Many thanks to writer and producer Lena Katz for this guest post.
The landscaping is perfect, the historic buildings perfectly preserved, and the security is tight. Surely this neighborhood is an ideal place to buy a short-term rental home—right?
Not necessarily. Those features, and many more, can be a sign that a neighborhood won’t welcome your investment. Sometimes a neighborhood is just too “nice” to be investor-friendly. There are often regulations galore and lots of overzealous community members committed to keeping strangers out.
Before starting your search, consider these 7 reasons why you might not want to buy your short-term rental home in a nice neighborhood:
- NIMBY (“Not in my backyard”) associations
- Historic designations
- Rental restrictions
- Parking restrictions
- Unfriendly HOAs and Co-op boards
- Slow permitting and inspection process
- Too dull or too out-of-the-way
- Over-observant neighbors
1. NIMBY neighborhood associations
NIMBY groups can cripple a neighborhood’s improvement potential because they want nothing to change. They’ll fight—sometimes ferociously—everything from changes in paint color or landscaping, and forget about adding a second story or enlarging the front porch.
Even if the locale’s zoning regulations are on your side, NIMBYs will stand in your way at every point. The neighborhood can be perfect, but you’ll be seriously crippled in your ability to make your home more appealing to short-term guests.
2. Historic designations
Ever toured a charming historic property and wondered why the owners haven’t updated the clunky plumbing and the drafty windows? It might have been too hard for them to get into the guts of the place and fix it up without raising alarms.
Homes identified as historically significant to their community or their state may be protected by multiple zoning and historic preservation laws. To remodel the home, you need approval from a local historic or conservation commission. Getting that approval can be a challenge, and you might have to make a commitment to work with architects and engineers who are already known to the commission.
3. Rental restrictions
Maybe you find a beautiful, well-priced condo in a lovely neighborhood only steps from the beach: the perfect second home! You make an offer only to learn that you won’t be allowed to rent it out until you’ve lived in it for at least a year. Even then, the minimum rental period will be six months, far too long for you to use the condo as a short-term rental.
This is not an unusual situation. More and more communities, especially popular vacation areas and cities with lots of transitional residents, have enacted strict laws around short-term rentals. To make matters more difficult for owners, HOAs and co-op boards often add stricter rules of their own.
If your goal is to rent your second home to travelers, learn about any rental restrictions well before you enter into any serious discussion about a purchase.
4. Parking restrictions
Unless your short-term rental is in a city with good public transportation, your guests will need a place to park. But “nice” neighborhoods often have permit-only street parking, with hyper-vigilant parking monitors who gleefully hand out tickets to transgressors.
It’s best to research the restrictions before you buy.
5. Slow renovation process
Chances are you’ll want to renovate or at least upgrade the home you buy to make it more attractive as a short-term rental. But even for “non-historic” homes, it can be time-consuming and difficult to get the necessary permits and inspections. In communities where permits and inspections take three times longer than average to turn around, you will need to adjust your entire renovation/capital improvements timetable.
Think about whether you can afford to pay the bills until the home is ready for paying guests.
6. Too dull or too out-of-the-way
People travel for lots of reasons. But when you’re buying a home to use as a short-term rental, keep in mind that a lively neighborhood near interesting activities has more appeal than one in a nice but boring neighborhood.
Think about what your guests might want to do while they’re staying in your home: Hike? Ski? Visit an amusement park? Shop and go to museums? Try new cafes and restaurants? Your short-term rental will attract more guests if it’s close to where they want to be.
But keep in mind that neighborhoods can be too lively and too close to tourist activities. A fun, exciting neighborhood gets its character from the restaurants and bars surrounding it—but it also might be noisy and congested. Sometimes a little dullness isn’t bad. Look for a neighborhood with a good balance of activity and peace.
7. Over-observant neighbors
“Nice” neighborhoods tend to have an abundance of over-observant neighbors who are finely tuned to strangers on their street or in their building. It’s nice to have friendly neighbors who will keep an eye on your home when you’re not there. But the same neighbors might not take kindly to guests coming and going every few weeks, which can make life difficult for you and unpleasant for your guests. It’s something to think about before you buy a short-term rental home.
But what if your heart is set on buying your short-term rental home in a nice neighborhood? You can alleviate some of the neighbors’ concerns by getting to know them, letting them know that you screen your guests very carefully, and making sure they can reach you quickly if they notice any problems.
Have you ever bought a short-term rental home in a nice neighborhood? We’d love to hear from you in the Comments or on our Facebook page.