Short-Term “Transient” Rental in San Jose

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With housing prices so high in the Silicon Valley area, many home and condo owners are looking for ways to generate additional income to offset the cost of housing. Most homeowners with extra space or a willingness to build an accessory dwelling unit (ADU – aka “Granny Pods”) opt for a more traditional long-term rental arrangement, through leases of a year a more.

However, with the growth of short-term rental options, such as Airbnb and others, some homeowners are opting for short-term rentals as a way to bring in additional income while maintaining flexibility. With short-term rentals, the property owner is in control of when and how often the unit is rented, so that owners can offer their extra space for rent on a schedule that is most convenient.

Due to the high cost of real estate, it is unlikely that purchasing property solely for the the purpose of short-term rental, which has overtaken some neighborhoods in highly sought-after tourist areas (such as in Sedona, AZ and certain parts of Florida), would be economically viable in San Jose. Plus, local restrictions may put a damper on some of this activity. However, short-term vacation rental remains a viable option for those who are looking for a bump in income without all the hassles of becoming a long-term landlord.

If you are interested in converting an unused basement, room, or granny pod into a short-term rental, it’s extremely important that you understand laws and regulations in San Jose (or any other city). What is provided below is just a summary. If you have questions, contact the Department of Planning, Building, and Code Enforcement or other city agencies directly, or consult your legal or financial advisor.

Municipal Code: “Hosting” is permitted in all legal homes and apartments with some restrictions as listed in Section 20.80, Part 2.5.

  • If you will be present in the home at the time of the short-term rental, then you may have a maximum of 3 additional persons in the home on a short-term rental.
  • If you live a condo or other multi-family unit, then you may have a maximum of 2 additional persons in the home on a short-term rental (if you will be present on site).
  • If you will NOT be present on the property during a short-term rental, then the maximum occupancy is 2 people in a studio, 3 people in a one-bedroom, and two people in each bedroom beyond the one bedroom.
  • If you will not be present on the property at the time of rental, then you must provide in writing the name and phone number of a local contact, not only to the personal renting the unit, but also to all adjacent neighbors.
  • If you will not be present during the rental, then unit can be rented for a maximum of 180 days per year. If you ARE present, then the unit may be rented 365 days per year.
  • You must collect the required “transient occupancy tax” and pay the tax to the City as outlined in the code. Airbnb and other platforms may collect and pay this tax for you, so check before listing.
  • The unit must meet all required zoning and use requirements.
  • There must be adequate parking.
  • You must keep records of compliance with all rules for 3 years for each period of transient occupancy, including payment of tax. You must be able to produce these records upon request.

The above is not comprehensive. Make sure you understand all the rules before listing your unit for short-term rental.

Business Registration and Tax:  San Jose requires businesses to pay a tax before issuing a business license.

Other Rules: While the City has rules that must be followed, you should also know and understand how other contracts or rules may bind you, such as leases, condo board or co-op rules, HOA rules, etc. For instance, if you rent an condo, your lease may or may not prohibit sub-leasing of any kind, including short-term rentals. These rules have to be followed as well, otherwise you may face eviction, fines, or other consequences.

Short-term rentals may be a great option for people who are want to dip their toes into becoming landlords or who want more flexibility, but if you are looking for stable, reliable investment income, then direct investing in rental property may still be the best bet. Talk it over with an advisor before taking the plunge.

Let my team at Keystone Realtors® meet all your real estate needs. We can help you find the perfect investment property to get started, and provide advice on your investing journey. Paul Phangureh has over 16 years of experience in buying and selling in the Santa Clara and San Mateo County areas, specializing in the high-end, luxury market, as well as commercial and multi-use real estate. We can help you navigate the process of getting started with real estate investment. Visit our website at Keystonesv.com for listings and information. You can contact Paul at 650-924-2544, or email at [email protected].