Are Vacation rental (Short Term Rental) owners rich?
Sec 6-222 Penalty
The Committee discussed the current penalty fines for Municipal Civil Infractions. Currently the 1st fine is $250 and the 2nd fine is $500. The Committee feels the fines need to be higher as these amounts are low compared to the amount of money these properties will generate for short-term rentals.
Sec 6-216 Fees
The Committee had previously discussed a $500 fee to apply for the license and if chosen then an additional $500 would have to be paid. Each of these $500 fees are per unit, not per property.
I don’t know where they got their figures,here are some actual figures taken from an existing Vacation Rental. These figures are based on a single family property with a value of $150,000.00. Keep in mind that these figures do not include the initial investment to turn a monthly rental into a short term rental that will be in excess of $10,000.00.
I have used $200 per night rental with a $100 cleaning fee that seems to be the average in Ludington. The main rental period is from the first week in June to the first week in September or 12 weeks per year.
Income with a property Manager or self managing are the same except for management fees: Managing yourself:
Weekly Rental x 12 = $18,000 30% management fee - $5,400 Self - Air B&B/ VRBO 17% $3,060
cleaning + fees $1,500 cleaning supplies $ 300 Lawn care $60 wk x 15 $ 900 maintenance $2,000 Utilities (yearly) $3,000 advertising $ 500 Insurance $1,000 Property Taxes $4, 078 Mortgage Pmt $700 mo. $8,400
TOTAL NET INCOME WITH A PROPERTY MANAGER -($9,078) SELF MANAGING - ($6,738)
Now add a $500.00 lottery fee to see if you get a permit and another $500 fee for the permit. The only way you can possibly break even is to have 2 rentals in one house so all the utilities would be combined. $2,000.00 for permits to the city to conduct a small business seems unreasonable to me.
I do agree that short term rentals could be very profitable if there was a longer season to rent but 12 to 15 rentals a year are not going to make anyone rich.
My question to the city is: are all current short term rentals including the condo str’s that are allowed now going to be required to pay the $500 permit fee each year and pay non-homestead property taxes?
Thanks for fleshing out the numbers and giving our readers a better understanding of the inherent problem of having the City skim an extra $1000 per unit off these vacation rentals. I would add the analysis that if there are 50 more STR units in the City and tourism remains stable, not only will the existing STRs be less likely to fill during the lean periods of summer, but the expected return on the new ones will likely be less than the city's static model would indicate. The added competition would also reduce STR rates naturally.
Do you have a link to the specific ordinance that covers this topic. Is the fine specific to rental property or to all civil infractions in general?
Sec 6-222 states the current Penalty Fines are $250 first offence $500 second offense for all Municipal Infractions. This includes not mowing your lawn. The ordinance is the new proposed ordinance for STRs. It should be on the ludington government page but I couldn't locate it now, perhaps XLFD can locate it. The quote I made was from the Oct. 30 building and licensing meeting.