Can I Turn My Property into a Short Term Rental in Portland?
The short answer is: maybe.
With the rise of vacation rental sites, short-term rentals (rentals for less than 30 days) are a hot topic in Portland and throughout the world. Arguably the kingpin of all is Airbnb. The company is not just a leader in the industry, they have vaulted their name to be synonymous with the industry joining the ranks of other companies whose names are verbs or category kings like Google, Kleenex, Coke, and Xerox.
Portland hosts headquarters for both Airbnb, and another up-and-coming juggernaut called Vacasa. Despite this, short-term rentals are a contested subject in the city. Many people, though, are wondering:
“Can I turn my property into a short-term rental?”
Drivers behind the industry growth in Portland
I believe there are two major drivers behind this. First and foremost, Portland is becoming a sought after destination for tourists. Some people thank the show Portlandia for this, others the reputation as a food-spirits-and green vibes kind of town. The ability to change the programming of the property from long-term rentals to a nightly rental and get a higher cash flow is alluring.
The second reason why people are looking into short-term rentals is to lower their own cost of living. Let’s face it, Portland isn’t a place with cheap rent or inexpensive houses anymore. The ability to offset a mortgage payment can be a huge boon to a household’s finances.
The City of Portland does allow short-term rentals, but they have limits. They limit this for several reasons: preserve housing stock to be used as long-term housing, and to keep a buffer between commercial activities in residential neighborhoods.
Eligible properties are those properties that have a long-term occupant living in the dwelling for a minimum of nine months out of the year. Someone can rent out bedrooms in a house or entire units if they are an Accessory Dwelling Unit (ADU), attached housing, or a duplex. Additionally, no more than 25% of a multi-family property can be used for short-term rentals.
The city is quite serious about this—as are concerned neighbors—as it has been cracking the whip on un-permitted short-term rentals. The penalties can be severe, and in some cases fees can range from $1,000 - $5,000 per day.
There are two types of permits—Type A, which allows for two bedrooms to be rented out to a maximum of 5 people, and Type B, which allows for 3 or more bedrooms to be rented out. Type B permits are not easy to get, and require time, money, and perseverance to get through.
As more and more people are entering into the short-term rental space, the less lucrative it is becoming. Real estate in general is susceptible to effects of supply and demand, and there are a lot of short-term rentals in Portland. To make matters worse, however, is Airbnb’s new “smart pricing” strategy that sets prices for the host.
The result, either intentional or not, is that nightly rental prices have dropped out the bottom. Rates go down when your neighbors property rents for a lot less than yours.
Others things to be aware of when thinking about converting to a short term rental are the increased energy it takes to run (it is definitely not a passive strategy for those managing themselves!) and high operating costs. They have high upfront costs with furniture purchases, and high utility costs—especially compared with a long-term rental where the tenants pay utilities, and wear-and-tear isn’t just limited to the property, but also the expensive furniture.
One thing is for certain: scaling a portfolio of short-term rentals like one can with long-term rentals just isn’t a reality in Portland.
If you want to talk specifics about your property, then feel free to drop me an email at email@example.com.