Owning a vacation rental can be quite lucrative, especially in popular destinations such as Miami Beach. If you are considering entering into the Miami Beach short term rental market, it is important to have a good understanding of the legal and financial implications, particularly in the wake of the settlement between Miami Beach and Airbnb.
THE FUTURE OF AIRBNB IN MIAMI BEACH
The vacation rental market in Miami Beach has been making headlines for quite some time, and not just due to the amazing beaches and nightlife. Miami Beach has been involved in a lawsuit with Airbnb since January, when Airbnb filed suit against the city alleging Miami Beach’s rules concerning short term rentals violated federal law. This suit was settled in early August, bringing clarity to the future of vacation rentals in Miami Beach.
So what was the lawsuit all about? Much of it revolved around a Miami Beach ordinance that required companies such as Airbnb to verify and display a city business tax receipt and a resort tax certification alongside listings. These are required in order to avoid fines of up to $20k for noncomplying homeowners. Miami Beach placed the onus for this compliance on home-sharing websites in response to a loophole in which tenants were renting out and subletting rooms and then sticking the property owners with the fines.
According to the complaint, “The burden to Airbnb of reviewing third-party content to alter, prohibit, or remove listings… would be an ongoing and expanding burden. In the normal course of business, hosts can add new listings, change the status of listings, and deactivate listings every day, at any time. Airbnb then, too, would have to monitor for every change constantly…[which] would cause a significant disruption to Airbnb’s operations and impose substantial personnel and other costs”
The lawsuit between Airbnb Inc. and the city of Miami Beach was dismissed after mediation proceedings produced a settlement between the two parties. As a result of the settlement, Airbnb will no longer be expected to verify the validity of the business tax receipt number and resort tax number for each property listing. Airbnb will provide the mandatory fields for hosts to fill out while the city will verify validity. In addition, Airbnb paid Miami Beach $380,000 to be used at their discretion “including to educate residents about home-sharing rules and/or for the enforcement”.
Airbnb sees this settlement as a positive breakthrough, noting that the settlement is “a win-win for Airbnb and our Miami Beach hosts as we move towards a constructive and collaborative working relationship with the city. It is a win for our hosts who will have certainty as to the rules and a win for the city when it comes to having a regulatory framework that will work.”
The clarity gained from this lawsuit by the largest player in the home-sharing industry should bring comfort to those who are in, or considering entering the vacation rental market in Miami Beach. It paves a clear path forward for the industry and should allow it to continue growing, within the guidelines set forth.
PRACTICE SAFE RENTING: HOW TO AVOID POTENTIAL FINES
Homeowners who participate in short term rentals in Miami Beach without following the Miami Beach ordinances can face huge fines of up to $20,000. If you are considering entering the vacation rental market in Miami Beach, it is important to make sure that you have the necessary approval.
The City of Miami Beach Land Development Regulations (Chapter 142, Article IV, Division 3, Sec. 142-1111) prohibit short term rentals for periods of six months or less for homes located in certain areas of the City. Miamibeachfl.gov provides an easy way to verify that the property that you intend to rent is permitted. Enter your property address here to find out – or reference the zoning map.
In addition to the zoning requirements, there are slews of other licenses, certificates, and receipts that homeowners who intend to rent a property on a short term basis must have. This includes:
Obtain Florida state Department of Business and Professional Regulation (DPBR) business license
Register with the Florida Department of Revenue
Obtain a Miami-Dade Certificate of Use
Obtain a Resort Tax Registration Certificate if in the City of Miami Beach
Obtain a Business Tax Receipt from the City of Miami Beach
Other requirements may also pertain to your dwelling. Within Miami-Dade county, if a home is part of a condominium or homeowner’s association, one must obtain written authorization from the relevant association regarding the operation of their short term rental. Additionally, swimming pool safety requirements are in place within Miami-Dade county. Vacation rental homes with swimming pools can not permit children under the age of 6 to stay unless the pool has a safety barrier, safety cover, pool alarm, or door latch/alarm.
UNDERSTANDING A VACATION RENTAL’S INVESTMENT POTENTIAL
Vacation rentals in Miami Beach can truly be great investments, but it is important to have an accurate understanding of the revenue that your investment could be expected to drive. To arrive at this figure, you must have a firm gauge on the income your investment will drive, as well as the expected costs you will incur through fees and maintenance.
To arrive at your potential income figure, you need an understanding of the nightly rate that you can charge, and the occupancy rate that you can expect to achieve. Location, amenities, home size, and seasonality are all factors in determining this figure. Working with an experienced real estate firm is invaluable in gaining confidence in this estimation. Don’t trust blanket advertising figures that promise a certain percentage increase for short term rentals in comparison to renting to an annual tenant. This figure can vary widely.
Prospective investors must also have an understanding of the fees and expenses their investment will incur. This includes an understanding of the depreciation that the property will face as a result of additional wear and tear, and what the maintenance and cleaning plan will entail. In Miami Beach, rentals for periods of less than 180-days are subject to a resort tax, which is 4% on the rent of the dwelling. To calculate your potential resort tax, use this form.
In order to make sure that your Miami Beach vacation rental investment is going to work in your favor for years to come, you need to be informed. Working with an experienced real estate agent who has an abundance of market knowledge empowers you to make the best decision for your lifestyle, considering your financial goals. Your agent can help you understand the power of your investment in light of location, market trends, and the current legal landscape. Reach out to an agent at RE/MAX Paradise today if you are considering purchasing a vacation rental in Miami Beach to get a thorough understanding of your investment landscape.