Real estate investor’s instinct might tell you that the Los Angeles real estate market 2018 and Airbnb go together perfectly. All of the attractions of Hollywood, the beach resorts, and others seemingly would add up to Airbnb Los Angeles being majorly profitable. And you’re right.
Unfortunately, things aren’t so simple for Airbnb hosts in the Los Angeles real estate market 2018. As we continue into the year, new Airbnb regulations may be passed into law that can change the face of Airbnb Los Angeles.
Even so, as an ambitious real estate investor, there are ways to invest in Los Angeles real estate with the Airbnb rental strategy while fully complying with the new Airbnb regulations in the city. Review the new possible Airbnb regulations with us and find out how you can still profit in the Los Angeles real estate market 2018 with an Airbnb investment.
Airbnb Los Angeles Real Estate: Is It Legal?
Is Airbnb legal in Los Angeles? Can a real estate investor rent out a house on Airbnb in L.A.? The answers to these questions are likely to change as Airbnb Los Angeles will be put under new regulations.
Is Airbnb legal in Los Angeles? Technically, until now owning an Airbnb Los Angeles real estate property was illegal. However, with the new ordinance approved by the Los Angeles City Council last month, owning an Airbnb will be allowed under certain circumstances.
Can a real estate investor rent out a house on Airbnb? Unfortunately, new regulations will make Airbnb illegal when it comes to Los Angeles real estate investors using the Airbnb rental strategy with investment property, vacation rental property, and second homes.
Not interested in Airbnb Los Angeles anymore? Click here to learn all about long term rentals and the Los Angeles real estate market 2018.
Let’s take a closer look at the new regulations.
New Airbnb Los Angeles Regulations in 2018
It’s important to first note that the new Airbnb Los Angeles regulations have not passed as of date. It can take up to four months, and in the process any of the short term rentals regulations can be changed. A real estate investor should still be aware of the possibility of changes in the law for Airbnb Los Angeles.
First and foremost, only a primary residence may be used as an Airbnb rental. Also, any Los Angeles real estate property that is subject to rent stabilization or falls in the category of affordable housing can’t be rented out on Airbnb.
Airbnb Los Angeles hosts will be required to register their short term rentals with the city.
Los Angeles short term rentals will be subject to a rental cap: a real estate property can only be rented out on Airbnb for 120 days of the year or less. However, for outstanding Los Angeles Airbnb hosts who have no violations against their short term rentals and are registered in the city may have the opportunity to extend the rental cap. This will come with a hefty fee (estimated to be anywhere from $1,100-$5,660).
If any of the above Airbnb Los Angeles regulations are broken, short term rentals hosts will likely pay up to $500 per day for listing an illegal Airbnb property. Even the short term rentals site, Airbnb, will be facing consequences under the new regulations. Airbnb will be fined $1,000 daily for illegal Airbnb Los Angeles listings or if they withhold addresses of illegal short term rentals.
Los Angeles Real Estate Market 2018 vs. Airbnb: What’s the Problem?
Why is the city so against a Los Angeles real estate investment being rented out on Airbnb? In fact, as a real estate investor looking at the benefits of Airbnb Los Angeles to the city, the residents, and its economy, it can be hard to understand. Let’s look at the positive and negative effects of Airbnb Los Angeles on the city.
Airbnb Los Angeles Real Estate: The Positives
In the Los Angeles real estate market 2018, there are more than 16,700 Airbnb rentals, according to AirDNA. From these short term rentals, 65% are an entire Los Angeles investment property or house. Because of the vast activity across L.A., authorities came to an agreement with the short term rentals company on an occupancy tax, as of 2016. Airbnb Los Angeles would collect a 14% transient occupancy tax on the listing price for stays of 30 nights or less. This regulation alone has brought in millions in tax revenue for the city: $42 million in 2017.
Beyond tax revenue, Airbnb Los Angeles boosts the city’s tourism. With over 1.4 million Airbnb Los Angeles guests in 2017, short term rentals accumulated more than $1.4 billion in economic activity.
That’s the big picture of what Airbnb Los Angeles is doing for the city. If we take a look at the benefits of short term rentals for individual residents, the positives are even more apparent. A third of Airbnb Los Angeles hosts were able to avoid eviction or foreclosure thanks to Airbnb rental income last year.
Airbnb Los Angeles Real Estate: The Negatives
Even with all of the positives of Airbnb Los Angeles, there are tangible negative effects on the Los Angeles real estate market. For one, many residents claim that these short term rentals are a nuisance to Los Angeles neighborhoods, causing all kinds of disruption. This can be a negative for a Los Angeles investment property rented to long term tenants as well.
Another negative felt in not only the Los Angeles real estate market 2018, but in the current housing market as a whole, is the effect of Airbnb investment property on house prices and rent. A study carried out over 2012-2016 found that as Airbnb investment property increased, so did the local house prices and rental rates.
The study honed in on Hollywood, L.A. and its Airbnb investment properties. It was found that, with a higher rate of absentee landlords (real estate investors essentially) renting out a Los Angeles real estate investment on Airbnb, rent prices increased by 6.4%. This was in relation to a 50% increase in Airbnb listings a year.
This study backs up the claims of residents that Airbnb Los Angeles real estate investment is spurring the housing crisis in the city.
Airbnb Los Angeles Real Estate Investor: What Are Your Options?
By now, a Los Angeles real estate investor is likely to be discouraged from entering the world of Airbnb real estate investing in this location. Don’t be quick to make such a call, however. The Los Angeles real estate market 2018 does offer a good return on investment with short term rentals. Let’s take a look at the numbers (provided by Mashvisor’s Airbnb profit calculator and AirDNA):
- Monthly Airbnb Rental Income: $1,874
- Airbnb Cash on Cash Return: 0.86%
- Airbnb Cap Rate: 0.86%
- Airbnb Occupancy Rate: 77%
So, what are your options? If you can’t fully rent a Los Angeles real estate investment as an Airbnb rental, consider the alternatives. You can either invest in Los Angeles real estate by way of a duplex house or a multi family home. With this real estate investment strategy, you’d be an owner-occupier, living on the property and making Airbnb rental income from one or more units. Alternatively, if you currently rent an apartment or plan on moving, consider buying a real estate investment as a primary residence and renting out a room on Airbnb while you live there.
If you invest in Los Angeles real estate in this way, you not only follow Airbnb regulations, but you also have a place to live that pays the mortgage. If done right, you can even pocket money from the Airbnb rental income for yourself. This can be done only in the best neighborhoods in Los Angeles for Airbnb real estate investing.
The Best Neighborhoods in Los Angeles for Airbnb Real Estate Investing
Making money in real estate with short term rentals is still a great opportunity in the Los Angeles real estate market 2018. Even with stricter regulations on the horizon, you can still make Airbnb rental income thanks to the high Airbnb occupancy rate. This is why it’s important to learn what the best neighborhoods in Los Angeles are for Airbnb real estate investing (provided by Mashvisor’s Airbnb profit calculator):
- Median Property Price: $895,000
- Monthly Airbnb Rental Income: $1,555
- Airbnb Cash on Cash Return: 1.6%
- Airbnb Cap Rate: 1.6%
- Airbnb Occupancy Rate: 60.43%
- Median Property Price: $1,847,000
- Monthly Airbnb Rental Income: $3,049
- Airbnb Cash on Cash Return: 1.1%
- Airbnb Cap Rate: 1.1%
- Airbnb Occupancy Rate: 60.2%
- Median Property Price: $875,000
- Monthly Airbnb Rental Income: $1,935
- Airbnb Cash on Cash Return: 0.99%
- Airbnb Cap Rate: 0.99%
- Airbnb Occupancy Rate: 61.36%
Mid City West
- Median Property Price: $1,699,000
- Monthly Airbnb Rental Income: $3,836
- Airbnb Cash on Cash Return: 0.96%
- Airbnb Cap Rate: 0.96%
- Airbnb Occupancy Rate: 61.61%
Click here to learn how to find the best Airbnb Los Angeles real estate investment.
Even with the best neighborhoods in Los Angeles for Airbnb real estate investing, always be sure to check the regulations before making a move.
Despite the legalization of short term rentals in the Los Angeles real estate market 2018, it wouldn’t be labeled as Airbnb friendly for real estate investors. Still, there are real estate investing opportunities that will work with Airbnb Los Angeles and bring profit. Weigh your options and what works for you before making a final decision. Just don’t be quick to put an ‘X’ on the Los Angeles real estate market 2018 for an Airbnb investment.