AIPIS 225 - AirBnB Regulation, Litgation, the Constitution, & Good Management with Flavia Berys

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It's my pleasure to welcome Flavia Baris to the show. She is a real estate attorney. She's host of the Lifestyle solopreneur podcast. She also runs an education portal I believe at it is called Landlord Prep and has some great background in short term rentals and as an attorney can tell us about some of the issues and litigation going on very generally around the world frankly with short term rentals and let's kind of dive in. Flavia, welcome. How are you?

Great. Thanks for having me on the show, Jason. Really excited to be here.

It's our pleasure and give our listeners a sense of geography. Where are you located today?

I am in the beautiful, sun, sunny San Diego, California area.

Yes. And we have this little conversation off air about how you want to follow in my footsteps, which I recommend in moving to a no income tax state someday.

Absolutely. Or you know, if we can convince more states to sort of adopt that, wouldn't that be great? Give us more options?

Flavia, it's very interesting you brought that up because I've been doing quite a few discussions on my various shows about the GOP tax reform and I think that it was a bit of a Islam for the GOP to disincentivize living in these high tax jurisdictions as they did with the SALT taxes that we've all talked about and the maximum $10,000 in property tax and state tax deductions. But the interesting thing is, you know, the people that are upset about that, I would argue that they're asking the wrong question or complaining about the wrong thing. What they should be saying is why doesn't my state or jurisdiction have lower taxes and maybe this will put some pressure on those states so that people can stop being forced to vote with their feet and moving to these more desirable jurisdictions. Thoughts?

Oh no, I agree with you 100% and that should be the conversation because in some ways our country's amazing. But it's so interesting how states are so different from each other, you know, and at some point they have to look at each other and wonder, you know, maybe we should copy some of these economic models from other states because people seem to be flocking there.

Absolutely. And you know, that is an excellent feedback loop for the high tax jurisdictions like my home state, for the vast majority of my life, the Socialist Republic of California. So there you go.

I'm still here. So, I mean, I don't know how long you've been gone, but not much has changed, I'm sure.

Yeah, no, it's only gotten worse since I left. I left in 2011. So, you know, it's. It is what it is, but certainly a beautiful place. Let's talk maybe generally. I remember when I lived where you live now in San Diego. I was in La Jolla, you know, the beach areas, seeing all these signs in front yards, Flavia, saying this is a neighborhood, not a rental community, not a short term rental community. These aren't vacation homes. And you know, these were obviously the residents that live there that were upset that, you know, these transient people were coming out, in and out and, you know, for the weekend and people. Then they were ren. People's homes. Airbnb, vrbo, whatever. What is the status of that? I remember seeing a lot of things in the local newspapers and, you know, this is a debate and a fight that rages on in many jurisdictions, not just San Diego. Give us a kind of a barometer on that, if you would.

Sure. Well, right now, I mean, the topic is hot and people are discussing it on both sides. Short term rental use has a lot of support and, and it also has a lot of criticism. And there's a lot of the, you know, I moved into X neighborhood because it was a residential neighborhood and I wanted to have neighbors that I got to know and that would look out for me. I'd look out for them. And I just didn't count on living next to a hotel. And so there's a lot of people that argue, look, unless you're in a commercial zone or mixed use zone, you really can't run a B and B or a hotel out of your home. Especially when it's not just a one room being rented out, where the owner retains some, some control and supervision, but when the entire place is rented out for potentially someone coming in with a huge group, throwing big parties, being loud, being in vacation mode. But then on the flip side, people say, you know, it's really expensive to make a go of it in some of these cities and the only way to really do this right is to increase my rental income for my investment properties and Short term vacation rentals are the best way to do that. We have a shortage of hotels, we have a shortage of accommodations, and it's great for tourists to be able to enjoy the beaches this way and, you know, have a kitchen and not have to live out of a hotel.

No question. So you, you outlined kind of the debate from the, you know, the general perception of, of parties on both sides, which, you know, I can really see both sides of the argument. I can. But there's a much deeper constitutional issue here, and since you're an attorney, I thought I'd bring it up. And that is the issue of property rights. And, you know, one of the, the foundations of democratic societies throughout history and everywhere in the world is property rights. Right. And if it's your property, you should have the right to dispose of that property. And dispose of it means rent it temporarily in any way you choose. Right. So there, there really is a deep constitutional issue here. Maybe address that for a moment too. I'd love to hear your thoughts. Sure.

I mean, you're almost in dangerous territory asking an attorney to wax philosophical on these issues. I mean, we can.

How much time do we have?

Oh, I know, right. I'm not gonna, I won't bore your audience, but when you're in law school and you start taking property classes, they go way back. The first cases you read about are, you know, the rabbit runs from one property to the other. Who owns the rabbit? You know, I mean, it just way, way back when, since people could talk to each other and think they've been fighting over territory and what's a boundary line and whose is whose right and who owns what. But let's talk first a second. Yeah. About freedom. It's actually, it's called freedom of alienation. Right? Freedom to do what you want with your property, to divest yourself of it, either short term with, through a lease, longer term. Maybe you give someone a life estate so they can own it for their lifetime and then it reverts back to you to selling it. You know, there's, and there's a lot of restrictions that are put in place either sort of by contract, like if you own a condominium or a townhome. Anyone who's listening, who has, you know, a planned community, if you pay HOA fees, you live in some sort of a planned community. Those are contractual rules. So you actually have to follow whatever your CC and R is. Those are the recorded documents say if it says you can only have two dogs, you can only have two dogs. So you're sort of Limited in some ways. You can only paint your house drab brown, beige or you know, you can do drab vanilla, but those are your limits. Or they can be imposed by municipalities. Zoning laws in general are these kinds of limits. If you tell somebody, well, yeah, you own this lot, but guess what? Nobody can ever live on it. It can only be used for industrial uses.

Right. And there's a zillion other restrictions. I mean, look at folks. When you are in a society, you have restrictions, deal with it. Right. There's mineral rights, there's air rights, there's riparian or water rights, there's all sorts of things.

There's noise ordinances, you know, even how loud can you be on your own property? Are you allowed to use it as a dump? Are, you know. Right, we got it never ends in a way.

Yep, yep. When it comes to the short term rental issue, you know, like factor that into your thoughts on this if you would.

Sure. Because so the short term vacation rentals is a gray area because being able to do it in such an easy and widespread way is really sort of a technological advance. Because we didn't really have the ability, say 20, 30 years ago to widely advertise a room for rent in your home, or maybe your entire home for rent for short term because you weren't set up like a hotel and it wasn't easy to find people that were going to book that sort of thing. I mean, you maybe had the original B and Bs, the bed and breakfast where a proprietor would have their home and they'd rent out some of the rooms and serve people pancakes in the morning and perhaps you had just a lot of the informal couch surfing and maybe you'd put, put a little ad in the paper for a border because you had an extra room and maybe an out of town professor would come in and live out of your house for a few months. So it sort of began that way and it's been around for a long, long time. But not the way it has sprung up in the last few years, probably last decade or so because of technology and these websites and software that now enables, you know, an average Joe to go online, hunt down some different places they could stay and book it just as easily as they would book a room at, you know, the Marriott or the Hilton.

Right, Absolutely. Ok, so where are we going to end up on this debate? I mean, if you had to make a prediction, who's, who's going to win? You know, is it going to be the Airbnb host or. I hate to Say Airbnb, it's like becoming Coke and Kleenex, which is not fair to the other, the short term rental host. Or is it going to be the other residents who don't like it?

You know, it's a really good question and I don't think it'll ever be a truce where the both sides just agree on a middle ground. I think it's going to be imposed on the groups by the government because that's the way it's been going, because it was a gray area and because forever you've been able to rent out your home. So landlording has been around for a long time and is pretty established. So a lot of the laws were designed to accommodate landlording and leasing out your place. And a lot of them were not limited in the way that the books were written, the law books to specifically address at what point does a tenant become more of a hotel guest rather than a tenant? Although more and more condo and townhome associations are starting to define it as 30 days or less is short term vacation rental, where 30 day or more or longer lease would be more of a traditional lease or a month to month lease would be a traditional lease. And so either the CCNRs are starting to address that, the rules and regulations privately are addressing and defining these things and then the cities are stepping in city councils. Recently I've been keeping an eye on one particular city that has been been punting it forward. I mean, they just, they don't want to make a decision and pass regulations. They keep listening to advocates on both sides, they keep doing the research, they keep getting proposals, they keep looking at legislation that could be enacted and they just refuse.

It'll just go away if we ignore it.

I don't know. Or maybe they're stalling to see what other cities do.

Yeah, right, right. They might be looking, for example, it's.

A big city, so they're going to, you know, they're maybe afraid to make the wrong decision on it before seeing what some of the other tourist destination cities do.

Yeah, interesting, interesting stuff. If you have anything more to say about the legality, feel free. But if not, talk about some of your experiences as a property manager and a host for your own short term rentals and just some best practices. Any apps or technologies that you like or, you know, just anything.

Well, I love being involved in short term rentals. I think it is a phenomenal way to in some cases double or triple the net revenue that you make from a rental for the summer season, depending where you are. I Do have one that's in the ski resort town. So that one does better in the winter than the summer. But then there's one we have here down at the beach and that one does, as you can imagine, really well in the summer months, not so well in the winter months. So there's sort of a combination. We've been playing with a lot of different strategies. Believe it or not, short term rentals that are two to three months long for traveling professionals like Travel Nurses is a really great market and generally very, you know, high caliber tenants who are just coming into town for a few months and need a fully furnished place with utilities included.

Yeah. So everybody probably agrees with you, but where do you find that person? Is that off? Like which platform are you going to find them on?

Sure. So there's. And I can name specific platforms. Furnished Finder is a good one. There is a lot of private closed Facebook groups for these professionals. For example, Travel Nurses join Facebook groups where they can chat to each other about housing options. Hey, I'm leading the San Antonio. I've got this great 3 month rental. Who else wants it? I'll pass your name to the landlord. And those are great places where you as a landlord, as the owner of one of these locations can put up a post and they're usually very welcomed by the moderators of these groups so that you can reach a very specific target of tenants who are looking for say the two to three month rentals. I will say for a lot of condos where the condo HOA has really come down on short term vacation use. So they've, you know, sent violation letters if they see that it's being used that way. Or maybe it's also not zoned for vacation rental use. This might be a great option because it's fully furnished, utilities included, but you do 30 day minimum. So you can usually be in compliance with your HOA documents even for those types of condos and still get some great, you know, additional rent for that unit. When you look at what you're able to charge when it is fully furnished versus not. Some other tips are. I've frequented some hotel liquidation wholesalers. These are companies that when a hotel renovates completely or goes out of business, all of their inventory, beds, linen towels, chairs, everything that you'd see in a hotel room, even some of the items from the lobby, like art and mirrors and different things get sold to these liquidators and you can get some amazing deals on bulk towels. So you can essentially save a lot of money when furnishing your new Condo or apartment, whatever it is that you're converting to short term use.

Right, right. But those are, you know, that's fairly rare and it's probably a little bit hard to find. And I don't know if you have a bunch of short term rentals. Yeah, that could really sort of move the needle if you got a whole bunch of furniture and stuff. But I don't know, that doesn't seem like it's gonna do too much for you, but maybe I'm wrong.

Well, you know, if for me, what I found is it was amazing to me, the difference in how many towels certain guests use as opposed to other guests. That was one of the learning curve issues. It's like, that's interesting. You know, you really have to kind of drill down on some of these things, like, what are you going to supply in the kitchen? You have to make these decisions from the onset. You know, salt and pepper oil, cooking items, you know, do you give them starter creamer in the fridge. What are you going to do? What's going to get you most stars and ratings and sort of positive reviews from guests. And there's these little things you can do where it really impresses your guests and it's something they weren't expecting that really only maybe cost you an extra couple bucks, but made a difference in the review that you get left.

Yeah, yeah, got it. Okay. All right, good. Any technology like apps or, you know, websites you like to use or software?

Yeah, I'm a big fan of Simplisafe as a security system. Security system. And everything's remote, so you can reset alarm codes remotely. You can use temporary alarm codes assigned to a specific person. I love keyless entry. Where it's a keypad and which one.

Which one for keyless entry, you know, it's kind of amazing to me, Flavia, how slow keyless entry has developed. Folks, listen to me. You should all be just as shocked as I am that we're using keys in the modern era. Like, it's shocking we're still using keys at all for anything. I can't believe it. But even, you know, the keyless entry for traditional register, you know, residential homes, I mean, few of them are connected to WI fi. There are all sorts of different concepts of them. You know, somewhere you, the tenant or guest has to download an app on their phone and then the app works with the thing on a Bluetooth. And, you know, there's just all these, like, different. I don't know, it's kind of amazing how that really seems rather behind it Is it's true.

I keep it pretty simple. I haven't yet switched to the ones that are WI FI enabled where you can change the actual front door lock remotely. They've been on there long enough that I got them, I think before they had that kind of connectivity. I don't recall that being an option when these were purchased. It's just a standard, you know, little keypad on it. I think Schlage makes them, or maybe it's quickset, it's one of those companies, one of the well known ones. You get them at Home Depot. I think each deadbolt's like $100 last time I had to buy one. And what I like is I actually ask the upcoming tenant or guest give me a four to five digit code that is easy for you to remember. And a lot of them choose their zip code or their phone number or I don't know what they choose, but they give me a code. And at the turnover before that guest comes in, that code is put into the door so that each guest has a unique code that will not operate once they leave. And they don't have to worry that the people before them have access or their code or can come in at night. So I think that gives everyone a little peace of mind and keeps things organized.

Yeah, good. Good stuff. Okay, good. So with Simplisafe, just for example, how are you using that in your properties? You set it up. Do you have the camera in there? Is there a camera on Simplisafe or just a motion sensor?

There's camera option. Both. There's motion sensors, there's cameras. What I like about Simplisafe is we have certain closets that are actually padlocked away that no guest access for certain things that get stored. And Simplisafe allows you to put some sensors, even when the alarm system is on off mode or home mode, you can place some sensors that are always on silent alert. So. So you would know if somebody broke into your supply closet or you'd be able to follow up on that because you'd get that. Or, you know, if you live at home, you could put it on your medicine cabinet or something like that. And then if you throw a party, you know that someone was peeking in your medicine cabinet. Another nice thing is the cameras because we have, for example, at the ski resort cabin, there's a camera pointing at the driveway so you can sort of monitor how many cars are parked there. And you just have to disclose to people that the driveway is monitored during their stay. And that also helps cut down on pets that maybe weren't allowed because, you know, you could see dogs and that sort of thing. And it just gives you a way to later take screenshots or prove, you know, you had 10 vehicles there. There's a two vehicle max. The interior camera is something that we have the guests unplug. Like it's part of their check in procedure. They have to unplug the camera and then they have to replug the camera back in on their exit. And so they see it. I mean, it's an actual plug. You see the camera turn off. So they know that it's not filming that.

Yeah, you got to be careful of that for sure.

And then there's no cameras in the bedrooms even when nobody is staying there. And that's just how we do it. I mean, a lot of this is like, you find what works for you, your stride, what makes sense to you. There's no perfect way to do it. There's no right or wrong way. I know people who use noise sensors to make sure there isn't a party. I don't do that. I know people who. There's certain software. I don't know the name of it. Maybe you do. It'll monitor how many cell phones and WI fi devices are within a radius.

Oh, I don't know about that one.

Yeah, so if you have like 20 cell phones in use in your place with four person occupancy, you know that there's 20 folks there and you can.

Oh, so it's actually monitoring. It doesn't have to be hooked to the WI fi, it's monitoring the cell phone signals. Wow.

That's what I believe. Unless it was just through the WI fi, I don't have it. Saw this mentioned in a Facebook group. And again with social media, now you can become a member of Facebook groups.

That'll help you. Yeah.

And they'll all network together.

Sure, yeah.

And give you advice and, you know.

It'S an amazing time to be alive, as I always say. Are you managing? I mean, you Talked about the SimpliSafe and the requiring the guest to unplug the camera, plug it back in. You know, that's pretty granular. Are you managing any of your own short term rental properties to the extent where you don't actually go there yourself, Even if they're local, could they just as easily be a thousand miles away?

Yes. And I know people who. I don't do this yet, so I don't have, you know, places that are that far. Although my furthest away rental is three and a half hours away.

So you're not going there at all, right? Yeah.

Right. Well, I don't need to because this is one that we use for our own vacation use. We're there quite often, but it can all be done remotely. That's another reason to use technology, so that people can get in and turn off the alarm and, you know, you get the notification, the alarm was turned off, you know, people have arrived, they can call you. Nowadays you can FaceTime. So, I mean, if someone's having trouble using the thermostat, you can say, why don't you put me on FaceTime and I'll walk you through it, you know. But there is a lot of hands on. This is not landlording. This is hosting. This is customer service. It's very different than landlording and it's much more personal and there's a lot more interaction between guests and hosts, especially because the guest has a higher expectation. So for them, this is in between a hotel and their rental at home. This is something somewhere in the middle. And I think we're all finding where that middle ground is and what the appropriate level of personal service versus hands off is. And so it's going to be trial and error for all new hosts.

Good stuff. Well, I want to ask you to give out your website, tell people where they can find you and you know, just close with any comment you have. Maybe a question I didn't ask you or anything you want to bring up.

So I've been teaching landlording at the local community college for years now, over five years. And there's always a wait list and it's a great class to take in person if you happen to be in San Diego. But for anyone who's not in San Diego but is a California landlord or has some California properties, I've put everything that's in my class online at Landlord Prep and that's just to prep new do it yourself landlords or experienced ones, so that you get all the practical know how and all of the legal contracts and templates that you're going to need going forward. So come Visit us@LandlordPrep.com I'd love to have you in our community and as a student. And one last thing that I want to throw out there because this is, you know, the lawyer and me putting on my lawyer hat talking. And I want to take care of people and hope that they pay attention to this. This is an important part of any new venture is thinking about your insurance needs and make sure that the type of insurance you have for the property that you're converting to short term vacation rental use is covering you for that use, which for many insurance companies is considered commercial use and not true landlording. So you'll want to make sure. When I shopped around, I really only found three good companies that were offering that kind of coverage. And so I was able to get some quotes and bids and choose the best one for our needs. But it was something that required a little, a little bit of footwork because the company I ordinarily use for rentals does not cover short term vacation rental use.

Yeah. Okay, good. Good to know.

Good to know.

Yeah. Insurance is really becoming an issue. I mean, I mean, for many years, it has been certainly ever since Katrina. I mean, we do business all over the country and it's. Insurance used to be easy. Now insurance is getting. It's gotten a lot more complicated. But again, that's a barrier to entry for competitors. Right. The more difficult anything is, the fewer people will enter the marketplace and the bar is higher. And so there's always an offsetting effect that can benefit you. So if you're willing to do the work, then, hey, you'll get the profits and. And fewer people will. Will want to do the work. So just a general concept in the in marketplaces. Flavia, thank you so much for joining us. Really appreciate it. Great insights and really interesting legal discussion as well.

Thanks, Jason. It's been a pleasure.

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