Atlanta's Home Rental Ban for Airbnb: Why Coliving is Better

Ten years ago, Airbnb forever altered how people chose to lodge and invest. Earning passive income through property management became more accessible, with people now able to rent out various types of properties. While those seeking lodging arrangements are now able to have more freedom in locations and the length of their stays. 

However, the effects of Airbnb are soon to be diminished in the Atlanta area due to a new ordinance passed in May. The new ordinance will prohibit individuals from owning more than two Airbnb or short-term properties, one of which must be considered their primary residence. 

It will require owners to be a resident of Atlanta, pay an annual permit of $150, and pay an 8% rental tax fee. Owners will also face pricey fines for being in violation of these requirements, and for stricter noise and party violations. 

Though many short-term residence owners hope to negotiate parts of the ordinance, they will have until September until it is fully enacted. 

The change in government’s attitudes toward rental properties is likely to continue as city housing is becoming more scarce. However, this shouldn’t stop you from investing, but instead how you invest. 

With Alcove, the business model is more resilient than Airbnb’s, making Alcove a better option for how you rent out your properties. 

Risk-Reward of Short-Term Rental Sites

Vacation and short-term rental businesses, like Airbnb, typically do generate more profit than traditional renting, but the effort and accumulating risks are greater as well. With markets like Airbnb, you still need to provide essential services like maintenance and cleaning, and the continuous risk of high turnover does not create a consistent cash flow. 

The additional risks with Airbnb are the growing consideration of its “illegal” business model. Similar to what is happening in Atlanta, many cities and towns are making “live-out businesses” illegal within their jurisdiction. 

Leaving investments susceptible to their constantly changing town ordinances makes investors vulnerable at a short notice, and helpless with the financial burden of getting rid of large components of their income. 

While you can read up on your own city's laws surrounding this, investors should be wary of these risks when considering platforms like Airbnb, VRBO, HomeAway, or others.

Traditional Renting Means Cashflow

In contrast to renting models like Airbnb is “traditional renting”, where a property manager is hired or you self-manage the properties. Choosing to do a traditional renting model means that you have to deal with leasing and sourcing tenants, property turnover, maintenance, and more–putting a larger hole in your pockets and time. 

This strategy has less risk, as you can be more selective of your rental population. Homeowners will also experience less turnover as tenants occupy the space for longer rental periods of time. 

Though traditional renting generates less income than Airbnb, the main benefit is it eliminates income risks. Additionally, the traditional renting’s method allows for a more consistent cash flow. 

Alcove's Per-Bedroom Model

Despite traditional renting still taking up the majority of the U.S. rental market, there are new options of income for investor-owners that balance the high rewards of Airbnb and the lower risk of long-term rentals. 

By being in the middle of the rental spectrum, Alcove provides benefits for both sides. 

Alcove’s rental method allows you to lease your property out on a by-the-bedroom model with per-bedroom leases. Permitting you to generate above-market returns through per-bedroom leasing (an over 15% NOI average increase), all while decreasing asset risks of high turnover from longer retention phases of tenants.

Compared to other models of renting, Alcove does the stressful parts of property management like sourcing tenants, furnishings, and essential coliving services. 

Choosing to use Alcove’s services and per-bedroom model better protects investors from the current trend of illegalizing short-term rentals, all while creating higher returns and less work overall. 

What to expect as an investor-owner using Alcove:

• Decreased turnovers and longer tenures (an average high retention of 15 months per tenant making for consistent cashflow)

• Decreased seasonality (long-term rentals prevent inconsistent occupancies due to seasonal trends)

• Increased market returns and NOI