Rental Arbitrage in New Orleans | What You Should Know!

Are you keen to invest in a rental arbitrage in New Orleans? Is it profitable? Or just maybe dreaming of becoming a host or a property manager in New Orleans but not quite sure where to start? Let’s take a deep dive on:

• What is Rental Arbitrage?
• Getting to know New Orleans
• What are the requirements for a short-term rental in New Orleans?
• What are the short-term rental license types?
• How to register?
• New Orleans Zoning Restrictions
• Taxes and Fees

What is Rental Arbitrage?

Rental arbitrage is a way forward in operating an STR business without actually owning a property and earning an income through real estate. With that said, it allows you to host a wide range of spaces from an entire house to private rooms or even a shared room and list through platforms such as Airbnb, VRBO, Booking.com, etc.

Moreover, it is perfectly legal as long as you abide by the specific laws and liability guidelines in your region.

Getting to know New Orleans!

New Orleans is one of the tourist hotspots in the US and has welcomed 18.51 million visitors in 2018. More importantly, it has been world-renowned for its distinctive music, cuisines, dialects, and never forgetting its annual celebration and festivals such as Mardi Gras.

The City itself has been described as the ‘most unique’ with its vibrant nightlife along Bourbon Street and its French and Spanish Creole architecture, the French Quarter. With that said, New Orleans welcomes short-term rentals business (for less than 30 consecutive nights at a time) as residents benefit from the tax revenue collected going towards improving infrastructure and emergency medical services of New Orleans.

Furthermore, a host earns an average of $10,000 a year in renting out space to tourists based on the Airbnb report revealed in 2015. And likely a majority of the tourist both local and international travelers would revisit New Orleans. According to AirDNA data 2021, there are about 6537 active rentals at current with a daily average rate of $199, accumulating of 60% occupancy rate, and monthly revenue of $2,565.

What are the Requirements for a Short-Term Rental in New Orleans?

The permit requirements are as follows:

1. No dwelling unit in Orleans Parish shall be used as a short-term rental unless:

• The owner of the dwelling unit possesses a valid and current short-term rental owner permit issued for the dwelling unit following Division 2 and fully complies with all legal requirements and duties imposed herein concerning each and every short-term rental

• The owner has designated an operator possessing a valid short-term rental operator issued following Division 3, and such operator fully complies with all legal requirements and duties imposed herein concerning each and every short-term rental

2. No platform shall facilitate or conduct any booking transaction for a short-term rental in Orleans Parish without first obtaining and maintaining a short-term rental platform permit issued following Division 4.

3. The permits required are regulated privileges, not rights, and can be revoked or suspended by the city following the provisions provided herein.

4. Any permit issued pursuant is non-transferable.

5. Any change in ownership requires a new short-term rental owner permit.

6. If any required contact information changes for any permit, the person possessing the permit shall immediately notify the department in writing, and the department shall issue a revised permit to reflect the updated contact information.

Permit Updates

New Orleans’ short-term rental permit registration website is currently not accepting applications. Therefore, download the application forms and email your completed form to STR@nola.gov. to apply for your short-term rental owner and operator permits.

Take note, deadlines have been extended in obtaining your owner and operator permits for listings.

What are the Short-Term Rental License Types?

Short-term rental (STR) owner licenses are divided into two categories: Residential STR (RSTR) and Commercial STR (CSTR). However, the RSTR licenses are split into three types which all require a Homestead Exemption. Mentioned below are as follows:

Residential Partial Unit (RSTR-Partial)

• Allow property owners to rent up to 5 guest bedrooms up to 10 guests in one dwelling unit such as a townhouse, single-family home, apartment, or condo.

• Hosts must have a valid homestead exemption in their name and live on the property

• Only property owners can apply for this license and where a host is limited to 1 RSTR-Partial license

License Fee- $250

Residential Small (RSTR-Small)

• Allow property owners to rent up to 5 guest bedrooms up to 10 guests in one dwelling with no more than four dwelling units

• Hosts must have a valid homestead exemption in their name and live on the property

• Only property owners can apply for this license and where a host is limited to 1 RSTR- Small license in the same building

License Fee- $500

Residential Large (RSTR- Large)

• Allow property owners to rent up to 6 guest bedrooms up to 12 guests in three dwellings with no more than four dwelling units. For example, if the building has more than 4 apartments, the host can rent out 3 separate apartments in the same apartment.

• Hosts must have a valid homestead exemption in their name and live on the property

• Only property owners can apply for this license and where a host can get up to 3 RSTR- Large licenses

License Fee- $500

Commercial (CSTR)

• Allow hosts to rent up to 5 guest bedrooms up to 10 guests in any building where fewer than 25% of the total dwelling units are currently licensed for STRs.

• Property owners or renters in non-residential zones can apply for a CSTR license

• No limit to how many CSTR licenses a host can get

License Fee- $1000

How to Register?

To register for a short-term license is simple. Follow the steps below:

Step 1: Get an owner and operator license

Firstly, apply through the city’s website and create an account. Once you have created an account, enter your listing information, select the license type, and update a photo identification. An affidavit from the landlord with written permission allows for you to host if you are a tenant.

Step 2: Pay for your license

The processing time of your application will take two weeks and be notified via mail. Once approved, a link will be given by the city to pay for your short-term rental license online.

Step 3: Add your license to your listing

Importantly, once you have received your both owner and operator license number, add it to your listing to finalize your registration with the city allowing you to continue hosting short-term stays in New Orleans.

New Orleans Zoning Restrictions

The Comprehensive Zoning Ordinance sets out detailed use standards for short-term rental operations, which include, though are not limited to the following, with an effect on April 1, 2017. As follows:

• The license placard provided by Safety and Permits must be displayed on the front façade of the structure in a location visible from the street during all periods of occupancy.

• Short-term rentals are not permitted outdoors, in an accessory structure; for example shed or garage, or in a recreational vehicle.

• Only one party of guests are permitted

• It is prohibited the use of short-term rentals for any commercial or social events.

• It shall externally appear as a residential dwelling

• It shall not unfavorably affect the residential character of the neighborhood nor shall use generate noise, vibration, glare, odors, or other effects that unreasonably interfere with any person’s enjoyment of his or her residence.

Note: Specific zoning districts are only allowed in specific types of short-term rentals depending on the license type. Mentioned above is for General Short-term Rental Restriction. For more or other details, visit the Short-Term Rental Zoning Restrictions page.

Taxes and Fees in New Orleans

The City Code requires that all licensed Short-Term Rentals collect and report:

• The Hotel/Motel Sales Tax- the tax is 4% which is calculated on the rental rate agreed upon between the renter and the guest.

• Hotel Occupancy Privilege Tax- the tax rate is $0.50 per night of rental and calculated according to the number of rooms available within the licensed short-term rental.

• Additional Assessment- $1.00 fee is mandatory for every night of rental occupancy which is calculated by the City of New Orleans to benefit the City’s Neighborhood Housing Improvement Fund.

Note: On behalf of the guests, Airbnb collects and remits taxes to the City of New Orleans though if you are hosting on other platforms in addition to Airbnb, you are responsible for collecting and reporting the taxes and fees from any rental arrangement made on those other platforms or through any other means.

Reporting Requirements

Register with the Department of Finance, Bureau of Revenue to obtain an account number in remitting the needed taxes and fees to the City of New Orleans after you have been issued a short-term rental license by the Department of Safety and Permits. Take note, it will require filing an application with the Bureau of Revenue for taxes to be properly credited to your short-term rental.

With that said, taxes and fees are reported monthly with Form 8010-STR and reports must be submitted by the 20th of the month following the month of collection. Penalties may be assessed by the city if these reports are not filed as required. For more details and online payments for taxation, visit the Bureau of Revenue-Sales Tax or mail the completed form along with the corresponding payment to:

The City of New Orleans, Bureau of Revenue 1300 Perdido St., Room 1W15 New Orleans, LA 70112

Key Takeaways

Understanding the market research, laws, regulations, and license types is a highly valuable asset in strategizing your rental arbitrage business in New Orleans. Take note, with the data collected, you can grow your rental arbitrage by:

• Identifying problems
• Predict future trends
• Make informed decisions
• Implement evidence-based strategies

If you are interested in rental arbitrage in other regions such as Orlando, Nashville, Houston, Montreal, Austin, and Boston, do take the time to do market research and understand its laws and regulations for that particular region.