By: Gina Dewar
DRE#02057793 @GinaDewarRealEstate
915-321-1358
This article is part of our summer 2023 edition of La Revista Binacional. Read the rest here.
California is a popular location for Airbnb investments due to its many tourist attractions and warm climate. However, it’s important to familiarize yourself with the state’s short term rental laws before buying a vacation rental property. California has strict regulations for vacation rentals and leaves it up to local authorities to determine their own laws and restrictions. Each city in the state has its own laws and regulations, so it’s important to research the specific regulations in the city where you plan to invest.
If you’re interested in turning your property into a short-term rental, but you’re not sure if it’s legal under Airbnb regulations we can help.
California’s Definition of a Short-Term Rental:
The State of California defines a short-term rental as a residential dwelling or a portion of a residential dwelling that is rented out for 30 consecutive days. A residential dwelling, in turn, refers to a private structure that has been designed and is available for use and occupancy as a residence by one or more individuals. This definition excludes commercially operated hotels, motels, bed and breakfast inns, and timeshare properties.
Starting any business, including a vacation rental, in California is handled by the Office of the California Secretary of State (SOS).
According to the SOS website, you need to go through a few steps to form a business.
The 5 steps to start a short-term rental business in California are:
1. Develop a Business Plan
You cannot start a business without a plan. When thinking about an Airbnb business, especially in California, there are certain things that need to be defined: location, structure, marketing, advertising, on your own or with the help of a professional marketing agency.
2. Choose a Location for Your Business
Where do you want your business to be located? It does not have to be where you live. It can be anywhere in the world, for that matter.
3. Select a Business Structure
In California, you need to know what type of business structure best suits your purpose. Whether it is a sole proprietor, LLC (Limited Liability) or a corporation, you must understand what each one is and study the pros and cons of them. It is highly recommended that your accountant or business lawyer advises you on what is best.
4. File Tax and Employer Identification Documents
You are expected to pay taxes, therefore your Employer ID Number (EIN) must be obtained. There are many ways to pay taxes, including platforms that have the rental listing set up to aid hosts in complying with IRS. If you are paying taxes as a foreign national, there are certain tax issues that you need to be aware of, so we strongly advise you to contact tax attorneys that specialize in FIRPTA and foreign investors obligations.
5. Obtain Licenses and Permits
It is better to have licenses and permits to start your Airbnb business. California cities are now requiring it, but every city might have different regulations.
It is very important to understand that not every neighborhood in the city you want to invest in will allow Airbnb.
You need the help of a real estate agent that can assist you in finding out the regulations per zone. Homeowners’ associations can be very strict with Airbnb regulations and can be a problem if ignored.
So, before you invest, visit us at New Journey Real Estate, where we can certainly help you with every step towards your AIRBNB business, whether you want to invest in the United States or Mexico. We are your binational, bicultural, and professional brokerage that is ready to help you create investments that will be part of your passive income and retirement plan.
