Buying a Property for an Airbnb Rental in LA

People travel to Los Angeles for work, to visit family, and to experience the sweeping ocean, mountain views, glitz, and glamour found in the City of Angels. And travelers are eschewing costly cookie-cutter hotels in exchange for Airbnbs situated in famous neighborhoods and towns nearby tourism hot spots.

While LA residents can cash in on renting out their property, homeowners need to carefully plan their entrance into the short-term rental market space. Issues from insurance, maintenance, regulations, and a steady stream of vacationers in your home can create headaches fast, and this article aims to instruct buyers on how to approach short-term rentals in Los Angeles. 

A neighborhood feel in the heart of Los Angeles 

"Location, location, location" is a timeless phrase in real estate, and it rings true when buying a Los Angeles property with short-term rentals in mind. Ideally, an Airbnb property should be within a convenient distance to the locales advertised in the listing. 

While wealthy buyers purchasing a property with Airbnb in mind can close a deal on a home closer to tourist destinations. But homeowners splitting their live-in property with vacationers have to make concessions depending on where they work in Los Angeles, and really play up their slice of LA.

Aspiring homeowners or investors wanting to attract beachgoers should consider Mid City, Mar Vista, Del Rey, and Winchester, as these neighborhoods are close to the ocean and LAX, providing travelers with easy transportation and accessibility to the beach. If you’re aiming to attract Hollywood-minded tourists, Los Feliz, East Hollywood, Spaulding Square, and Fairfax provide buyers with affordable properties just outside of the main drag of Hollywood Boulevard. 

Travelers staying in Airbnbs want to experience what it feels like to live in Los Angeles. But bookings will be far and few between if your "sea-side bungalow escape" near Venice involves a 40 minute drive through traffic from Beverlywood, CA. 

Owners with homes off the beaten path need to become a de-facto tour guide of their neighborhood and extoll the hidden gems of the region and work hard to create a charming abode fitting the LA scene. 

Keeping up with Los Angeles City Planning regulations

On November 1st, 2019, the LACP office began enforcing the Home Sharing Ordinance, in an attempt to preserve housing stock in the Los Angeles market and prevent price gouging. Landlords in Los Angeles previously had free reign for years to rent out anything ranging from a spare bedroom to entire homes, erasing thousands of housing units for the residents of LA.

Over the years city planners, tenants’ rights activities, and hotel operators worked together to create a set of rules and regulations to limit the short-term rental market. 

The ordinance requires hosts to register with the state and limit rental usage to 120 days of the year, and owners must register with the state, putting their registration number on all online and offline listings. 

Most importantly, hosts can only list one residence and it must be their primary home, so wealthy homeowners cannot put a second or third listing up on Airbnb. For $850 a year, homeowners can book guests beyond the 120 day limit, but still must use their primary residence to house vacationers. 

Affordable housing, maintenance costs

Airbnb and other prominent short-term, vacation rental sites are powerful tools because first-time homebuyers and wealthy buyers can take advantage of short-term renting. But how these buyers approach using these sites are two radically different paths.

First-time buyers must consider their needs for work, travel, and personal space, as offering up a spare bedroom for short-term rentals means you will have to coordinate with incoming guests to provide keys and then clean up after them. 

Buyers wanting to rent out extra space in their home should make sure their search includes homes with a private entrance for guests to use. A second entrance allows aspiring Airbnb hosts to keep their personal life separate from vacationers seeking California sun while allowing for easier clean-ups once the guests have gone on their way. 

Wealthy buyers purchasing a property with Airbnb in mind have a whole other set of issues to consider, as their property might include a guest house for short-term rentals that they can’t or don’t want to manage.

From giving guests the keys (or digital code access) to cleaning up the home after their stay, managing the upkeep of a guest house Airbnb rental is a job in itself. Not to say that caring for an extra room run out of your personal home is not difficult, but for a wealthy buyer with a demanding job, they may need outside help to manage the property.

Creating an ambient setting

When considering a deal on a rental investment property in LA, buyers need to consider if they want to invest in a fixer-upper or make a turnkey purchase on a newly-renovated home. Each option has pros and cons; a fixer-upper comes at a cost-effective price, allowing buyers to customize the experience guests will have when they vacation in the home. But if a buyer isn’t ready for the costs that come with designing and constructing their dream, the overhead can quickly overwhelm an owner. 

Conversely, closing a deal on a newly-renovated home means there is less for budding Airbnb hosts to worry about when their first guests step onto the property. Not requiring a full redesign or rebuild help, and buyers get a sense of peace knowing that the property is fully operational and no hidden insurance snafus are awaiting an unsuspecting renter.  

The ambiance of an Airbnb is paramount, and Los Angeles is a designer’s dream, with plenty of stores where creative homeowners can design the decor in their Airbnb to match the soft pinks and blues of the LA sunset. 

Buyers making space in their own homes and investment property owners should not outfit their rentals with valuable items or family heirlooms. But beauty is surface deep, and while a new coat of paint is charming, Airbnb hosts must ensure their property is fully operational before welcoming guests into the home. 

Working with experts to secure your short-term rental

Purchasing a short-term rental property, only to find out that the town only allows long-term stays is a costly mistake. Regardless of the location, aspiring buyers in any city should work with broker’s agents well-versed in your target neighborhoods, as these experts can put you in touch with experts on the local ordinances and restrictions in your area. Beyond informing buyers about regulations, a buyer’s agent can also help you find properties that are attractive for properties with extra income potential.

Managing a short-term rental property isn’t an easy task, especially for buyers adding an investment property to their portfolio. But short-term rental hosts in LA don’t have to despair, as property managers can streamline the short-term rental processes for their clients. From managing bookings to cleaning up after guests leave, outsourced property managers can remove a lot of the headaches that come with short-term rentals. 

Some third-party managers also provide the invaluable service of optimizing the pricing of your listing to maximize bookings, which can increase the cash flow brought in from the booking. These experts can also help you source renters insurance, which is critical to have if you are opening up a home for vacationers to use. 

DISCLAIMER: This material was provided for informational purposes only, and is neither intended to provide, nor should be relied upon as tax, legal, or accounting advice. Prevu and its subsidiaries do not provide tax, legal, or accounting advice. You are encouraged to consult your personal tax, legal, or accounting professionals before considering any transaction as your individual situation may vary.

Prevu Real Estate, Inc. is a licensed real estate broker in California, license number 02134758.