As residential real estate becomes increasingly more competitive, so does making the most of your portfolio. So, what’s the solution?
Short-Term Rentals are the future
In recent years, consumers have been utilizing Online Travel Agencies (OTA’s) to find unique stays far more than traditional hotels. Platforms such as Airbnb and Homeaway have experienced exponential growth since the mid-2000s and show no sign of slowing down. But how does that correlate to your Minneapolis Apartments?
Many cities including Minneapolis are experiencing a major shift in demand towards utilization of these OTA type rooms rather than traditional hotels. Currently, demand is heightened for these units in a Short term rental (STR) scenario while there is simultaneously an oversupply of long term units. As more apartment buildings are built and leased on a long term basis, the excess supply will continue to increase. This leaves a unique opportunity to turn your apartment into a short term rental!
Regulations regarding rentals
You may be wondering what the rules are now that you see a great opportunity, so let’s dive in. On a national/federal level, there are minimal if any regulations at all on short term rentals as long as sales tax is paid. The same applies to Minnesota on a state level regarding regulations and taxes! Many platforms and software make collecting sales taxes easy, and many will remit them to the state and local jurisdiction automatically on your behalf.
Once you’re all squared up for taxes, it’s time to think about licensing and occupancy rules relating to Minneapolis. The city itself has more regulations than state or county including registration and certain restrictions. To begin the process, the owner or tenant of the unit must complete registration that can be found here. Remember to submit the $50 registration fee too! Before renting, make sure the unit also has its Minneapolis rental license (as STR guests count as tenants in a rental). That form can be found here.
Beyond taxes and registration, the regulations are fairly straightforward; however, there is one additional quirk in the situation you run or own several apartments. The city of Minneapolis deems any building with more than 5 short term rental units a hotel! Being classified as a hotel entails many other rules which can be read here.
Preventing unwanted rentals
In the case that you own or manage your own building, how do you prevent tenants from renting out their units themselves? Preventing arbitrage is no easy task, but there are a few options when it comes to smart technology and software! If you’re interested in learning more, be sure to contact us at 612.246.4942 so we can have a consultation with you at your building.