Cashflow Diary™

Four. That's how many places I check before I sign a lease on a rental. Four places. And most people who ask me, is Airbnb legal in my city, have checked zero of them. They've checked a headline.

Welcome back to the Cashflow Diary podcast. I'm J. Massey.

Maybe you're not even thinking about rentals yet. Maybe you're thinking about money. The paycheck that's gone before the month is. The feeling that one surprise bill would knock you over. Somebody mentioned renting out a place, and the very next thing you heard was, oh, you can't do that here. They banned it.

Maybe that's true where you live. Maybe it isn't. I'm not going to tell you which today, because I don't know your city, and I'm not your lawyer. What I will do is show you how to find out for yourself, the same way I do it every time I look at a new market. Four places. Before you sign anything.

The first thing I tell people is this. The newspaper article is not the ordinance.

I've said it on live trainings for years. Somebody tells me, well, it's banned and I can't do it here. And I ask one question. Did you read the ordinance? Not what the newspaper said. Not what you think you know or heard. Did you actually read the ordinance?

Almost every time, the answer is no.

A headline has a job, and the job is to get you to read the story. City council restricts Airbnb gets more clicks than city council adds a checklist. I know of a couple of cities where the headline said restrictions, and the restrictions turned out to be a fire extinguisher, a smoke detector, a carbon monoxide detector, and your contact information where guests can find it. Things a good host does anyway.

Other times the rules are real, and they're strict. Some places do say no to certain kinds of rentals. That's fine too. You want to know which one you're dealing with before you sign a twelve month lease, and not after.

Same goes for your realtor friend, the property manager down the street, and the guy at the barbecue who heard you can't do it here. They might be right. They're still not the ordinance.

Place number one is the city or county code. That's where the actual rule lives.

Here's the search I give people. Type short-term rental ordinance, then the name of your city. When the results come up, look for the address that ends in dot gov. That's the government. A dot com page is somebody's interpretation, and I want the boring original.

Most cities post their code online, and a lot of them use a code library like Municode or American Legal Publishing, with a search box. Type in short-term rental. Then try transient, lodging, and vacation rental, because cities don't all use the same words.

Sometimes it takes a while. I did this once on a live training, with a city in Utah I'd never looked at before. I clicked through the city website, the planning page, the zoning map, the municipal code. Couldn't find it. The rule I needed was at the county level. So if the city comes up empty, check the county. And if the property sits outside city limits, the county may be the one with the rule.

If you can't find anything at all, don't take that as a yes. That's your cue for place number two.

Before we get there, once you find the ordinance, here's how I read it. I go straight to the definitions.

Most of the answer is sitting inside the definition. What does this city call a short-term rental? Who does the rule apply to? Read it slowly. Every word is in there on purpose.

A lot of codes tie it to the number of nights. Austin, Texas, for example, says on its city website that short-term rentals are residences rented for less than thirty consecutive days. So in Austin's own words, the length of the stay is part of what makes it a short-term rental. Your city's number may be different, or there may be no number at all. Find it and write it down.

Then look for four more things. Where, meaning which zones or neighborhoods the rule covers. When, meaning night limits, or a cap on days per year. How, meaning a permit, a license, a registration number, or an inspection. And who. Some codes limit certain kinds of rentals to owners, or to people who live on the property.

The most useful question I know when you're reading one of these is, what does that mean? Ask it about every word you're not sure of. Primary residence. Dwelling unit. Transient. Circle it, and take that list to place number two.

Place number two is the people who run the rule. Usually that's the planning and zoning department, or a permit or licensing office. Some cities have a short-term rental page with a phone number and an email right on it.

Now, I've said for years that the guy at the planning counter is not the ordinance either, and I stand by that. So do your reading first. Then call with the section number in front of you. It changes the whole conversation. Instead of asking, can I do Airbnb here, you can say, section such and such defines a short-term rental this way. Does this address fall under it? Is there a permit I'd need?

Write down who you talked to, the date, and what they said. Then ask them to send it in an email. A phone call is a memory. An email is a record.

Ask what it costs to apply and how long it takes. Ask if there's a cap or a waiting list. The goal is to work with the city, in the open.

Place number three is the HOA, the homeowners association, or a condo or co-op board if there is one.

In general, I'm not a fan of HOAs for this business model. They can have their own rules, and those rules can be stricter than the city's. A city can allow something an association still prohibits.

The rules live in a document called the CC&Rs. That stands for covenants, conditions, and restrictions. There are also bylaws, a list of rules, and amendments, and the amendments are where things change. Ask the management company or the board for the current versions of all of it.

What do you look for? Words like lease, rental, minimum term, transient, and business use. Some associations set a minimum lease length. Some cap how many units can be rented at once.

Some cities send you right back to the HOA. Newport Beach, California, says on its short-term rental page that it's up to the owner to review their CC&Rs and follow up with the HOA before advertising or applying for permits. The city is telling you the same thing I am. Check both.

Place number four is the lease. Or the deal with the owner, if you're buying.

For me, most of my units came through rental arbitrage. That means leasing a property with the owner's permission and renting it out furnished. The words that matter there are the owner's permission.

Read the lease for words like sublet, sublease, assign, occupancy, and business use. If the lease is silent, or it says no, the conversation with the landlord comes first. So put it on the table. In our course, the order goes like this. Find a landlord who's willing to do business. Tell them exactly how you run it, who you serve, and how you find your guests. Check the ordinances. Then sign the lease, with the permission written into it.

Airbnb's own help center tells hosts to read their lease, check with their landlord, and check their HOA rules. It even suggests adding a rider to the contract that spells out who's responsible for what.

A rental is a business. It takes work, it takes money, and it can lose money. This is education, not financial advice, and it's not legal advice. For your situation, talk to your city and a local attorney.

Now your homework. Ten minutes. Pick one city. Do the search, short-term rental ordinance plus the city name. Find the dot gov page. Find the definition, and write down the number of nights, if there is one. You'll know more than the headline did.

Four places. The code. The people who run it. The HOA. The lease. Check all four before you sign, and the headline stops making your decisions for you.

If you'd like a second set of eyes on your situation, your numbers, and whether a rental business fits your next step... that's what our complimentary one-on-one diagnostic call is for. Go to cashflowdiary.com/diagnostic. And we'll look at it together. Bring the ordinance, if you found one.

Okay, that's it for today. Pick a city, find the definition, and write down the number. I'll see you on the next one.

I'm J. Massey. And this has been the Cashflow Diary podcast.

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Quick note... this episode was voiced with my licensed AI voice, built from my own recordings.