fbpx

How to Buy a Short Term Rental in Charleston

Charleston is apparently a wonderful city in which to sojourn. So just as when visiting any attractive city, guests have a number of options for room and board: hotels, vacation homes, timeshares, and short term rentals from services like Airbnb and Vrbo. Saavy real estate investors responded to the growing popularity of short term rentals by purchasing properties in downtown Charleston with the sole intention of operating them as rental machines. 

Bicyclists in downtown CharlestonHowever, while some municipalities are totally fine with short term rentals (e.g. the beaches), the City of Charleston residential zoning rules did not permit rentals under 30 days – so these property owners cashing in on downtown short term rentals were risking ordinance violations in doing so. An income-producing asset is not so valuable when the income is illegal. The trend became so popular that Charleston residents and officials saw a need to establish clear rules and enforce them. 

For the investor looking to operate a short term rental in Charleston: There are actually many more legal short term rentals now, so know that it is possible – but only if you and your agent are acquainted with identifying properties that would be eligible, and then navigating the permit process.

Beginning on July 10, 2018, homeowners can begin applying for licenses to operate under the new rules, and by August the City will begin enforcing them. 

Each municipal area has its own ordinances regarding short term rentals. 
For the sake of clarity, let’s begin where rules are the most strict: 

Downtown Charleston

First question out of the gate – this part is now what matters most. A or B:

A. Are you looking for a property that you will be living in, and has an income generating portion, like a carriage house or mother-in-law suite? 

You can now do this in (almost) any part of the downtown Charleston peninsula, and here is what that looks like:

 

 

Here are the rules you must abide by for renting part of your home in downtown Charleston:

1. You must live there and you cannot rent the entire house. You have to prove you reside at the property, to the extent of showing proof that you are benefitting from the state’s 4% owner occupant property tax rate.
2. You must be there. You must be physically present on the property or “generally available” during any time the property has a short term tenant and you must spend the night there (we’re all curious to see how this is enforceable).
3. There can be only one short term rental unit on any residential property, and the rental unit can only house up to 4 adults.
4. Must provide 1 off-street parking space designated for the rental, in addition to any parking required for residential use (this one provision disqualifies many historic homes in Charleston, as the lot sizes are generally narrow). 
5. The short term rental property must be of secondary use on the property (can’t rent the main house).

Additional rules for two districts on the peninsula:
Historic District (Category 1)
The short term rental unit must be in a building that is listed on the National Register of Historic Places.
If the rental unit is or has been occupied by a tenant, you must wait 1 full year before applying for a short term permit (prevents displacement of rental housing stock).

A map of Charleston, SC indicating the Category 1 and Category 2 zones pertaining to the Short Term Rental Ordinance
The Category 1 & 2 zones on the Peninsula
From the City of Charleston

Upper Peninsula (Category 2)
The building housing the short term rental unit must have been constructed at least 50 years ago.
Also, in a weird quirk, Cannonborough-Elliotborough (for these purposes aka the Short Term Rental Overlay) will be operating under its own rules adopted in 2012, which prevents short term rentals in residential properties unless they acquire a Bed & Breakfast permit, which is a whole other can of worms.

Fine print:
Owner must have a business license and comply with revenue collection laws
Owner must provide a rental packet to tenants containing applicable city rules and restrictions, and safety information
Owner may not place any signage on the property advertising the short term rental
Owner must have an insurance policy with general liability up to $1,000,000
Owner must keep a guest register including names, addresses, telephone numbers and dates of occupancy of all guests
Owner must list the short term rental permit number on any listing or advertisement
Owner cannot expand the short term rental beyond the rooms that are designated on the permit
Any modifications to make building a suitable short term rental must be interior only, so a permit would be denied if exterior changes were required to create the rental
Owner must comply with any other existing zoning and lot ordinances

B. Or, are you looking for a property that would be purely income-generating, while you lived elsewhere?

You can do this only within either (1) the Accommodations Overlay – which is nearly the entire spine of the peninsula between King Street and Meeting Street, down to the Market Street area into the French Quarter – this overlay was created specifically to contain where hotels can operate and buddy, operate they do. Or (2) in the commercially zoned parcels of the Short Term Rental Overlay – which is Cannonborough-Elliotborough.

NEW in 2019: Locate specific properties that MAY be eligible for a commerical short term rental like Airbnb or Vrbo:
Click HERE to view the currently available properties 

At the time of this writing, that map looks something like this:

Map of Charleston, SC indicating parcels that may be eligible for commercial short term rentals
Parcels that may be eligible for commercial short term rentals

These overlays include many of the properties on: King Street, Meeting Street, Market Street – most of these buildings are retail/restaurant/office space, and many have residential condos above them. And on Cannon Street and Spring Street are many commercially zoned historic homes that may be eligible for a permit as well. 

If you want an investment property in Charleston on a short term rental program, these are the areas in which you should focus your attention.

Condo Rules
An added layer of restriction comes from the rules and regulations that govern condominium associations. Many have provisions that restrict rental terms to at least 30 or 60 days or more. Know the condo rules before buying one to use as a short term rental, and also know that condo boards can change the rules during your ownership, so get a feel from the board on how they feel about the subject.

The Rest of City of Charleston

(Most of West Ashley, James Island, Johns Island, and Daniel Island)

The rules are less strict – particularly in that there are no age requirements on the home, but all the residency requirements still apply:

A map of Charleston, SC indicating the Category 3 zone pertaining to the Short Term Rental Ordinance
The Category 3 zone off the Peninsula
From the City of Charleston

1. You must live there and you cannot rent the entire house. You have to prove you reside at the property, to the extent of showing proof that you are benefitting from the state’s 4% owner occupant property tax rate.
2. You must be there. You must be physically present on the property or “generally available” during any time the property has a short term tenant and you must spend the night there (we’re all curious to see how this is enforceable).
3. There can be only one short term rental unit on any residential property, and the rental unit can only house up to 4 adults.
4. Must provide 1 off-street parking space designated for the rental, in addition to any parking required for residential use (this one provision disqualifies many historic homes in Charleston, as the lot sizes are generally narrow).
5. The short term rental property must be of secondary use on the property (can’t rent the main house).

Charleston County (outside the City of Charleston)

Short term rentals outside the city boundaries are much less strict – you can obtain a permit to rent the primary residence, or an accessory dwelling, or both. You can also short term rent a non-primary residence.

You must obtain a business license, provide adequate off street parking, and abide by all other zoning rules. There are three types of short term rentals allowed based on various zoning rules:

1. Limited Home Rental – engaging in short term rentals of a primary residence – can’t exceed 72 days in a calendar year.

2. Extended Home Rental – engaging in short term rentals of an investment property – can’t exceed 144 days in a calendar year. Must obtain a Special Exception from County Zoning.

3. Commercial Guest House – engaging in short term rentals in commercially zoned districts.

The Beaches

Generally the rules are fairly open to short term rentals – you’ll just need a business license through the municipality (Isle of Palms, Folly Beach, Kiawah Island, Seabrook Island). Each town has a few other ordinances to abide by, but generally short term rentals are a breeze at the beaches, with one exception:

Sullivan’s Island – The town of Sullivan’s Island is openly hostile to short term rentals, and it’s hard to argue with their reasoning for preserving the quiet residential nature of the island.
Any rentals less than 30 days are not legal at all; a scarce few owners do still operate vacation rentals because they are grandfathered in from before the ordinance went into effect in 2002. 

Odd Details

Can an LLC qualify as a residential owner? Yes, a single or dual member LLC can own the property and still qualify, as long as the LLC members pass all the same residency requirements.

Does short term renting affect the insurance policy? Probably. Many homeowners insurance policies have a clause that excludes claims from damages related to short term renting. Reach out to a good insurance advisor to make sure you would be covered.

Leave a Comment