Is Renting Your Vacation Home Even Legal?
Here's Exactly How to Find Out
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The Red Tape
Now that you know who you are as a future vacation home owner, what your dream home looks like and where it’s located, we need to talk about the elephant in the room: regulations.
If your eyes are already starting to glaze over, I get that. This isn’t the sexiest part of vacation home ownership. But here’s the thing: making sure your home, your investment, is able to be rented out legally is absolutely essential for this strategy to work. Additionally, we not only need to know what’s legal today, but what trends and attitudes are shaping the regulations of tomorrow.
Where to Begin
So, where do you even start? Regulations live in a hierarchy, and depending on where you buy, you may need to answer to one, some, or all of the following:
Village
Township or City
County
State
Country
STEP 1 - Figure out who’s in charge
Look back at the shortlist of destinations you came up with. Now, head to your favorite real estate website (i.e. Zillow, Trulia, Redfin, etc.) and grab a few addresses of properties that are currently for sale.
Armed with those addresses, visit the U.S. Census Bureau’s Geocoder website, specifically selecting “Stateside Parsed Address Processing” under “Find Geographies”. (Let’s ignore the fact that the government is in desperate need of a marketing department and a rebrand, and instead, focus on the fact that this tool is helpful and free.) Populate the search bar with one address at a time and check out your results. You’re specifically looking for:
Township or City (under “County Subdivisions”)
Village (under “Incorporated Places”)
County (under “Counties”)
State (under “States”)
STEP 2 - Check Local Laws
Now that you know who’s in charge, it’s time to learn about these municipalities.
i. Google it/ Ask ChatGPT - Start with the smallest municipality first (typically the village, if applicable) and work your way outwards. Begin with a simple search: Short-term rental regulations in [Municipality Name]. See what pops up. You might get your answer straight away or you may need to refine your search terms.
Pro Tip- Make sure you’re looking at the correct town. When I was buying in Lodi, NY, I frequently received results regarding Lodi, NJ and Lodi, CA.
ii. Check official websites - The next place you want to look is the official website for each municipality. Most likely, your search results in step i led you here. Many towns post their ordinances, permit application rules, and even frequently asked questions about short-term rental regulations here. A quick Control-F search can quickly highlight terms like “short-term rental”, “STR”, “Airbnb” and more.
Pro Tip- Another overlooked place to find information: meeting minutes. Most towns archive these online and you can find motions, failed rulings and general discussions that can help you understand community sentiment.
iii. Pick up the phone - Next, it’s important to call the office directly. Their phone number is typically listed on their website, and you could say something like this:
Hello. I’m considering purchasing a home in [Town Name] and might want to rent it out on sites like Airbnb and Vrbo when I’m not there. I wanted to find out if [Municipality] had any short-term rental regulations. Would you be able to connect me to the person who oversees that?
Typically, your call will be routed to zoning, planning or building, though it’s not uncommon for many small towns to not have these departments. Once you’re connected to the right person, get as much information as you can. Don’t just ask what’s legal today, but also:
Are any changes being discussed?
What’s the community’s sentiment towards STRs—economic driver, nuisance or somewhere in between?
Is there a cap on or a waitlist for permits?
Can permits transfer from one owner to another?
If I submit all permit documents correctly, is there any reason why I might be denied?
Pro Tip- Remember, you’re speaking to one person, so their opinions on sentiment shouldn’t be taken as gospel, but rather as helpful clues in trying to piece together a larger picture.
iv. Check press coverage - After the call, go back to Google and click on the ‘News’ tab. Look for coverage of proposed regulations that failed to pass, protests from neighbors, or anything else making headlines.
Pro Tip- Set up a Google Alert for “[Town Name] + short-term rental” so you get notified about future developments in real time.
v. Talk to local owners and property managers - Finally, get intel from people on the ground. You can find them via Facebook groups, Airbnb’s Co-Host network, or local STR management companies. Search Short-term rental management in [Town Name] and make some calls. These conversations often reveal the real sentiment in a way city hall never could.
Pro Tip- More advanced short-term rental owners and operators might have direct booking websites for their properties. Find these by searching Short-term rental in [Town Name] and use their Contact form to reach out directly.
STEP 3 - Permits
Most commonly, at least one of the municipalities that oversee your address will require a short-term rental permit. There is typically a clear set of criteria outlined for you to apply. Depending on your location, you might need to submit:
An application form
An application fee (one-time, annual or another cadence)
A copy of your deed (or other document showing ownership)
Proof of insurance
A site plan (sometimes a quick amateur sketch will suffice)
Copy of your advertising materials
Certificate of Authority to collect tax (more on this in the next section)
You may also be required to complete, pass or agree to:
Fire and/or safety inspections
Occupancy limits (commonly 2 people per bedroom)
Parking requirements (often 1-2 off street spaces per bedroom)
Provide guests with a copy of the area’s rules
Finally, pay close attention to two things once you’re approved: where you’re required to display the permit (typically inside your home) and when it expires. An out of date permit = a shut down rental.
STEP 4 - Occupancy + Sales Tax
Occupancy tax (often called “bed tax”) is a per-night tax charged to guests that goes to the local government (typically the county). Depending on your location, one, some, or all municipalities may require you to collect it (charge the guest) and remit it (send it to the municipality).
Every jurisdiction has their own rules, processes and procedures. Most are fairly straightforward, especially now that you know where to look. If you’re interested in buying someplace that requires manual paperwork and you don’t want to be bothered mailing checks or filling out forms, we’ll discuss options to outsource this in future newsletter.
Free Resources
Download the free Due Diligence Checklist and the Due Diligence Worksheet to guide you through every step of the regulations process.