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By: Brandon Farmer

Cities all across the U.S. are tightening regulations for “non-owner occupied” short term rentals (STR). Nashville recently announced that all non-owner occupied STR’s will be required to cease operation beginning January 1, 2022. While owner occupied STR’s will still be permitted, this will still be a big blow to investors and hosts when the ball drops on New Years 2022.

So what is the difference between “owner occupied” and “non-owner occupied” short term rentals and what is the forecast for the market here in Louisville? Let's break it down…

There are 3 types of short term rentals:

Hosted Home Sharing - The primary occupant of the residence resides in the dwelling at the same time as guests.

Un-Hosted Home Sharing - The primary occupant of the residence vacates the dwelling while it is rented to guests.

Dedicated Short Term Rental - There is no primary occupant of the residence and the dwellings sole purpose is short term rental use.

photo credit: Louisville Metro Government

The first two (Hosted and Un-Hosted Home Sharing) are considered “owner occupied” short term rentals. There are several regulations regarding these types of STR’s. All STR’s, whether owner occupied or not, require a $100 annual short term rental registration. Booking channels such as Airbnb and VRBO are working with city officials to prevent unlicensed listings from being marketed on their sites. Other rules include regulations on the number of guests allowed, smoke/CO2 detector requirements, etc., but the main focus of law makers in Louisville and around the country are directed at number three on the list, Dedicated STR’s.

Dedicated STR’s are typically residentially zoned investment properties designated for rental periods of 30 days or less. If you want to turn investment property into an Airbnb or VRBO you will want to read the rest of this article very carefully!

Short term rentals are often seen in a negative light when it comes to neighbors. People who do not understand staying in a stranger’s house (I get that one all the time) automatically assume the worst possible thing will happen when random people come to stay next door. The overwhelming majority of Airbnb and VRBO properties have an overall positive impact on the neighborhood in which they’re located.

Home values increase. Local businesses thrive. Many eye-sore type properties are purchased and renovated into beautiful homes. The typical vacation traveler is out-and-about most of the day and only return to the property to rest, causing very little impact on the day-to-day activities of the neighborhood.

The main concerns (I like to call them the big 3) are noise, parking, and trash. No one wants to be woken up in the middle of the night or wake up to see a yard full of beer bottles. In many instances there are already ordinances to control these issues. The best way to deal with these issues is to make sure they never happen by thoroughly screening guests before allowing access to the home (*Tip: If a guest already lives in Louisville, DO NOT ALLOW ACCESS, you’re asking for a party!) or hiring a full time property manager to promptly respond to any issues that occur. Unfortunately, we do not live in a perfect world and issues will come up from time to time, which has caused many residents to contact local officials with complaints.

In May of 2019 Louisville Metro Government adopted a new set of regulations regarding “non-owner occupied” STR’s. In order to operate STR’s, owners and/or property managers must go through the process of containing a Conditional Use Permit (CUP) from the Board of Zoning Adjustment. This process usually takes around 60 days and can be a bit grueling if you’re not up for it. Here are the steps for obtaining a CUP for an STR in Louisville…

1. Submit a CUP Pre-Application - The pre-application gets the ball rolling and essentially reserves your place in line for STR approval. This must be accompanied by a $150 non-refundable fee, and must be physically delivered to the Office of Planning and Design.

2. Meet with Case Manager - The Office of Planning and Design will assign a case manager to your application. The owner/property manager will meet with the case manager to discuss the next steps and cover any potential obstacles for approval. During this meeting, the case manager will provide with a list of Tier 1 and Tier 2 neighbors who must be notified of your intentions via mail.

3. Early Notification Letters - A Tier 1 neighbor is any neighbor whose property lines touch your property lines directly. Tier 2 neighbors are any neighbor touching a Tier 1 neighbor within 500 feet of your property. You must compile a mailing list and send out a notice of intention to each identified neighbor.

4. Neighborhood Meeting - A second notification will go out to neighbors informing them of a neighborhood meeting. It is your, or the property manager’s job to host this meeting on a weeknight between 6pm and 8pm within 1 mile of the address of the proposed STR.

5. Submit Formal CUP Application - This is a $550 non-refundable application for your case to be heard by the Board of Zoning Adjustment

6. BOZA Hearing - After another follow up with your case manager, a date will be set for your hearing with the Board of Zoning Adjustment. Your CUP will either be approved or denied at this hearing. If approved, you must apply for your STR registration within 30 days.

*The 600 Foot Rule* - Part of the new regulations is the implementation of the 600 foot rule, which states that no two “non-owner occupied” STR’s will be permitted within 600 feet of on another.

It’s a lot, I know. But these rules exist for the greater good of our community. There are too many irresponsible hosts out there who do not care about the fabric of our neighborhoods.

There are a few loopholes. Any commercially zoned property is not subject to CUP requirements. Also, residentially zoned homes that sit on more than 2 acres get some special treatment. Surrounding counties, such as Oldham have far less strict policies.

STR ownership can be an immensely rewarding endeavor, both financially and emotionally. Sharing our great city with people from out of town is something that all Louisvillians should take pride in. Hosting travelers is a passion of mine. I love hearing stories about seeing the Twin Spires for the first time, or having that first glass of bourbon, or eating the first Hot Brown.

We need to share our city, but we need to do it right. These regulations help ensure that the fabric of our neighborhoods remain in tact.

I hope this gives you a better understanding of the regulations and why they exist. If you or anyone you know are going through this process or considering investing in STR properties please reach out to us anytime, we’re here to help!

Brandon Farmer is a short term rental owner, manager, and consultant. He is also the founder of Bourbon Trail Rentals in Louisville, KY.

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By Brandon Farmer

Mortgages. Student loans. Credit cards. Car loans. HELOCs. Sound familiar? Nearly every household in America is carrying some sort of significant debt that is keeping them from living the lifestyle they dream about. If you understand compound interest, you know that every dollar spent on a monthly payment today could be worth thousands 20 years from now.

Your number one wealth building tool is your income, and the way to maximize the income that you invest is by becoming (and staying) debt free. Not rocket surgery. If your money doesn’t go toward interest, you can put it towards your future.

The boom of the “gig economy” has opened doors for people to take on freelance positions in addition to their day job. Anyone with a laptop or a smartphone can take advantage of all sorts of different side hustles to earn extra income. That extra money can be used to pay off debt, go on a vacation, or donate to your favorite charity. One of the most lucrative endeavors in the “gig economy” is vacation rental ownership.

Now I know what you’re thinking…”Sure, it would be great to be a vacation rental owner, but you have to have a lot of money to do that.” Well, no ya don’t. Here are 5 reasons why debt free vacation rental ownership is more attainable than ever:

1. Staying in a stranger’s house has officially gone mainstream.

Now I don’t mean to get all “Ted Bundy Tape’s” creepy on you...but the fact is, if you’ve ever stayed in a VRBO or Airbnb, that space belonged to someone else that you probably had never met...a.k.a. A stranger. But by the grace of basic human evolution and 5 star reviews, people have become incredibly comfortable with staying in a stranger’s house. As a matter of fact, not only have we become comfortable with it, it is rapidly taking over hotels as our preferred method of lodging when traveling. Short term rental sites like VRBO and Airbnb take most of the anxiety out of the equation through detailed property descriptions and streamlined communication between guest and host. There is a trusting target market out there for your space, which leads me to my next point…

2. The marketing is already done for you.

Airbnb estimates that in 2018, 120 million travelers visited their website EVERY MONTH. Imagine making an instagram post about your house and within the first month you have over 100 million views….well, it’s not exactly the same thing but you get the point. The traffic is already flowing, you just have to merge. All the major rental sites have very user friendly interfaces that make posting and marketing a listing rather simple. While snapping a few photos and typing out a quick description will certainly get you in the game, you should definitely look into consulting an expert to help with photos and a description that will make your space stand out from the vastly growing competition.

3. Vacation rental sites allow you to rent single rooms in your home.

While the typical family or group of friends will be looking to rent an entire home, there is definitely a niche market for low budget travelers looking to book single rooms. Lucky for us, vacation rental sites do not require listings to be completely vacant homes. It takes a certain type of host to delve into this world. Having a guest stay at your place when you’re not there is one thing, but to share a house with someone you don’t know just down the hall is a little different. Another cool feature the listing sites offer if the ability to turn off the “Instant Booking” feature. This allows the owner to properly vet the guests requesting to stay. You can read reviews, chat, or share a phone call with potential renters to get a better feel of who will be coming. It may sound weird at first, but here’s the thing….people do it every day and have wild success with this strategy. My wife and I shared an apartment with 2 other couples in San Francisco (the owner was there too) and it was a great and memorable experience, even though we were a little unsure going into it. That owner was getting $150 per couple per night to help pay the mortgage….not bad.

4. Linens aren’t that expensive.

Whether you decide to rent out your entire home, or a single space, you will need to purchase extra linens and towels. This isn’t even about money, it’s just basic human decency. No one wants to sleep on used sheets or dry off with a used towel. Gross. You can get decent sheets and towels for very cheap through Amazon or other local stores. Most travelers are not picky. As long as the towels and linens are clean, dry, and smell decently fresh, that is good enough. Depending on the size and quality of your space, most of the upfront costs of starting a vacation rental are covered by a single weekend’s rent rates. $150 should be able to get a single space rental equipped with some nice sheets and towels.

5. Your space is already furnished.

One of the major differences between short term rental management and traditional land-lording is that the owner is responsible to furnishing the space as opposed to the tenant. If you’re getting started by renting out your entire place or a single room, there is a good chance that the space is already furnished. There is no requirement to go out and buy cashmere blankets and 24 karat gold lamps. Many travelers are simply looking for a clean, comfortable place to recharge during the downtime of their vacation adventures or business trips. Although it certainly helps to add some “Charm-Factor” to your space, a good review or two and some clean photos can get your listing off the ground. If you decide to spice up your listing once some cash flow is coming in it will only help, but there is certainly no reason to go into debt to create a standout listing.

As always, look into any local ordinances or laws that prohibit short term rentals in your area. Consult a local real estate or insurance professional to see if your dwelling might require any additional coverage or licenses. Most areas make it very easy to obtain short term rental credentials.

Get on track towards the life you want to live. Earn extra money and chip away at that debt. Be adventurous and meet some new people. Start a vacation rental business debt free.

Brandon Farmer is a short term rental owner, manager, and consultant. He is also the founder of Bourbon Trail Rentals in Louisville, KY.

Instagram (Brandon):

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