What’s the deal with Airbnb and the New Orleans real estate market in 2018?
It’s no secret that New Orleans is a popular tourists’ destination – in fact, the New Orleans Convention and Visitors Bureau found that a total of 17.74 million people visited the city in 2017 and, back in January, the New York Times named New Orleans as its top place to visit in 2018! If you’re a real estate investor, you might see this as an opportunity to capitalize on short-term rental properties in the New Orleans real estate market. Before you decide on becoming an Airbnb host, however, it’s important that you have an understanding of the laws in the city regarding short-term rentals.
Just two years ago, New Orleans passed a series of laws aimed at legalizing and regulating short-term rentals to protect residents renting out on Airbnb while allowing the city’s tourism industry to continue to bloom. This encouraged many New Orleans real estate investors to rent out their investment properties for short-term instead of leasing to long-term tenants. Of course, not everyone was happy about this. Opponents of Airbnb say those laws were too lenient and some claim that short-term rentals are often owned by out-of-state property investors, not residents.
This leads us to wonder: Is the New Orleans real estate market Airbnb friendly? This blog covers several points to help property investors better understand the laws and regulations of Airbnb New Orleans. Please keep in mind this is not a complete list, but a few things to consider before renting out investment properties short-term in the city.
Short-Term Rental License
The city of New Orleans requires all Airbnb hosts to obtain a license in order to list their properties as short-term rentals on the site. In June of 2018, Airbnb removed New Orleans’ pass-through registration system from its website. This system allowed hosts to automatically apply for a city license when they list their property and publicly posted their license number on their listing. City inspectors used this to identify properties violating city regulations by matching licenses with property owners.
As a result of removing the pass-through registration system, unlicensed rental properties are now harder to find for enforcement purposes. Thus, if you’re a current license holder with an active listing on Airbnb, you will need to manually enter your license number in your listing in order to operate legally in the New Orleans real estate market.
If you want to apply for a new permit or renew a permit, on the other hand, you’ll have to do so directly with the City Council. As a real estate investor, you can apply for one of these three categories:
- Accessory Short Term Rentals (Type A): allow property owners occupying their dwelling to rent out spare space.
- Commercial Short Term Rentals (Type C): allow property owners to operate with few restrictions in nonresidential districts.
- Temporary Short Term Rentals (Type T): allow property owners to rent out their entire dwelling for up to 90 days.
For more general information, visit the city’s Short Term Rental Licensing Requirements page.
Airbnb New Orleans Zoning Restrictions
On May of 2018, the New Orleans City Council passed motion number (M-18-195) establishing a 9-month Interim Zoning District. According to this Comprehensive Zoning Ordinance, property investors can only rent out specific types of short-term rental licenses in specific zoning districts of the New Orleans real estate market. For a real estate investor thinking of buying an Airbnb property, checking the zoning restrictions is an important task.
Some standards of the ordinance include, but are not limited to:
- Only one party of guests are permitted per short-term rental.
- Use of the short-term rental for any commercial or social events is prohibited.
- The short-term rental shall outwardly appear as a residential dwelling.
- Short-term rentals shall not affect the residential character of the neighborhood or unreasonably interfere with any person’s enjoyment of his/her residence.
As for license-specific regulations, they include:
- Accessory Short Term Rentals: These rental properties are prohibited in the French Quarter, the dwelling is limited to 3 bedrooms and occupancy is limited to 6 guests, and the owner must be present during the occupancy.
- Commercial Short Term Rentals: are prohibited in non-VCE portions of the French Quarter, occupancy is limited to 5 bedrooms and 10 guests, and must be in a non-residential zoning district.
- Temporary Short Term Rentals: These allow a maximum of 90-rental nights per license year, the entire dwelling may be rented out, the owner does not need to be present, and occupancy is limited to 2 guests per bedroom. However, they are prohibited in the French Quarter
Visit the Short Term Rental Zoning Restrictions page for more information.
Airbnb New Orleans Real Estate Stats
Now that we have a better understanding of the Airbnb laws and regulations in the New Orleans real estate market, property investors must be questioning how profitable it would be to own an Airbnb investment in the city. Your goal is to make money after all, right? Mashvisor’s investment property calculator will give you the answer. This real estate investment tool allows you to estimate the return on investment of properties in almost any city and neighborhood across the US housing market. For more info, read Investment Property Calculator for Analyzing Real Estate Investments.
Using this tool, here’s an overview of how profitable a New Orleans real estate property would be if an investor were to rent it out on Airbnb, in addition to the best neighborhoods to consider for an Airbnb investment:
- Median Property Price: $421,189
- Price Per Square Foot: $220.73
- Airbnb Rental Income: $2,591
- Cash on Cash Return: 3.39%
- Cap Rate: 3.39%
- Occupancy Rate: 48.67%
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The Best Places to Invest in Airbnb New Orleans
According to Mashvisor’s investment property calculator, the top 5 neighborhoods in the New Orleans real estate market are:
- Median Property Price: $171,973
- Price Per Square Foot: $120.72
- Airbnb Rental Income: $2,144
- Cash on Cash Return: 6.76%
- Cap Rate: 6.76%
- Occupancy Rate: 61.5%
- Median Property Price: $354,244
- Price Per Square Foot: $211.83
- Airbnb Rental Income: $2,398
- Cash on Cash Return: 3.9%
- Cap Rate: 3.9%
- Occupancy Rate: 48.2%
- Median Property Price: $631,345
- Price Per Square Foot: $218.47
- Airbnb Rental Income: $3,465
- Cash on Cash Return: 3.59%
- Cap Rate: 3.59%
- Occupancy Rate: 44.4%
- Median Property Price: $509,380
- Price Per Square Foot: $295.03
- Airbnb Rental Income: $3,418
- Cash on Cash Return: 2.49%
- Cap Rate: 2.49%
- Occupancy Rate: 55.1%
- Median Property Price: $833,900
- Price Per Square Foot: $300.97
- Airbnb Rental Income: $3,247
- Cash on Cash Return: 2.18%
- Cap Rate: 2.18%
- Occupancy Rate: 47%
To start looking for and analyzing the best Airbnb investment properties in your neighborhood of choice, click here.
Final Thoughts on Airbnb New Orleans
Making money from Airbnb rental properties has become an optimal investment strategy for property investors in some parts of the country. Nonetheless, you must adhere to the laws and regulations regarding short-term rental properties before you rent out on Airbnb. For New Orleans real estate investors, the above are only a few things to consider before starting an Airbnb business in the city. If you have any questions, make sure to contact the Short Term Rental Administration directly or consult a local lawyer.
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