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  • Writer's pictureBrandon Farmer

Hosting an Investment Property (not your personal home) on Airbnb In Louisville

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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