Rental Arbitrage in Savannah | What You Should Know!

Rental Arbitrage in Savannah | What You Should Know!

“Are you ready to plunder your way through to becoming the next leading property manager?”

As the tumultuous net of homeowners and property managers maneuver the "boom" of the short-term rental market, short-term tenancy laws have come into effect across the country to regulate the process and to promote landlords' compliance with building codes.

Today, our goal is to provide you with a comprehensive overview of Savannah, Georgia. It is the "Empire State of the South" with everything just "Peachy" including the short-term rental industry! They are primed for rental arbitrage capital appreciation in Savannah, and the regulations for running short-term rentals are discussed below to help property managers and vacation rental owners like yourselves run and scale their businesses more efficiently.

What is Rental Arbitrage?

Rental arbitrage is the practice of renting out long-term properties and re-renting them out to others on a short-term basis through short-term rental platforms such as Airbnb. This means that you’re using short-term rentals to pay your long-term lease and pocketing the difference. Contrary to popular belief, rental arbitrage is a legal business, as long as you adhere to the specific laws and liability guidelines in your region.

Rental arbitrage is a method of operating a short term rental business without actually owning real estate, allowing individuals to generate passive income through real estate.

Rent arbitrators benefit from the following features:

  • Owning property isn't necessary
  • Ensures a steady flow of passive income
  • The ability to rent multiple properties
  • Allows for incremental growth and monthly reinvestment
  • Leases can be terminated early - meaning less commitment

Rental arbitrage offers endless opportunities for budding hosts as well as seasoned property managers alike! The first step in rental arbitrage is to find the right location. The meaning of this can vary depending on how you choose to conduct your business. However, remember, the key point is to find a location that produces the most profit. Identify the location where there is sufficient short-term rental demand and a high volume of transactions.

Another important metric to consider is the “Average Occupancy Rate”. This is a great indicator of overall supply and demand in the market. Use this data to determine how many days your property might be booked out of all the days the property is available.

Discover the Enchanting Soul of Savannah, Georgia

Discover the Enchanting Soul of Savannah, Georgia

Savannah is the 5th-largest city in Georgia, and is located along the Savannah River, about 20 minutes from the Atlantic Ocean. The coastal town has a well-deserved reputation for gracious hospitality, being consistently voted one of the "world's friendliest cities" by Condé Nast Traveler readers. Under a veil of Spanish moss, Savannah is a charming Southern getaway full of art, period architecture, trendy boutiques, and ghost stories, all of which draw 14.8 million tourists to this city annually, generating $3.1 billion in sales.

The diverse mix of industries in the city mainly includes manufacturing, healthcare, high technology, tourism, and film. In fact, the state of Georgia ranks #1 globally in the production of top grossing feature films. So, instead of watching Savannah on the big screen, why not consider investing in rental property here? Perhaps your vacation rental will turn up in an Oscar-winning movie! Let's consider what it takes to make a profit in Savannah.

Rental Arbitrage Market Potential in Savannah

This iconic city in America, is ranked number #1 in the rental arbitrage market. Despite the challenges facing Savannah in terms of laws and regulations, the city is fast becoming a "Gold Mine" for investors who are searching for a steady, lucrative source of income. According to recent data found on AirDNA, the following is an overview of the vacation rental market stats:

Average Daily Rate :$245 Median Occupancy Rate :63% Median Monthly Revenue :$3,627 Rental Size :2.2 Bedrooms / 5.7 Guests on average

The number of active rentals in the city exceeds 2300, with 51% invested in Airbnb and 10% in VRBO.

Rental Arbitrage Market Potential in Savannah

                             *(Source : www.zillionhome.com)*

Real Estate Market Highlights:

For any rental strategy, home prices and appreciation are crucial. Savannah investors would be wise to become familiar with the local market's prices. Here's our guide:

  • Zillow Home Value Index is $224,373 (as of September 2021).
  • Home values in Savannah have increased by 18.8% over the past year.
  • The median list price of a single-family home in Savannah is $279,000 based on a report from Realtor.com (May 2021).
  • According to Zillow, real estate properties in the market will appreciate by 3.2% this year.
  • Of the 85 neighborhoods in Savannah, South Historic District is the most expensive, with a median listing price of $750,000.
  • The most affordable neighborhood in Savannah is West Savannah with a median listing price of $75,000.

Savannah allows short-term rentals, although there are several zoning ordinances in place and owners should research their individual requirements based on the district and ward their property is located in.

Property owners and hosts entering this market should pay close attention to compliance and work directly with their Community Development Department.

Short-Term Rental Regulations in Savannah

Short-Term Rental Regulations in Savannah

The City of Savannah defines a short-term vacation rental as the rental of an entire dwelling unit (an apartment or house) for 30 days or less. To better understand how it is segmented, here is a summary of the categorization,

Short-Term Vacation Rental Application Process

  • To operate legally within the city, Short Term Vacation Rental managers must complete an application process and secure a Short Term Vacation Rental certificate.
  • Short-Term Vacation Rental (“STVR”) property owners’ must complete an application and receive a certificate verifying they have met all zoning and ordinance requirements associated with the use. An STVR certificate must be obtained prior to operating.
  • Once an STVR application has been approved, a Business Tax Certificate (“BTC”) must be obtained through the Revenue Department, and a copy of the BTC must be forwarded to the Planning and Urban Design office prior to the issuance of the STVR Certificate.
  • The City’s eTRAC system enables the public to search for Short Term Vacation Rental certificates. The site provides the status of a certificate, expiration date, Short Term Vacation Rental Certificate number, and related information. Registration is not required to conduct general searches. The city also provides a map of registered Short Term Vacation Rentals.

New Applications

Any new short-term vacation rental applicant must notify all property owners on record adjacent to the property prior to the issuance of an initial short-term vacation rental certificate. Proof of notification must be provided to the City. Information provided to adjacent property owners include:

  • Street address of the proposed short-term vacation rental;
  • Location of any on-site parking for short-term vacation rental occupants;
  • Maximum occupancy requirements;
  • Copy of the short-term vacation exemplar rental agreement;
  • Name of the property owner; and
  • Name of rental agent company and contact information.

Condominium

For condominiums, as defined by the Georgia Condominium Act, the property owner must provide a copy of the adopted condominium declaration either explicitly permitting leasing of the dwelling unit(s) for less than 30 days or adopted condominium declaration which contains no prohibition on short-term vacation rentals or the leasing of dwelling units for less than 30 days.

Short Term Vacation Rental Certificate Transfers and Grandfathering

As per Sec. 8-11012 of City Code, Short Term Vacation Rental certificates remain non-transferable.

Renewals of pre-existing Short Term Vacation Rental certificates issued before September 28, 2017, will not be denied on the grounds that issuance of a certificate will exceed the per-ward maximum cap limitation. When a transfer of property title occurs for a parcel with a pre-existing Short Term Vacation Rental certificate, a new application from the transferee/grantee will not be denied on the grounds that the issuance of a certificate will exceed the pre-ward maximum cap limitation if the transferee/grantee applies for a new Short Term Vacation Rental within six months from the date of title transfer.

Note: All non-renewal Short Term Vacation Rental certificate applications submitted after September 28, 2017 are subject to the per-ward cap.

Short Term Vacation Rental Ordinance

Short Term Vacation Rental Ordinance

(as approved by City Council on 8/3/2017 and 9/28/2017)

The following ordinances govern the location and operation of short-term vacation rentals in the City of Savannah.

Short Term Vacation Rentals are limited to the area defined by the Short Term Vacation Rental Overlay District with the exception of certain business and agricultural zoning districts (B-C, B-N, B-L, and A-1).

Code Compliance Verification Form

This is a document executed by a short-term vacation owner certifying that the short-term vacation unit complies with applicable zoning, building, health, and life safety code provisions. No person shall allow occupancy or possession of any short-term vacation rental unit if the premises are in violation of any applicable zoning, building, health or life safety code provisions.

Owner-occupied Property

  1. This refers to property which contains one or more dwelling unit(s) where the principal dwelling unit must be occupied by the property owner and constitute his/her primary and usual place of residence.
  2. The dwelling units must share the Property Identification Number assigned by the Chatham County Board of Assessors.
  3. Proof of owner occupancy requires proof of a valid homestead exemption submitted with the application for a short-term vacation rental certificate. To qualify for homestead exemption, the applicant must submit a sworn affidavit and evidence of residency that declares that the primary dwelling unit is the person's legal residence and domicile.
  4. Proof of residency is required in the form of two of the following:

    1. A valid Georgia Driver's License or Georgia Identification Card;
    2. Registration of vehicles owned by and registered in the name of the applicant;
    3. Chatham County Voter's Registration Card or
    4. Previous year's W-2 Form or Internal Revenue Service Tax Return.

Short-term Vacation Rental Occupants

Guest, tourist, lessee, vacationer, or any other person who, for compensation, occupies a dwelling unit for lodging for at most 30 consecutive days.

Short-term Vacation Rental

An accommodation unit that is provided for transient guests in exchange for compensation for a period of time not to exceed 30 consecutive days. Such use may include or not include on-site management. Unless otherwise stated, the term residential dwelling refers to all types of housing excluding group living or other lodging uses.

Short-term Vacation Rental Agent

An individual who is designated by the owner of a short-term vacation rental on the application for a short-term vacation rental certificate. This person must be available and responsive at all times, as well as regularly present at a location within the city for purposes of transacting business.

Zoning Code in Savannah

Zoning Code in Savannah

Short Term Vacation Rentals are permitted within the short-term vacation rental overlay district. This includes,

  • Downtown
  • Victorian
  • Streetcar local historic districts.
  • Outside of this overlay, they are only permitted in certain Business and Agriculture zoning classifications (B-C, B-N, B-L and A-1).

There is another zoning requirement specific to the Downtown and Victorian districts. Each ward in a residential district has a 20% cap for new short-term vacation rentals.

What is a “Ward”?

A ward is a historic division that is roughly equal to a square with its surrounding blocks. The cap does not apply to owner-occupied properties. Furthermore, a 20% pre-ward cap applies to non-owner occupied properties in the Downtown Historic District.

Residential Parcels in Savannah Historic district

Per-Ward Cap

As of September 29, 2017, a 20% per-ward cap is applicable to non-owner occupied parcels in the Savannah Downtown Historic District.

Owner-occupied property refers to real property which contains one or more dwelling unit(s) where the principal dwelling unit must be occupied by the property owner and constitute his/her primary and usual place of residence. The dwelling units must share the Property Identification Number assigned by the Chatham County Board of Assessors.

Click here to see the Ward Map

Waiting List for Capped Wards

Any property owner wishing to apply for a non-owner occupied Short Term Vacation Rental certificate in the wards that have reached the 20% cap should submit the Short Term Vacation Rental Waiting List Form. The City will contact the waitlisted applicant when an opening in the ward occurs. The waiting list is maintained on a first-come, first-served basis.

Streetcar District

In the Streetcar (formerly Mid-City) local historic district, all Short Term Vacation Rentals on parcels zoned TN-2 must have two or more dwelling units, one of which must be owner-occupied. (More detail is available in the Ordinance in section 7.5.4.)

Occupancy

For dwelling units with no more than two bedrooms, occupancy cannot exceed four (4) adults. When a dwelling unit has three or more bedrooms, no more than two (2) adults are allowed per bedroom. Bedrooms must be verified by the Zoning Administrator to be in compliance with building codes.

Occupant Acknowledges Parking And Occupancy Requirements

The occupant(s) must acknowledge they are required to acknowledge the maximum occupancy and, if available, where the parking is located.

Change of Rental Agent

In the event the short-term vacation rental agent changes, it is the property owner’s responsibility to notify the City within five business days.

Exemplar Rental Agreement

The City requires occupants of short-term vacation rentals to sign a that specifies the rules they must adhere to. Applicants must attach the rental agreement to their application. Upon approval of the contract, the short term vacation rental property must exhibit the agreement.

Proof of Insurance

For all new and renewing applications, proof of insurance is required, indicating that the property is used for short-term vacation rentals.

Short-term Vacation Rental Advertising

A short-term vacation rental certificate number and an exemplar rental agreement must appear in all printed, digital, and internet advertisements for their short-term vacation rental property.

Taxes

Local Hotel/Motel Taxes

Short-term vacation rentals are required to remit a 6% local hotel/motel tax to the City’s Revenue Department by the 20th day of each month.

State Use And Sales Tax

The Georgia Revenue Department must receive 7% State Use and Sales Tax by the 20th of each month. If payments exceed $500, payments must be submitted electronically.

You can obtain a State Sales Tax Number by registering with the State Department of Revenue.

Conclusion

On the whole, Savannah is great for investing in short-term rentals. With its reasonable laws, profitability, and STVR demand, it will certainly continue to grow in the coming years. Therefore, taking advantage of Savannah's position as a vacation rental hub at this point would be a smart move.

The rental arbitrage business model is an ongoing growth model for short-term rental property investment, and this city is ripe for the plucking, so why not be the first among many to harvest the crop?

You may also find opportunities in other markets if you're interested in rental arbitrage in other cities. Check out Hostaway blogs that offer in-depth coverage for Jacksonville, Nashville, Houston, Austin, Orlando, Boston, Palm Springs and Fort Lauderdale.

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