The Impact of Short-Term Rentals (Airbnb/VRBO) on NC Mountain Real Estate: Investment Opportunities and Regulations

The majestic beauty of the North Carolina Mountains has long been a draw for tourists, and in recent years, the rise of short-term rental platforms like Airbnb and VRBO has transformed the local real estate landscape. For many, owning a mountain property isn't just about personal enjoyment; it's also a significant investment opportunity. However, this growth comes with its own set of complexities, particularly concerning local regulations.

Investment Opportunities in the NC Mountains

The appeal of short-term rentals in the NC Mountains is clear:

• Dual Purpose: Many investors are drawn to the idea of owning a vacation home they can enjoy personally while also generating income when they're not using it. This "best of both worlds" scenario helps offset ownership costs and can even turn a profit.

• Strong Tourism Demand: The Western North Carolina mountains, with popular destinations like Asheville, Boone, Hendersonville, and countless scenic trails, attract millions of visitors annually. This consistent demand for lodging creates a robust market for vacation rentals.

• Income Generation: A well-managed short-term rental can provide a significant stream of passive income, often enough to cover mortgage payments and other expenses, contributing to rapid equity growth.

• Diverse Property Types: Investment opportunities range from cozy cabins in the woods and riverfront properties to luxurious homes with panoramic mountain views, catering to a wide array of guest preferences.

• Resilience and Growth: Despite recent challenges like Hurricane Helene and shifts in the broader real estate market, the region has shown remarkable resilience. Property values in many areas continue to appreciate, making short-term rentals a solid long-term investment.

Popular areas for short-term rental investments include:

• Asheville: A vibrant hub with a thriving arts scene, culinary delights, and outdoor adventures. While regulations are tighter here, demand remains high.

• Black Mountain & Weaverville: Offer a quieter, small-town charm with easy access to Asheville's amenities, appealing to those seeking a peaceful getaway.

• Boone & Blowing Rock: Known for their proximity to ski resorts, Appalachian State University, and outdoor activities, attracting year-round visitors.

• Hendersonville: A growing town with a charming downtown, wineries, and apple orchards, appealing to families and retirees.

• Lake Lure, Cashiers, Highlands: Renowned for their scenic beauty, lake activities, and high-end properties, drawing a more affluent clientele.

Navigating Short-Term Rental Regulations

While the investment potential is attractive, understanding and complying with local regulations is paramount. North Carolina has a mix of state-level laws and varying local ordinances that impact short-term rentals.

State-Level Regulations: The NC Vacation Rental Act

The primary state-level mechanism for regulating short-term rentals is the North Carolina Vacation Rental Act (VRA). This act defines a "vacation rental" as the rental of residential property for vacation, leisure, or recreation purposes for fewer than 90 days, where the renter has another permanent residence. Key aspects of the VRA include:

• Written Agreements: The VRA mandates that vacation rentals must be facilitated via a written agreement outlining the rights and obligations of both parties, including details on rents, fees, and security deposits.

• Fit and Habitable Condition: Landlords are obligated to keep the premises in a fit and habitable condition.

• Eviction Process: The Act establishes grounds and processes for expedited eviction proceedings for vacation rentals.

• No State-Level Licensing: Importantly, North Carolina state law does not require short-term rentals to be registered or licensed at the state level. Furthermore, state laws generally prevent local governments from mandating permits or registrations for rental properties. However, this doesn't preclude local governments from regulating through zoning.

Local-Level Regulations: A Patchwork Approach

This is where it gets more complex. While the state limits local registration requirements, individual cities and counties in the NC Mountains have implemented their own zoning ordinances and rules to manage the impact of short-term rentals, often driven by concerns about affordable housing, neighborhood character, and noise.

Here's a look at some examples:

• Asheville: The City of Asheville has some of the most stringent regulations. Generally, short-term vacation rentals (renting an entire dwelling unit for less than 30 days) are only permitted in designated resort zoning districts. However, "homestays" (where the host lives in the property full-time and rents out one or two bedrooms for less than 30 days) are allowed under specific conditions, requiring a permit, liability insurance, and adherence to occupancy limits.

• Boone: In Boone, all short-term rental properties typically require a transient occupancy license or permit from the Planning and Inspections Department. Zoning laws also play a role, with rentals often not permitted in residential zones unless they are owner-occupied. Hosts must also collect and remit a local occupancy tax (e.g., 6%).

• Hendersonville: Hendersonville defines short-term rentals as lodging for less than 30 days and generally restricts them to Old Town Commercial (OTC) and General Commercial (GC) zoning districts. An Engineered Site Plan, Use and Occupancy Permit, and Business License are usually required.

• Other Counties/Towns: Regulations vary widely. Some counties might have very few restrictions, while others may have specific zoning overlays, occupancy limits, parking requirements, or noise ordinances.

Common Local Requirements (where permitted):

• Zoning Compliance: Ensuring your property's zoning allows for short-term rental operation.

• Permits/Licenses: Obtaining necessary local permits or business licenses (even if not a "registration" in the state's eyes).

• Occupancy Taxes: Collection and remittance of state sales tax (6.75-7.5%) and local occupancy taxes (typically 1-8%).

• Safety Standards: Compliance with fire, building, and safety codes, including smoke and carbon monoxide detectors.

• Liability Insurance: Many localities require specific liability insurance coverage for short-term rental use.

• Parking and Noise: Adherence to local ordinances regarding parking availability and noise levels to minimize impact on neighbors.

Key Considerations for Investors

1. Due Diligence on Regulations: Before purchasing any property for short-term rental, thoroughly research the specific regulations of the city, town, and county where it's located. This includes checking zoning, permit requirements, and tax obligations. Don't assume that what applies in one area applies in another.

2. Understand HOA/POA Rules: If the property is part of a homeowners' association (HOA) or property owners' association (POA), review their covenants carefully. Many HOAs have strict rules or outright bans on short-term rentals.

3. Financial Projections: Conduct a detailed financial analysis, factoring in potential rental income, operating expenses (utilities, cleaning, maintenance), property management fees, taxes, insurance, and any permit costs.

4. Property Management: Consider whether you will self-manage the property or hire a local property management company. A good management company can handle bookings, cleaning, maintenance, and guest communication, which is especially valuable for out-of-state owners.

5. Market Fluctuations: Be aware that the short-term rental market can be seasonal and influenced by economic factors, tourism trends, and even natural events (like Hurricane Helene's temporary impact).

The North Carolina Mountains continue to offer compelling opportunities for real estate investors interested in the short-term rental market. However, success hinges on a clear understanding of both the investment potential and the complex, evolving regulatory landscape. Partnering with a knowledgeable local real estate agent and legal counsel is essential to navigate these waters effectively and ensure a profitable and compliant venture.