With all the recent changes being made to rules for short term rentals (vacation rentals) around Lake Tahoe, many clients have been asking us what investment options might still be available. We will go over a few of those options in this article.
Many people who purchase a home in Lake Tahoe want to use it sometimes for personal vacations, but also want the ability to have the property make some money to help cover the cost of ownership. While this might make up only about 25% of home purchasers looking at properties in Lake Tahoe, it is common enough that we wanted to lay out the options here.
WHAT ABOUT VACATION RENTALS?
But why is this even an issue? Can’t you rent out your property anyway you see fit?
Local jurisdictions can place limits on the use of properties within certain zoning. The best example is that you can’t use a home in a residential neighborhood as an auto-shop. The reason being an auto-shop would be a commercial use in a residential zoned area.
Vacation rentals, also known as short term rentals, are viewed as semi-commercial uses and are defined as any rental term of 30 days or less. Some people label them as hotels. While there is plenty of commentary and disputed views on this subject, the bottom line is vacation rentals are regulated and usually require a special permit through the City or County the property is located in.
Locally, all of the jurisdictions around the lake have instituted rules and permitting regulations for vacation rentals. One area keeps it pretty simple and just has the basic rules (Truckee, Tahoe City, Kings Beach). Some limit how many vacation rental permits they issue (El Dorado County & Douglas County). One has very strict rules on what areas vacation rentals are allowed (City of South Lake Tahoe). And another one is all over the map making it difficult to figure out (Incline Village).
While it is still possible to purchase a property and use it as a vacation rental in Lake Tahoe, some people are feeling priced out of getting vacation rentals due to the increase in pricing around the lake and high demand for properties in vacation rental approved areas.
For more detailed info on the status of vacation rentals around the lake take a look at our special Vacation Rental Page.
SHORT-ISH TERM RENTALS
Since only rentals 30 days or less are considered vacation rentals, the easy answer is to just do 31+ day rentals. But who would rent a home for 31 days or more in Lake Tahoe? And would you be able to use the home when you wanted to for personal vacations?
There are actually a lot of people who have swapped using their homes as vacation rentals and moved to renting for longer periods of time. They seem to do pretty good and are able to find renters who want to have the house for a month or two at a time.
Another option is what we call “ski-leases”. These can be in summer too, and are basically rentals for 3 to 4 months at a time. We get a lot of people who want to spend the “season” in Tahoe. Some like winter and want a place to hang out in when they come up to hit the slopes so they don’t have to drive all the way back home every day. Other folks are more fans of the warm summer days and desire a home to enjoy our lovely beaches and boating on the lake.
The benefit of seasonal rentals is that you can think about what season you want to use your property, and then choose to rent it out during the other season. Or rent it out summer and winter and just keep it for personal use during our off-seasons of spring and fall.
LONG TERM RENTALS
The other option is to do a normal long term rental for a while to make some money and help pay down the mortgage on the property. This can allow you to lower your expenses in the long run and help to be set up financially to use the home as your personal vacation property down the road.
Tahoe has been having a major shortage in long term rentals for many years. This is a common issue in many tourist destinations around the country, so it isn’t totally unexpected. However, it has reached a point recently that makes it almost impossible for our locals to find a place to rent that they can afford. The local jurisdictions are working on solutions, such as some new construction projects of apartments and residential workforce housing.
But until we get more workforce housing in Tahoe, locals are limited to what is currently available. Right now a nice clean 3 bedroom house with about 1200 sqft of living space can get around $2000 per month in rental income for a year lease. Larger homes can charge more, but there is a top limit to what locals can afford to pay. So anything over $3000 per month for a year lease isn’t going to attract many potential renters, except maybe a large group of people that rent it together, which is a warning sign and carries massive potential for hard wear and tear on your home.
IN THE END
In summary… you can still buy a home and use it as a vacation rental if the area you purchase in allows for it. You can also do slightly longer and full term rentals of a month or more in any area around the lake. It just depends on what works best for your situation.
Contact OUR TEAM today to discuss your options and find out how to find the right property that fits your needs.
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