Boston is one of the popular cities among both local and foreign visitors making it the hottest real estate market in the US. Even if home prices have skyrocketed in the market the demand for rental properties is continuously increasing. Is Boston a good place for Airbnb real estate investment? And what are the challenges, Airbnb laws, and taxes you should take into consideration before investing? Let’s take a deep dive into:
From a general point of view, investing in Airbnb rentals is a more lucrative investment especially when considering the Boston real estate market. Without a doubt, the cap rate and cash on cash return are evidently higher in comparison to traditional rentals. Furthermore, the average Airbnb rental income is higher, estimating close to $4,000 per month.
With that said, Boston is a thriving city making it the best location for investment. Not only is it dominated by rental properties but also a great pick for starters as Boston’s real estate market is vibrant and offers investors a variety of opportunities in purchasing rental properties.
Boston is considered one of the least affordable housing markets in the US. Affordable housing has become a huge crisis for homebuyers resulting in people renting rather than buying a home as their only option.
On that note, real estate investors who have more financing options will see this as an opportunity as Boston’s rental income is high. Moreover, qualifying for a mortgage for investors is easier in comparison to a homebuyer, where a guaranteed loan will be paid with the expected rental income.
Though home prices have climbed in Massachusetts, mortgage interest rates are all-time low in the US housing market whereas experts forecast mortgage rates to increase soon. This means now is the best time to act in buying a rental property for investors while securing a low affordable mortgage interest rate, pushing down your repeated monthly expenses, and pushing up your rate of return.
At the beginning of the year 2000, real estate appreciation in the Boston housing market was 137%. However, based on Mashvisor’s data, it has increased by 16% between the years 2020 and 2021.
Therefore, real estate prices will continue to rise, worsening affordability for homebuyers. Real estate investors are encouraged to buy a rental property in Boston before prices become a challenge in the near future.
According to Mashvisor, the best place to invest in real estate in 2021 is Boston real estate market as it is a hot commodity with strong demand and the listing prices of houses are increasing at an above-average rate meaning Boston is a seller’s market.
According to NeighborhoodScout, 67.4% of Boston residents are renters meaning there is a continued expected increase in numbers for potential tenants in 2021. Hence, for an Airbnb investor, the demand for short-term rental properties is also high as many people do visit Boston each year choosing the comfort and affordability given by vacation rental properties.
Though, do take note of the legality of Airbnb short-term rentals in Boston before taking a step further.
Boston Airbnb has one of the fastest-growing short-term rental industries, internationally. And with that said, taking into account the residents’ concerns with regards to their safety, security, and comfort in residential real estate buildings, the City of Boston enforced new Airbnb laws in 2018.
Boston short-term rental legislation is as mentioned below:
In 2021, non-owner occupied Boston investment properties and other home-sharing platforms rented on Airbnb will not be welcome, leaving out-of-state investors erased from the picture. However, investors in real estate in Boston have the option of house hacking if in need of a home.
North Dorchester is one of Boston’s historic neighborhoods named after the town of Dorchester in the English county of Dorset, from which Puritans emigrated on the ship Mary and John, among others. It was also among the first founded neighborhoods in the city. Moreover, it is known for being diverse.
The Market Insight:
Beacon Hill is one of the renowned historic and picturesque neighborhoods as well as home to over 9,000 residents. It is also one of the city’s most exclusive residential neighborhoods in Boston. And while it is popular to both locals and tourists alike, take note that Beacon Hill’s Airbnb occupancy rate is at 68.8% making it a great option when considering Boston’s short-term rental.
The Market Insight:
A culturally rich neighborhood known for its Victorian row houses architecture surrounding charming English-style squares. It's quite popular among visitors for its dining and drinking scenes, trendy eateries, and low-key pubs. Like Dorchester, South End is very diverse and close to Downtown Crossing and Back Bay.
The Market Insight:
South Boston or “Southie” as the locals call it, is popular among visitors both local and foreign where its neighborhood displays its old-school diners and taverns mingling with pizzerias and gastropubs. More than that, it is a developing residential neighborhood with a strong Irish-American heritage.
The Market Insight:
Jamaica Plain is home to a diverse and tight-knit neighborhood. In the early 19th century, it was one of America’s first streetcar suburbs, though today, the roads are crossed through bicycles and Subarus.
The Market Insight:
If you are keen on hosting short-term rentals in Boston? Take note, short-term rentals for 28 days or less are required to register with the city and complete both Boston registration requirements and the Massachusetts Department of Revenue requirements in order to comply. Follow the steps below for an Airbnb in Boston:
To check your eligibility, go to the city’s website. However, if your property is considered not eligible, you have the opt. to switch to long-term stays (29 days or more) that do not require registering as a short-term rental operator if you choose to keep hosting. Take note, this may be subjected to associated rules and the city’s long-term rental registry.
Moreover, listings that are considered exempt as short-term rentals are as follows:
If your property listing mentioned above is exempted, you will not be required for registration, however, you will need to claim an exemption through Airbnb to keep hosting.
Note: Licensed lodging, B&B’s, Executive Suites, and Corporate apartments are not exempted and will still be required to follow through the registration process.
Apart from the exemptions, it is required for a short-term rental to have a license number where it can be applied through the city’s website. With that said, it will present you three category types to pick from for your listing where as follows:
Moreover, it will also be required to show proof of two documents for verification of your primary residence which is quite simple by following through the simple steps below:
Step 1: Take a photo of each document Step 2: Save it on your desktop Step 3: Click Choose a file to attach each one to your application
While here is the list of document options to choose from:
Note: Landlord’s letter of consent needs to be attached if you are renting the property.
Short-term rental registration costs yearly are as follows:
Once the city processes your application that could take a few days, an email will be sent to you with your registration number that is a prerequisite to your listing on Airbnb.
In completing your short-term rental registration, you’ll need to add your license number to your listing and be sure to include the “STR” prefix followed by the six numbers (STR-000000).
After you have received your short-term rental license, directly apply for a business certificate from the City Clerk’s office via mail or in-person as it will take one to two weeks processing. The best is to go in person for you to receive it immediately though you are allowed to continue hosting while waiting for your business certificate. Furthermore, the signature on the application notarized is required, which can be done at the City Clerk’s office.
With that said, the cost for a business certificate for Massachusetts valid for 4 years are as follows:
Note: It is vital to get your short-term rental license first before applying for the business license as the city will check your rental license when processing your application.
After registering, use the city’s mailing tool in notifying your neighbors within 30 days that your listing is registered as a short-term rental.
The Boston Zoning Code delivers direction for zoning regulation uses in Boston neighborhoods. However, do make sure to consult Article 2 of the Zoning Code to determine that your listing does not violate any zoning definitions.
Note: Important definitions include “use”, “accessory use”, “dwelling”, “lodging house”, “boarding house”, and “family”.
Taxes that may apply to your listing are as follows:
Massachusetts state law requires certain intermediaries to collect and remit the above taxes to the appropriate parties as of July 1, 2019, and also requires them to register with the State’s Department of Revenue. With that said, for short-term rental hosts in Boston, Airbnb will collect and remit these taxes.
For further understanding of short-term rental taxes in Boston, check out Room Excise Occupancy Tax.