Rental Arbitrage in Miami | What You Should Know!

What is Rental Arbitrage?

Rental Arbitrage is a method of engaging in the renting of vacation rentals for the short term without actually owning a property. It involves renting a suitable property and re-renting it to guests for short periods of time as a vacation rental. It allows you to host a wide range of spaces, from a house to a tent cabin or even just a room, without actually owning any of it. Rental arbitrage is low risk while allowing you to scale much faster than the traditional route.

Miami as a Tourist Destination

Miami is one of the most popular vacation spots in Florida, the US, and the world. Over 24 million tourists visited Greater Miami in 2019 with 67% being overnight visitors. Home to the world’s busiest cruise port and an international airport, Miami offers multiple enticements.

Sunny all year round, Miami is visited all year round by a diversity of visitors, from celebrities and art connoisseurs to college students and families. Miami offers plush hotels, Art Deco buildings, endless shopping, art festivals, wine extravaganzas, and a plethora of options for sports tourism, from experiences like deep-sea fishing and sailing to major league games, boat shows, auto racing, golf, and tennis. A melting pot of culture, the city boasts a world-renowned nightlife and never sleeps, hopped up on its rich Cuban coffee.

Rental Arbitrage Opportunity in Miami

Miami is one of the top ten cities in 2021 for rental arbitrage in the US according to AirDNA, the leading provider of data and analytics for the short term rental industry.

According to AirDNA data for Miami, the city enjoys an

• Average Occupancy Rate of 87% (March 2021)

• ADR of $236 (July 2021)

• Average Monthly Revenue of $3,914 (July 2021)

Meanwhile, according to AirDNA, in Miami

• Effective rent is $1,796

• STR premium is 106.5%

• Average Nights to cover rent 8.5

Short Term Vacation Rental Rules in Miami

State of Florida Rules

The state of Florida defines a short term rental as

“any unit or group of units in a condominium or cooperative or any individually or collectively owned single-family, two-family, or four-family house or dwelling unit that is also a transient public lodging establishment but that is not a timeshare project.”

1. State License

The state requires short term vacation rentals be licensed with the Department of Business and Professional Regulation (DBPR). The state issues two types of licenses depending on the type of the building: Short Term Vacation Rental Condo License and Short Term Vacation Rental Dwelling License.

Short term vacation rental operators managing multiple listings can opt for a Group License though separate licenses will have to be obtained if you have listings of both condos and dwellings. Licenses must be renewed annually.

2. State Taxes

Register with the Florida Department of Revenue to collect, report, and pay sales and surtax.

3. State Health & Safety Regulations

Once you have registered your rented property as a vacation rental, you are responsible for ensuring the property meets a number of health and safety requirements in order to keep your vacation rental license. As the licensed agent, you will be held responsible for all violations cited during an inspection if it occurs while the property is listed under you. For example:

• Halls and entrances must be clean, well-lit and well-ventilated
• If you provide dishes and glassware, they must be sanitized, between guests, according to public food service establishment standards
• The kitchen sink must have hot and cold running water under pressure
• Smoke alarms must be installed
• A properly charged and accessible fire extinguisher must be present
• If the vacation rental is three or more stories high and has railings, stairwells or balconies not in common areas, you must get a balcony inspection completed by a licensed inspector and renewed every three years.

County of Miami-Dade Rules

4. Occupancy

The County stipulates a maximum overnight occupancy of 2 persons per bedroom plus 2 additional persons per property, up to a maximum of 12 persons excluding children under 3 years of age.

5. HOA authorization

If the property to be listed as a short term vacation rental is part of a condominium or homeowners association, the County requires written authorization from the relevant association for the property to be operated as a short term vacation rental.

6. County Certificate of Use

Miami-Dade County requires property managers to obtain a Certificate of Use from the county’s Department of Regulatory and Economic Resources which requires the DBPR license and insurance to cover liability for guests. You have to schedule an inspection within 10 business days of applying to prove full compliance before receiving your Certificate of Use. The certificate must be renewed annually.

7. County Zoning Rules

Short Term Vacation Rentals can only be located in appropriately demarcated zones. Properties in designated Estate or Low Density Residential areas require the host to be resident in the property for over 6 months of each calendar year.

8. Guest Register

The County also requires property managers to maintain a register with the names and dates of stay of all guests to be inspected by the County at any time.

9. Swimming Safety

Short Term Vacation Rentals with swimming pools are required to have at least one safety feature (pool safety barrier, pool safety cover, pool alarm or door latch/alarm) if they allow children under the age of six. This does not apply if it is a community swimming pool.

10. Predator Search

Property managers are also required to obtain confirmation of a nationwide search from the County Police Department or other law enforcement agency that prospective occupants are not registered sexual offenders or sexual predators as a result of a conviction of a sexual offense as defined in Section 21-280.

City of Miami Rules

The city of Miami considers a short term rental as lodging use for less than 30 days.

11. City Zoning Regulations

The city of Miami only permits short term vacation rentals in Transect Zones in structures approved by the Building Department. Miami recognizes three types of transect zones where short term vacation rentals are permitted by right, by warrant, and by exception.

If your property is a transect zone that permits its use for lodging but has a different land use approval, you can apply for a change of use with the Building Department.

12. City Certificate of Use

The City of Miami requires short term vacation rental operators to obtain a Certificate of Use.

13. City Tax Receipt

The City of Miami requires short term vacation rental operators to obtain a Business Tax Receipt.

14. Non-Lodging Use

The city of Miami also permits Apartment Hotels and Condo Hotels, which are defined differently to lodging and residential use and are permitted only in specific transect zones. Both require a Certificate of Use and a Business Tax Receipt.

If a building or unit is found to be operating a short-term rental illegally, the tenants/visitors will be evicted and fines assessed against the owner.

Conclusion

Rental arbitrage can be a great way to not only run a profitable short term vacation rental business, but also scale your business fast without risking too much. Miami is not only a great holiday destination but also offers great rental arbitrage opportunity and is a city worth investing in.

If you are also looking at other US cities with significant rental arbitrage opportunity, check out Orlando, Nashville, Houston, Austin, Myrtle Beach, Fort Lauderdale, Boston, Charleston, San Diego, Savannah, New Orleans, Jacksonville, and Tampa.