The term zoned for “short term rental” or STR is something that you will read or hear about continuously during your research for a Orlando vacation home, but what exactly does that mean, and how does it affect you as a vacation home buyer?
In Florida, land is designated for use as “zoned” by a county or city. Zoning specifically defines what land uses are allowed for a particular area. There are four main basic categories: residential, commercial, industrial and agricultural.
Most residential property is zoned “residential” (I was up all night researching that), and can be rented out as a “Long Term Rental” (LTR) if the community association permits LTR. In some cases a community may be “Deed Restricted” and may not allow its residents to rent the property long term. Residential property may also be zoned for “Short term rental”.
Short Term Rental
A short term rental is a rental of a property for a period of less than seven months. Over a seven month rental period the rental would be considered a “Long Term Rental”
To operate your vacation home as a “short term rental” property, you must apply for a tourism tax license and a business license from the county that your property resides in.
It’s a simple and inexpensive process which will allow you to operate your property as a “small hotel”.
This license is only granted to an owner whose property qualifies by being in a properly zoned area and is essential to allow you to run your STR business.
Properties that are found to be operating a STR program but are not licensed to do so can be fined up to $250 a day for non-compliance.
Community or Association approval.
In addition to the land being zoned by the county for STR, the individual community must also have been approved by the Community “Home Owners Association” (HOA) for short term rental. You can therefore have a home in a county land area zoned for short term rental but not for the community your property is in. It is important to know if a community allows for STR before you decide to purchase if you intend to rent short term.
Where is the STR zone in the Orlando area.
With the exception of a few communities the majority of the land to the south and west of Walt Disney Land as far west as 27 and south as southern dunes golf club is zoned for short term rental. An experienced Realtor who specializes in vacation home property will be able to advise you if your property is situated in a community that allows short term rental.
What are the advantages disadvantages.
The main difference for you as an investor and the decision you will have to make regarding STR v LTR is use.
STR allows you to use the property whenever you want, you just need to let your property management company know in advance your plans and they will block out the dates for you.
STR is generally a more complex program and owners that opt for STR are usually looking to rent the property when they are not using it to help offset the costs of owning it.
Active owners and a property that is well marketed and in a good location can turn an annual profit, but in most cases the owner is looking to get close to breaking even.
LTR on the other hand is purely an investment strategy. Finding a renter for 12 months or more to generate guaranteed income can result in an annual positive cash flow. LTR is also relatively easy to manage.
The drawback is you can’t throw your renter onto the street when you fancy a few weeks in sunny Florida, but you can look forward to a long term annual returns and appreciation.
If you make a shrewd investment you could perhaps see a 100% return on investment within 5 or six years – giving you a nice investment property to add to your portfolio and perhaps an ideal place spend some time in later years where the climate is sunnier and warm.
Realtor, Vacation Home Specialist