Starting an Airbnb in Ann Arbor
Here’s everything you need to know about how to set up a short-term rental safely, profitably and legally.
“Your profits reflect the success of your customers.”
What is a Short-Term Rental?
Ann Arbor defines a short-term rental unit as one that is rented for 30 consecutive days or less. See their short-term rental description page here and further information regarding how Ann Arbor regulates short-term rentals here.
Currently, there are four main ways a dwelling can be used as a short-term rental in Ann Arbor.
1. You owned an existing short-term rental before the most recent update to city regulations on short-term rentals. These were “grandfathered” in.
2. You buy a new dwelling in a mixed-use or commercially zoned area for the purpose of using it for short-term rentals.
3. It is your primary residence and you want to rent part of your house to a short-term rental guest.
4. It is your primary residence and you want to rent all of your house to a short-term rental guest.
5. A bonus category short-term rental could be an RV that you let park in your driveway for game day as Ann Arbor Public Schools just said they would no longer allow RV’s to park at Pioneer High School for game day or rent out one you already own.
Ann Arbor currently allows short-term rentals. Just make sure you follow the rules!
Where Are Short-Term Rentals Located In Ann Arbor?
Short-term rentals in Ann Arbor as of the date of publication. Source: AirDNA.co
Tips to Offering Safe, Profitable and Legal Short-Term Rentals
Here are 5 tips to help you have the best experience with short-term rentals in Ann Arbor.
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-First, make sure it fits one of the categories of legal short-term rental dwellings outlined above by the City of Ann Arbor. RV’s are not real property and may be outside the category of the real property described as short-term rentals requiring a license—confirm this with the City.
-Second, apply for a license from the City here to use the dwelling as a short-term rental. Short-term rentals that are not primary residences will also need to be inspected and pass housing code requirements.
-Thirdly, make sure you apply for a Michigan Lodging Use Tax License as described here which is a 6% tax on gross rents and all fees charged for lodging less than 1 month in duration.
-Fourthly, if you use a third party platform to book your short-term rental with guests like airbnb, Vrbo, booking.com you have to register and follow their guidelines as well and pay the associated fees.
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Yes, third party booking sites, cohosts and property managers do offer host insurance. Be sure to read the terms carefully.
However, you probably want to make sure your homeowners policy covers the short-term rental activity also.
If you are just renting out a part of your house as a short-term rental, you may not need specific insurance for that as you are living in the house also—check with your policy provider.
A short-term rental where you are renting the whole house requires a short-term rental policy for the house. Most homeowners policies will not cover whole house short-term rentals. Call around for differences in policies and rates.
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A useful tool for short-term rental market research is a site called airdna.co.
You can find a plethora of information on active short-term rentals in the Ann Arbor area.
-For example, at the time of writing, the average daily rate is $249.
-Average occupancy rate is 61% with a high in August (start of football season) of 78% and a low in January of 43% occupancy.
-83% of short-term rentals are whole house rentals.
-17% are private room short-term rentals
-Rentals from platforms is 67% from airbnb and 13% from Vrbo with 20% from both.
-The number of active short-term rentals is up recently from 534 active rentals in Q1 of 2022 and 657 in Q2 of 2022 or a 23% increase. More short-term rentals=more supply so weigh that out.
-evolve.com was one of the top property management services in Ann Arbor helping owners manage short-term rentals.
-An interactive map of short-term rentals in Ann Arbor shows that most rentals are located in downtown and you can even click on each one and see daily rates, pictures and descriptions.
Make sure you do your market research in your specific part of downtown and think about your proximity to the stadium for game day rentals.
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There are services that will help you list your property on all the major short-term rental platforms, manage guest issues, restock consumables and handle cleaning and make sure your reviews stay high as that is an important part of the business.
Three services to consider are:
cohostmarket.com This is a service where you can post what you are looking for in a cohost and there are cohosts in the Ann Arbor area. There is a fee for this service depending on how involved you want them to be.
Graduate Homes Graduate Hotels has their own service they provide for whole houses that are rented that fit their criteria on game day weekends in Ann Arbor. Read about it here. Find out more specific details here.
evolve.com This is a service that will manage your whole house short-term rental but it must be for more than just game days. See their site for specific details.
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Think about having rules for your house for the guests posted online and in a book in the house for guests that are enforceable and enforced.
You can also include information on local attractions and dining but make sure the house rules are clear and the guests acknowledge them before their stay.
Exterior cameras are also a good precaution if you are not staying at the house also.
“The average daily Airbnb rate in Ann Arbor is $249, average occupancy is 61% and average monthly revenue is $3,000.”
How Can a Real Estate Professional Help You With Short-Term Rentals?
A real estate professional can help you understand the rules of having a short-term rental in Ann Arbor and if your property would be a good fit or potentially modified to include a short-term rental as a basement apartment or accessory dwelling.
If looking to purchase a property to use as a full time short-term rental they can identify areas that would be zoned to allow full time short-term rentals in the city.
Finally, they can help you run a short-term rental safely, profitably and legally.
How to Offer Short-Term Rentals in Ann Arbor Safely, Profitably and Legally.
While the profit potential is real and the City of Ann Arbor allows short-term rentals make sure your follow the rules and protect yourself and your property.
Make sure you apply for a short-term rental license with the City for your property and a Michigan Lodging Use Tax License with the state.
Many short-term rental platforms and cohosting services offer host protection. Make sure your own homeowners policy covers the short-term rental activity you intend to engage in.
Do your market research and study your competition in the city for short-term rentals and know the number of active short-term rentals has increased in the city.
Consider using a property management company or cohost service to help you manage guests, cleaning and restocking, bookings and keeping your reviews and ratings high to attract more guests.
Finally, make sure you have rules for guests for the house that are enforceable and enforce them.
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