When I first started real estate 20 years ago, you could buy a home for a rental, or whatever you wanted, wherever and rent, rent, rent. And as time has gone by, it has become more and more restrictive to buy a home just to rent it out, especially for a short-term rental. “The magic sentence, which is” 29 days or less. The journey of a “29 day or less rental home has become very restrictive” and there's a lot of things that need to be in place and a lot of things that need to be done.
The first step of buying a rental is establishing the area you want to be in. Next step is to call the county who has a dedicated permit rental employee on staff. Here you can find out about the wait for the permit, the length of the list and how it works in the area you are looking in. For a vacation rental permit at Pleasure Point for example, a homeowner, not a buyer, (you cannot get involved in getting a permit on speculation,) the homeowner puts their name on a list for a permit. It may take one to two years to secure it. Currently, there's 41 people in the whole county right now on a list to get called. And you will get called at some point. I do know of a client that waited a year and a half and did get called on in the Sea Cliff neighborhood. You're going to call that person right away, after your purchase they're going to give you paperwork, and then you're going to pay for the permit. Once the permit is secured, you can go on to Airbnb, VRBO or you can call Surf City Rentals and have them do all the advertising. Airbnb and V R B O are just sites that people put their properties on to advertise their beach rentals but this term often explains short term rentals.
Next step is area. There are communities, neighborhoods, or complexes that you can vacation rental in, starting with Pajaro Dunes, which is pretty far south, it's technically Watsonville. And then there's Seascape Resort, which is kind of like a hotel, people tend to lose interest with the realties of doing a rental within government guidelines. And there are basic vacation home permits.
Over the years restrictions were put on because of complaints. For example, five homes at Pleasure Point started doing short term rentals in a very small neighborhood where there are small lots, and the homes are very close together. A lot of people are coming and maybe making noise and having parties and gatherings. And over the years with the rentals, it got out of hand. Also, a supervisor moved into one of those neighborhoods and with complaints got the ordinance put in place. It is understandable. I mean, if you live in a nice house and on either side of you there's people coming and going, it, it can be a lot. And to be fair, Airbnb really blew it open. Like so many companies do. These disrupter companies come in wild and crazy, until there's pushback and then they go back and put in better restrictions.
There are different kinds of rentals area is important. Areas that you can do short-term rentals freely are Pajaro Dunes which is a little further south. Every unit is right on the sand, pretty much right on the beach. It is a whole vacation atmosphere type of place. Really nice community. And It's built for that. People are there, kids are running around yet it can be very quiet as well. They have their own rental company on site there that you can use. So they make it pretty easy. The next one would be Canon del Sol, which is off of San Andreas past Manresa Beach it's a bunch of town homes next to a state park, Manresa State Park, you can rent in there. But the caveat is that you have to have permission from the neighbors on each side of you that you share a wall. Another area you can do a short-term rental is Beach Drive, Aptos. You can get a permit easily. Yet this place is busy, floods and the prices can be high but it is a fun beach. Also, there is a complex on OceanView Drive there is a row of town homes that are right on the sand, and you can do it in there as well.
I sold one there and the most successful rentals used a management company to get them cleaned, and have it taken care of. They also can help you monitor activities, so you don't make the other neighbors upset. Keep in mind a beach rental can be a full-time job. There is scheduling, cleaning and maintenance, government compliance and neighborly issues if you decide to forgo a rental company.
If you wonder how this is enforced, go onto the City of Capitola and look up the vacation rental rules and regulations, there's a whole page on, if you know of somebody who is, non-compliant, you can call this number. All the complaints are going to be from the neighbor. It's very easy for a neighbor to track. People coming in, going every two, three days. All they have to do is call the City of Capitola or the city of Santa Cruz and say, is this person registered? Placards are required to this gives the neighbors a number to call in case of a disturbance. The city and county outside of Capitola are very active in enforcement as well and take neighbor calls seriously.
Taxes: There is a TOT tax, which is a transient occupancy tax. Let us say you're renting down in Capitola Village you go, and you get your permit, you have to also have a business license. Not all parts of the county require this, but you do have to have to have one in Capitola. And then every month you have to fill out a ledger to send to the city of how much was made week by week. And if even if it's vacant, you still have to send that ledger in and it's a 12% tax. No tax if no rental but you still have to turn in your ledger. They want an ongoing ledger too, it's a business and they track your business.
It's possible to fly under the radar, but, when people come to me and they specifically want to know, what do we have to do? This is what I tell them, these are the areas that they can do it. And they can apply for the, the permit and be on a waiting list. Or go to Pajaro Dunes and Seascape, you can use their management companies.
For beach rentals designate the area, understand the local laws, be prepared to pay taxes, cleaning charges, maintenance and maybe management fees it can be done, it is not easy but can be done. Also consult your attorney and CPA for how to hold title and what taxes you will pay to the IRS.
Posted by Michele Replogle on
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