Property owners can no longer use their second home as a short term rental in Washington D.C. See how these new regulations are affecting D.C. real estate investors.
The D.C. Council recently gave the final approval of new D.C. Airbnb regulations. We’ve been hearing a lot about new Airbnb laws being passed throughout various cities in the country for a while now, but what do these new regulations mean for D.C. short term rentals?
All About These New D.C. Regulations
The new rules on D.C. short term rentals were approved unanimously by district lawmakers. No one knew what to expect after they had delayed their final vote on the rules last month, but it’s clear now. Those of you owning a rental property and renting it out on Airbnb D.C., or any other short term rental platform, can expect these new regulations to take effect next October.
The D.C. short term rental bill bans property owners from renting out a property that isn’t their primary residence for periods of time less than 30 days. So this is clearly targeting those Airbnb investors who have been renting out on Airbnb or any other similar booking services such as VRBO. This is really going to change the flow of the market since there are currently around 9,000 D.C. short term rentals.
It has also added restrictions on property owners renting out their primary residences; hosts now have a maximum of 90 days to rent out their homes when they are away. Amidst the new regulations on D.C. short term rentals, officials say they don’t want to lock-out local homeowners from a profitable and emerging market. Under the new regulations, property owners can still rent out whole buildings as well as basement units.
If the current zoning statutes are actually enforced in the future, it’s estimated that the D.C. short term rentals bill will cost over $20 million a year in lost tax revenue. Clearly, these new rules on D.C. short term rentals are expected to take a toll on the market. That’s why it’s always important to ask “Is Airbnb legal here?” before investing in a market. Either way, try to stay updated on any new Airbnb regulations being set in your local market.
What to Gain From Investing in D.C. Long Term Rentals
Washington D.C. has a wide range of investment choices beyond Airbnb rentals. Long term rentals are actually a great choice. That’s because D.C. hosts different sets of workers who have different living standards and housing needs. The majority of government workers earn a modest living and are mainly renters, not homeowners (in apartment buildings, not single family homes). If we’re talking higher-level officials, they’re typically homeowners.
If you’re planning on investing in long term rentals, you need to invest in an area in which there’s high rental demand. The further away from downtown D.C., the better your chances are in the long term rental market.
Here are the advantages of investing in traditional rentals rather than D.C. short term rentals.
A point that can motivate Airbnb investors to make the switch from D.C. short term rentals to long term rentals (other than the new rules) is the cash flow. You can start realizing more consistent and sustainable rental income, rather than depending on travelers/tourists/visitors.
- Justifiable Property Management
Because of the more long-term nature of traditional rentals, paying for professional property management makes financial sense. You may have had to deal with guests personally while managing D.C. short term rentals. However, now you can hire professional management to tend to the needs of long term tenants and the property.
- Lower Vacancy Rates
Since you’re leasing your rental units to tenants for a longer period of time, occupancy rates will be up. This gives you a clear timeline when managing tenants. You’ll know when to start looking for new tenants before the units are vacant.
If you need a tool to help with calculating the financial aspect of buying D.C. long term rentals, check out our rental property calculator. It’ll calculate key return on investment metrics based on your inputs and modifications!
Where to Invest for High ROI Long Term Rentals
Seeing that Airbnb real estate investing isn’t the best option for those of you interested in the Washington D.C. real estate market, here’s how to make the switch to long term rentals. The first step is to find out where you can get high returns with traditional rentals.
Mashvisor’s investment property calculator has analyzed the performance of traditional rentals throughout Washington D.C., and we’ve narrowed down the top-performing neighborhoods. Here’s where to start your search for long term rentals for high returns in 2019.
- Median Property Price: $177,198
- Price per Square Foot: $136
- Price to Rent Ratio: 10.24
- Average Days on the Market: 49
- Monthly Traditional Rental Market: $1,441
- Traditional Cash on Cash Return: 7.52%
- Traditional Cap Rate: 7.52%
- Median Property Price: $147,967
- Price per Square Foot: $219
- Price to Rent Ratio: 8.65
- Average Days on the Market: 112
- Monthly Traditional Rental Market: $1,425
- Traditional Cash on Cash Return: 5.71%
- Traditional Cap Rate: 5.71%
- Median Property Price: $362,060
- Price per Square Foot: $421
- Price to Rent Ratio: 11.59
- Average Days on the Market: 41
- Monthly Traditional Rental Market: $2,604
- Traditional Cash on Cash Return: 5.25%
- Traditional Cap Rate: 5.25%
- Median Property Price: $275,000
- Price to Rent Ratio: 10.95
- Average Days on the Market: 112
- Monthly Traditional Rental Market: $2,093
- Traditional Cash on Cash Return: 4.58%
- Traditional Cap Rate: 4.58%
- Median Property Price: $899,250
- Price per Square Foot: $527
- Price to Rent Ratio: 15.8
- Average Days on the Market: 34
- Monthly Traditional Rental Market: $4,742
- Traditional Cash on Cash Return: 3.73%
- Traditional Cap Rate: 3.73%
These five neighborhoods should definitely be the first place to start looking for new D.C. investments. To start searching for traditional investment properties in Washington D.C. right now, click here.
If you’re a real estate investor who already owns D.C. short term rentals, consider keeping them and turning them into traditional rentals. Wondering whether or not the neighborhood you’re in performs well under the long term rental strategy? Start out your 14-day free trial with Mashvisor now to find out. Experience real estate investing like never before with our tools and instant data!
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