Do you like the idea of making additional revenue with your property real estate investment? If you have multiple properties or even an extra room, maybe you’ve considered looking into the popular website to advertise your place as a weekend or occasional rental, but you have no idea how to “legally” short- term rent your property in Davidson County.
Here’s a quick guide (found via Metro Nashville’s STRP website) to help you get into the short term rental game in Nashville:
Davidson County defines a short term rental property (STRP) as: residential dwelling unit, containing not more than four sleeping rooms, that is used and / or advertised through an online marketplace for rent for transient occupancy by guests. Owners of Short-Term Rental Properties (STRPs), are required to obtain an operating permit (Ordinance BL2014-951, Ordinance BL2014-909, Ordinance BL2015-94, and Ordinance BL 2016-492). This law applies to all properties (including rooms and guest houses) rented for less than 30 consecutive days to the same occupant.
There are three types on STRP properties: Type 1: Owner Occupied Type 2: Not Owner Occupied Type 3: Not Owner Occupied- Multifamily
As of this writing, you have to apply for a permit in person. Metro Codes Dept, 800 2nd Ave S.
To Apply for a Permit
- Owner of the STRP must apply in person at the Metro Codes Department.
- Bring required documentation:
- Floor plan of residence showing number of bedrooms and location of smoke alarms
- Contact info
- Proof of liability insurance of not less than 1 million dollars per occurrence
- Documented proof of written notification to owners of all adjacent properties
- Type 1: Proof of residence
- Signed Affidavit
- Proof of HOA compliance if applicable
- Determine short-term rental permit type (Type 1, Type 2, or Type 3)
- $50 permit fee
- Allow time (one to two weeks) for processing and approval
- Post the operating permit
- Comply with permit advertising rules
Know Your Limits
As of this writing, no more than 3% of the neighborhood shall be permitted with non owner-occupied short term rentals. Not to worry, the cap only applies to non owner-occupied properties. So for example, in my neighborhood, there are 1563 parcels of land at 3% cap= 47 total permits. There are 12 issued permits and 35 permits still available.
It’s easy to check the availability map to see if your investment property is eligible: http://maps.nashville.gov/strp/
Operating Your Business:
Fees
The permit holder shall be responsible for collecting and remitting all applicable room, occupancy, and sales taxes required by state law or the Metropolitan Code aka you’ll be paying a Hotel Tax, Sales Tax, Business license and licensure tax fees
Rules
In addition to property type specific rules such as principle residence or lease agreements for multifamily rentals, there are several rules about generally operating your short term rental. For example, “No food shall be prepared for or served to the transient by the permit holder.” So if you had big plans to prepare breakfast for your guests, cancel those plans.
So, what if you’re considering about buying the adorable property you found on Airbnb? First, you MUST know the permit does not convey with the property. No problem if you plan to also live there, but if this is an investment purchase, you should consult the permit availability map before offering to purchase!!
Secondly, STRP governance is being heavily reviewed in Nashville. If you are granted a permit today, please know it may not be renewed during the next cycle. If you must rent out this property for at least X-number of years, please take this variability into consideration before deciding to purchase.
Property Management
If the above outline sounds like more work than you care to manage, you can hire a company to handle your STRP from start to finish, but remember, the buck stops with you. You, the permit holder, are ultimately responsible for collecting and remitting all applicable taxes and fees to the government AND the permit does not authorize any person, other than the person named therein, to operate an STRP on the property. Be sure to thoroughly interview management companies. Ask to see their bookkeeping methods and ask for references. Is the company experienced- how many properties and how much property revenue is collected annually, what is their contract requirement and how involved are they in your business? What type of insurance do they carry and have they ever been sued? How do they handle damage and repairs, how will they communicate with you? This is your investment. Treat it like one and watch your money grow.