 main issues driving vacation rental restrictions.

The permanent residents.
It seems that many people who live permanently in the vacation rental areas are upset that people are moving in on their secret little paradises. They don’t like to deal with the crowed roads, stores, restaurants, the noise, etc.  What usually starts the wheels in motion for such a restriction is a permanent resident filing a formal complaint with his local government or HOA.

The main disadvantage for vacation rental owners, though they do pay property taxes, is that most are not voting members of the community.  Even if an area had 25 percent of the homes owned by permanent residents and 75 percent owned by out-of-town residents, it doesn’t matter—the out-of-towners have no “vote.”  The permanent residents win every time.

Economics.
With the demand for vacation homes so strong, especially in what used to be sleepy little towns, the prices are driving out the locals. They can no longer afford to live in those areas.  Two places that come to mind are Hawaii and the Florida Keys.  Both have limited the number of vacation rental licenses they are issuing.

The hotel and bed and breakfast (B&B) industries.
Most people who rent by owner think that their main competitors are property managers.  While property managers do share the industry, it’s really hotels and B&Bs who are our biggest competitors.  Vacation rental owners are edging in on their territories.  And watch out, hotels especially have deep pockets and plenty of money to lobby against short-term rentals.

The biggest problem vacation rental owners face in this situation is that it’s difficult for individual owners to band together to fight the cause.  This is when it’s imperative that individual owners and property managers work together.  For example, Big Bear, California had a group of B&B owners who lobbied against vacation rentals.  Thankfully Big Bear had a good number of property managers and they worked with individual vacation homeowners to fight it together.  It was an ugly debate, but for now they have been successful in legally having the right to rent their properties on a nightly or weekly basis.

Defense?
One thing you may want to consider is networking with other owners and property managers to band together to lobby against any proposed regulations.  But your number one defense against vacation rental bans in your area is to collect and pay sales taxes!  And encourage all other owners in your area to do the same.  In every case I have seen regarding vacation rental bans, the sales tax revenue has been a heavily weighted deciding factor on whether or not the laws get passed. The areas where the majority of the property owners collect and pay sales taxes usually don’t lose their right to rent.  For instances, in 2005, Polk County, Florida reported that the vacation home industry contributed more than $3.5 million in tourism development taxes (sales tax) to their region.  That’s some serious money for the county.  I would venture to guess that Polk County Florida would have a hard time passing a vacation rental ban. Let’s face it, once the county, city or town is used to the revenue stream from the sales taxes collected via vacation rentals, no one like to give it up, especially not politicians.

And probably equally important is to get socially and politically involved in your vacation rental community.  Attend meetings, volunteer events, etc. that can help the community get to know you.  Let them see that you’re not just some monster investor who cares nothing about their community.  Be sensitive to their gripes and annoyances and try your best not to add to the problems.  Be sure to clearly inform your renters of any parking, noise, or other ordinances within the community.  Remember, even though you don’t live there full time, it’s your community too.

We are very thankful to Christine Karpinski for sharing an excerpt of the second edition of her book with us.  Please listen to bestselling author Christine Karpinski’s interview of an owner who fought a vacation rental restriction in Oklahoma and eventually won: http://media.podcastingmanager.com/45826-84299/Media/Dian%20Jordan.MP3

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