3 leaders from Revedy, Nectar, and Proper Insurance share their insight on the latest trends in STR regulations, as well as practical tips for growing your STR business.

Even with the enormous growth of the short-term rental industry in recent years, many cities and municipalities lack clear and consistent regulations for STR owners and operators. 

In our recent webinar, “STR Regulations 101,” Nectar Head of Strategy and Growth Walker Skaar led a panel discussion with three leaders in the STR space: Revedy CEO Colin Carvey, Nectar CEO Derrick Barker, and Proper Insurance Director of Sales Nick Massey. 

The panelists provided an overview of some of the biggest trends they’ve noticed in STR regulations throughout the U.S., and they shared tips for underwriting deals, choosing which locations to invest in, and advocating for regulatory changes.

STR Regulation Trends in 2022

With most regulation happening at the local level, the STR regulatory landscape is extremely fragmented. However, there are still some common trends that are emerging as the industry becomes more professionalized. 

Many local governments are cracking down on STRs due to concerns over housing affordability and quality of life for locals. However, many cities are starting to see STRs as a viable business, and are creating regulations accordingly.

“As this space gets more professionalized, the regulations are changing. And I think you’re seeing, for the most part, more professionalization. So more cities that are doing permits, more cities that are seeing the tax benefits,” Carvey shared. 

He also reminded listeners that while some regulations can be dangerous, on the whole, they are actually a good thing because they help markets stabilize. 

Massey shared that he’s seen certain states take action to standardize the local regulations. In Arizona, for example, the state government is putting out guidelines that will then be adopted at the local level. 

How Regulations Impact Underwriting

In order to underwrite a STR deal, you need to look not just at the regulations that exist today, but also the areas where they might change in the future. 

This is one of the key things that Revedy focuses on. In particular, Carvey recommends paying attention to:

  • Historical trends in the city or municipality
  • The local government’s attitude toward STRs, and whether or not it is changing
  • Committees or regulatory boards focused on STRs

“There are some markets where it is just not tenable in terms of the regulations,” Barker added. “You don’t want to be in there fighting the city. You might win some battles, but it’s a war you don’t want to fight.”

He also reminded listeners that they should never be afraid to ask. You can often learn a lot just by picking up the phone and talking with someone in your local government, letting them know what you’re doing and figuring out how they can accommodate you. 

Factors to Consider Before You Invest

Even in high-growth markets, there’s still plenty of opportunity for experienced operators to outperform their competitors. In these situations, regulations can actually provide an advantage for the professionals who take the time to get a permit and adhere to all local guidelines. 

“It makes sense to do the work of figuring out the regulations and doing it right. That way it can be an asset instead of a liability for you,” Barker explained. “Figure out what the rules are, follow the rules, and if they change the rules then you have a leg to stand on.”

Carvey also recommends investing in a variety of markets, focusing on places that are positioned to keep growing in the future. 

“Think about where this market is trending. We are going to continue to see ADRs climb, in my opinion, as we continue to see the space professionalize. And that’s a big positive,” he shared.