September, 2018. Sedona Vacation Rentals
I was on the MLS tour yesterday, and I heard an agent comment about a home, “That will sell quickly; just say Airbnb”. We’re all familiar with this topic by now, but how does it work from a business point of view, and what are the financial rewards?
Rules for Vacation Rentals in Sedona
Since the State of Arizona passed a law last year allowing this type of rental activity, the only two constraints are: proper planning permission from The City and the CC&Rs of the subdivision where the rental home is located, if it’s in a subdivision.
- Our Sedona city planners are ready to help people walk through the permit process and a prospective landlord’s inquiries should start there – I’ve heard that almost all remodel permits are now being issued for prospective Airbnb’s as people convert garages and basements into rental units. Provided your property is a single-family residence, a condo, townhome or a 1- 4 unit multi-family—you qualify.
- Regarding CC&Rs in subdivisions, even though there may be no homeowners’ association to enforce them, the restrictions can be enforced by individual homeowners in a “breach of contract” action in which they can ask the judge to award them their legal fees against the respondent, so beware of violating them.
Tips for Setting Up a Rental House in Sedona
Once the home is properly permitted and the owner has a state Transaction Privilege License for tax-paying purposes, you’re ready to go. Here are some tips for getting your vacation rental set up:
- Use professional photography — There are lots of websites besides Airbnb on which to advertise but I believe the most important feature in the ads is professional photography.
- Decide who will manage the property — When you’ve uploaded your information and you start to get inquiries, who will manage the rental? The law says that you can only use a manager who has a real estate license, but there are two exceptions: 1) an unlicensed person can manage units in a common area development (i.e. a subdivision with commonly-owned real property such as a clubhouse or open space) and, of course, 2) the owner can do it themselves. My personal experience as a tenant has shown me to only deal with a brokerage company as they have regulatory supervision by The State and can’t blatantly rip you off by retaining deposits, etc.
- Set a reasonable, competitive price — So, what should you charge the guests? Take a look at a few websites like VRBO and see what the competition is charging. My understanding is that a single room with a bathroom starts at $90 a night and averages about $120 a night; multiple bedrooms can be $200 or more a night. You also need to remember that you’re competing against the traditional hotels, so check their rates.
- Take additional fees into account — In addition, you’ll want to charge a cleaning fee, which seems to average about $100. Service fees to the website you choose are likely around $50, and local taxes which are about 13% in Sedona. Occupancy rates average about 70% according to the few owners that I spoke to.
The Future of Vacation Rentals in Sedona
I can tell you from personal experience that being a landlord can be a demanding job, and if there really are 1,000 vacation rental units in the area, how much longer will it be before we reach saturation and rents start to fall? Anecdotally, I hear that rents are already softening, especially for one-bedroom units that truly compete with hotels. That’s an important factor because it’s expensive to equip a vacation rental with good furniture, linens, crockery, cookware etc. For me personally, I think I’d rather rent the room out on a month-to-month basis for about $800 to a tenant I know and trust; after all, you’re going to be living with your guests if it’s your home.
This month’s Real Estate Review was written by Andrew Brearley, managing broker at Coldwell Banker Residential Brokerage.
Contact Us About Sedona Real Estate
Damian Bruno: damian@sedonarealestateagents.com | (928) 202-0038
Danielle Giann: danielle@sedonarealestateagents.com | (928) 300-0139
Coldwell Banker Realty
6486 Arizona State Route 179, Ste 102, Sedona AZ 86351
