Jason opens up the show with good news for investors in Chicago as well as the tax situation in California. Later in the show, he brings on Rob Stephens, co-founder of Avalara MyLodgeTax. The two discuss the short-term rental market and oversupply. They go into the impact of institutional investors and their impact on the market. They end the show by looking at the tax implications of short-term rentals.
You’re that kind of person and you’ve got the capital and you’re a great negotiator. You’ve got great people skills. You could probably be a successful flipper, but it’s like a job. Right? If you’re not flipping, you’re not making money. And that’s why I prefer income property because you just make money every month.
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:07
Welcome to Episode 1283 1283. Thanks for joining me today. So good news for our Chicago investors with all of the fiasco is going on in Illinois, you know, their pension crisis, etc, etc. Chicago still is a world class city. Of course, that depends where I get it. And you know, same with any other world class city, New York, London, etc, etc. But Amazon is expanding in Chicago since 2010. They’ve spent $4.4 billion in the state of Illinois, they are really increasing their tech hub presence there. They’re adding 70,000 square feet of space at the Franklin office building in downtown Chicago. And they should in very short order, create an additional 400 high paying jobs there. So they are into that market. So one of the things that you’ve got to realize about the Chicagoland area, I will freely agree that there are another mismanaged left wing area, but hey, what other mismanaged left wing type of government area can you get into for the price you can get into Chicago for ya can’t do it in Los Angeles. Another mismanaged left wing disaster. Yeah. Can’t do it in San Francisco. Same applies there. Yeah, can’t do it in New York City. You can’t do it in Miami. You can’t do it in any of these places. Chicago is like the last one standing where you can get into one of these sort of World Class cities at a reasonable price. We’re not doing that much business there. Right now. We had an issue as I told you about before with one of our vendors there and so we’ve we’ve kind of cooled off for recommending that market and the property taxes. Any broke left wing, poorly managed. Government is always looking for money. And I tell you, like we talked about yesterday in California, prop 13. They’re coming after prop 13. And if that happens in California, whoa, hold on to your hat. Because disaster will follow. Many times. Over the last 15 years, I have stated that one of the reasons California has been lucky enough to experience the kind of appreciation and prices it has. Now the cash flows terrible and pathetic. And by the way, Chicago land is the only leftist area like that where you can actually get cash flow, right? You can get properties that make sense in terms of getting close to that 1% rent to value ratio metric right? You can’t do that in any of these other poorly managed left wing markets. Do you like how I put that I want to invest in a poorly managed left wing market like California or New York can’t do it. Can’t do it in any of these areas. How about London? No way. Not even close. The last one of these standing Come on, why can’t do it? And why? Any of these left leaning areas, right? The only one, I would submit the only one you can do it in his Chicago land that will actually come close to making sense. Now, what was I saying? Oh, prop 13, California when prop 13 if and when prop 13 goes away? God forbid, that is going to be you know, remember ross perot, when he was running for president. Some of you aren’t old enough to remember this. But anyway, he had a really funny get presidential campaign with these cool flip charts. And when he was running for president, he talked about and popularized the term that Giant sucking sound right when he was talking about NAFTA and he turned out to be right ross perot was absolutely right. But Wow, if you don’t think that has happened in California yet, if prop 13 goes away, I mean, first if they pass rent control, that’ll be of course, a massive disaster. But secondly, if prop 13 is attacked, you know, some say okay, well, they’re only gonna attack prop 13 on commercial real estate. That won’t matter to me because I own residential real estate. Are you asleep? Wake up and smell the coffee.
Jason Hartman 5:41
Wake up and smell the coffee because that will definitely affect you. Because Guess who? Who is occupying commercial real estate people with jobs? Oh, let me see if all that commercial real estate gets really expensive and around a foreclosures comes along. How’s it will if if the tax is just sore? I mean, the taxes in California, in comparison on a percentage basis are so cheap. I know, I know all of you listening in California, my former home state for the vast majority of my life. I know what you’re thinking. You’re thinking, Jason, my tax bill in California is outrageous. Well, sure, compared to the, you know, because of the value of your property, the price of your property, the assessed value of it, yeah, your tax bill is high. But as a percentage, your taxes are cheap, cheap, cheap, cheap, cheap, unless, of course, you are unlucky enough to live in one of those special assessment districts like a mello roos, or whatever the assessments are that are out there, all those bond issues they float to raise your taxes. I lived in many of those in Irvine and Newport coast over the years. I know your tax bills much higher, but if you were simply paying the prop 13 protected tax assessment in the Socialist Republic of California. You got a bow toward Howard Jarvis his grave every day and pray, because you are lucky, lucky, lucky. And if that goes away, wow, that will be just insane. I mean, I can’t even imagine the devastation that will occur if that happens. Well, our guest today is going to be talking to us about short term rentals and the potential short term rental bubble. Now interestingly, I just made an offer on a short term rental property for myself. Yes, from one of our local market specialist. He’s been on the show before talking about the properties he has. But overall, from a macro sense, you’ve really got to pay attention to this. You gotta still even though there’s a lot of money that’s been made, and money will continue to be made. Just follow my commandment number 21. Thou shalt avoid manias. Okay, whenever there’s this mania, whenever things are being just massively overpromoted, you gotta check your brain at the door and have some like common sense about things. look at things rationally with a lot of hype. Okay? Take a step back, look at the big picture. So many people, they’re looking up close, they’re looking at the brush strokes on the painting, but they need to take a step back and look at the whole painting, right? And that’s what we’ve got to do. We’ve got to keep ourselves in check. All those people that lost their fortunes in the tulipmania.
Jason Hartman 8:38
Back in Holland in the day, or whatever mania was, throughout history, humans are very susceptible to manias wasn’t just 10 commandments. It wasn’t just 20 we’re up to commandment number 21 of Jason’s commandments for successful investing and number 21 thou shalt avoid manias. Don’t be caught up in the mania now. Before we get to our guest, I want to say one more thing about Amazon. These tech companies are abusing their power in. Absolutely deplorable. Hey, do I sound like Hillary Clinton? There are deplorable all these deployables you know the deplorable is our is the big tech companies. They are abusing their power in ridiculous ways. Well, the Wall Street Journal just reported that Amazon changed its search algorithms in a way to benefit its own products. Surprise, surprise, surprise. I told you I told you they were doing this before the Wall Street Journal reported this. I said that okay. And I was just speculating. But what do you know, I was writing again, I was right again. Okay. Now here’s the thing. The reason this is so disgusting, as he is all the disgusting stuff that Facebook does absolutely disgusting. gusting stuff Facebook does absolutely disgusting stuff Google does, and the absolutely disgusting stuff Amazon does. And really, all these tech companies, these platform companies, right, they have access to data that can allow them to and does allow them to unfairly compete. Think of it in the Amazon world. If you want to sell something on Amazon, you go into their marketplace, you create a product, maybe you do all the research and development for that product. You put it on their website, like my girlfriend does. She’s she has an Amazon business, you spend all the money to do the heavy lifting. And then Amazon looks at all the data of how your products selling and decides how they’re going to show your product in the search rankings. And they’ll decide if the reviews on your product are fake or unacceptable or not. And they will just decide everything of how its presented. And then they’ll use all this data to decide whether or not they want to go into that business and compete against you. That is absolutely disgusting, and should be illegal. And these disgusting abuse of tech companies have got to be busted up. Thank God, the government is finally on what I’ve been saying for 15 years. Okay. Now attorneys general in 50 states in 50 states. Now, of course, that leaves seven states that they’re not doing anything. Didn’t Obama say we had 57 states? Yeah. So according to Obama, there’s seven more attorneys general that are not doing anything about Google yet. But at least in 50 of the 57 states. You love my sarcasm, probably not as much as I do. Okay. The attorneys general are attacking Google. Thank God, long overdue. And we’re finally getting some balance of power here. So this will unfold and continue. Okay, let’s get back to real estate. Join us. profits in paradise event. I gotta tell you something special about this event, for the first time ever. We are adding a property tour. Yes, we are adding a bonus property tour on Friday. never been done before never been done before. Hey, think of it last year, profits in paradise was in Hawaii. The I think we’re going to do a property tour there. No way. We wouldn’t guide you to such crappy investments. I’m your guide. My team is your guide. We only want to get you the good stuff. So we are doing a bonus property tour on Friday. The day before profits in paradise starts on Saturday. So join us for that. Go to Jason Hartman live.com. And don’t forget about our contest can get free tickets, plus maybe a free cruise for our cruise event. And that’s it Jason hartman.com slash contest. So you can see all this just by going to Jason Hartman make it easy for you. Jason hartman.com go check it out. Let’s get to our guest. Let’s talk about short term rentals. It’s my pleasure to welcome Rob Stephens. He is co founder of avalara, my lodge tax, and we’re going to talk about tax compliance for short term rental properties. also talk about the marketplace in general. Rob, welcome.
Rob Stephens 13:23
Yeah. Thanks for having me. Jason. Happy to be happy to have you. Where are you located? We’re in Denver, Colorado. Okay, great.
Jason Hartman 13:28
What is going on with the marketplace in the short term rental world? When we were speaking off air for just a quick moment? I said that my impression just anecdotally was that the market is starting to get to a point where it might be oversupplied, where there are so many people converting properties into short term rentals kind of has that feeling of a gold rush. And and you know how those always end all manias and the same. It’s just a question of when will they end and you had kind of a counter to Go ahead and tell us what your thoughts are.
Rob Stephens 14:02
Yeah, I mean, I haven’t necessarily broadly seen or heard that. And I’ve been doing this since 2000, actually 1989 for almost 20 years. So the industry’s very different than when I first got involved. But you’re absolutely right. I think Airbnb being short term running has really become ubiquitous. It’s happening everywhere. There’s tons and tons of people doing this. And so there’s a lot more properties out there on the market for rent. But what I’m seeing and I have my own short term rental, that I ran here in Vail, Colorado, and my experience, at least for this little market for the winter was I continue to get really strong bookings. So I think the websites have grown a lot, but I think they’ve done a really good job of driving a lot more travelers to the short term rental option. You know, homeaway used to do market research years ago, and even in 2010 2011 there wasn’t great awareness of short term rentals as a category for travelers and I think clearly, you know, Airbnb is really a household name, you know, homeaway vrb have become very large, successful company. So I think There’s just a lot more travelers. So I think keeping up with kind of the supply side is the properties the demand is, is the traveler side. So I think that equilibrium is relatively in check. Now, the other trend we’re seeing is I think the market is certainly as it matures and you’ve got more people doing it. We’re also seeing a lot more serious people doing like, for instance, you know, maryada announced that they’re going big into the vacation rental space, they announced the last week or two, you think that a company like Marriott has been in the vacation rental space since their founding? They are a hotel after all? Well, certainly,
Jason Hartman 15:30
but I know what you’re saying I’m
Rob Stephens 15:33
sure, you know, the traditional short term rental property to their mix. So that’s another trend we’re seeing is very professional, institutional, live branded operators coming to the space providing a really, you know, consistent and quality experience. Okay,
Jason Hartman 15:47
so before we get there, how long just hold that Mary out thought for a minute because I want to just go back to the equilibrium question. And I agree with you. There are a lot more travelers. There’s a lot more bookings but Let’s just look at what’s gone on over the past decade or so, since the rise of Airbnb. And coming out of the Great Recession over the past decade, we’ve had a booming economy. Certainly there are chinks in the armor. I get that. But overall, I think, you know, everyone would agree the economy is booming. And we’ve also had additional hotel construction, hotels are still moving along. And we have increased the supply of travelers. But we have this really good economy with really low fuel cost, keeping airline prices and travel opportunities, transportation opportunities cheap. So what happens when we finally enter a recession, which we inevitably will, and maybe we see energy fuel costs go up and an overall slowdown in the economy. I mean, something has to give right the supply of travelers will likely decline and I don’t track it closely. But my understanding is that the hotels are doing pretty well, like their occupancy is decent. So, you know, either the hotels have to give up occupancy, because it’s shifting to short term rentals. Or there’s just overall more demand, which I know there is, but will it continue? You know, what’s the future hold? And then let’s talk about the institutional players and what that means.
Rob Stephens 17:23
Yeah, sure. Great question. And certainly, to your point, at least for my corner of the world, I haven’t seen certainly short term rentals has not been the demise of, you know, the hotel operators, I think, you know, they continue to grow and thrive, and certainly the vacation or the short term rental industry is booming. So the pie must just be getting larger and larger. I think in the context of you bring up a good point. It’s been a great run for, you know, over 10 years economically. And we do have some data going back to 2007 2008 when we had to, you know, the great recession. And you know, I was in the short term rental space at the time. I don’t think Airbnb had been founded yet, but certainly homeaway was an established company operating, it’ll be interesting to see what happens because certainly, it’s clear when there’s a recession or pullback discretionary spending, you know, obviously travel and vacations being one of those is the first thing to go from the consumer. So travel is typically hit very hard in those environments. Now, how that falls out will be interesting because what we saw as an industry in 2007, eight is yes, a big pullback in consumer spending. But what happens is people would they go to drive in markets, you know, on the Gulf Coast, rather than, you know, fly to Hawaii or fly to the Caribbean. So, people still want to take trips, they shorten them, they want to spend less money in some sense. vacations can be a really good option in that scenario. So I don’t think anybody has a crystal ball, but certainly from 2007 and eight short term rentals really weathered that storm pretty well for some of the things I mentioned, people still like to take trips, so driving markets, more affordable properties property you can share with families
Jason Hartman 18:57
so they don’t fly to a vacation. They do Take a road trip vacation, which is less expensive, but it’s still more expensive than staying home. And there are still home exchange programs if someone wants to trade their house right, rather than actually renting one and paying for basically two places at the same time. But it kind of begs the question, Rob, and here’s the $64,000 question, is it cheaper to stay in a short term rental? Or a hotel? I don’t know about that. Certainly, for a big family, it’s probably gonna be cheaper to stay in a short term rental. But for everybody else sign I don’t know, you know, by the time you add these cleaning fees in and this and that, I mean, I know hotels, nickel and dime you too. But hotels have gotten I don’t know, they’re not that expensive, given all the bargain hotel sites out there. And so far.
Rob Stephens 19:46
Yeah, I mean, I think they’re, you know, in some segments, you know, they’re different. They’re different products for different people. So I mean, I use hotels a lot. When I travel for business, particularly one two nights days, you know, at least right now, vacation rental short termism. I just don’t seem like a great option for me. Certainly, when I’m going anywhere for a week, or with groups, if you’re growing with friends or a couple of friends or families or sharing a place, I do think it’s a great option. Now there’s like there’s very expensive short term rental properties out there. But I think part of the value is the nightly rate. But part of the value is you have your own kitchen, you have multiple rooms, you have more space. So you’re not you know, going out as much going to restaurants, you have the ability to share the space, you kind of spend time community you know, that’s the other part this industry will talk about is the community element. And I’ve stayed in hotels with my kids before and they were in a separate room and, and my wife and I are in a different room where we’re sharing a room and that’s that’s not always a great experience. But like hotels to your point, hotels are continuing to grow. There’s for certain types of trips that really makes sense, I think, for other types of trips where term rentals are going to make a ton of sense.
Jason Hartman 20:52
Okay, so you don’t kind of wonder what’s going on with the timeshare industry in all of this. I haven’t heard much about it. timeshares used to feel that right sort of short term rental, you know, vacation ownership kind of a need. And of course, they’ve adapted and changed and maybe they’re a little less sleazy than they used to be, I think and definitely more institutional. Certainly many big names in that world now maryada included Ritz Carlton, etc. But do you know anything about what’s been going on with timeshares? Because most timeshares are more like a home, they’re more like a condo, you know, they’ve got a they’ve got a kitchen, they’ve got a laundry, all that,
Rob Stephens 21:27
right. I mean, I, you know, anecdotally, yeah, we do bump into them. We have a few of them as customers of our business. But I think your general premise is correct that with if you can go to an Airbnb or via a website, and you have millions of properties to choose from, and kind of book now pretty easily online conveniently, you know, this has all become pretty easy to do what you really want to lock into two kind of a timeshare investment when you have such a broad product offering anywhere in the world that you can stay out through the short term rental sites. Yeah,
Jason Hartman 21:57
you know, it’s interesting, I think, I wouldn’t want to do that as much okay. Now let’s talk about the institutional players what you were getting at before. So what does it mean? When, say Mariano or you know, any of these larger players are entering the short term rental market? I mean, how do you know how do you even classify them as entering the market? are they buying single family homes? You know, is is mariadb buying a bunch of single family homes and sticking them on Airbnb or what are they doing?
Rob Stephens 22:24
Yeah, I don’t know their exact strategy, but typically, they it’s very rare that they would buy the physical asset or buy homes or condos that’s very expensive. I mean, they may control condo inventory at their resorts. But the typical model is to partner with property managers. And this is one of the big trends we’re seeing. We’re seeing companies like Marriott partner with multifamily operators. So you know, by multifamily, I mean people that own and operate apartments and these are large, well diversified real estate companies with huge inventories of apartments across the US. So the That’s where some of these larger and more branded operators are getting the inventory that they can then put in a short term rental pool. And that’s one of the big trends. I mean, the multifamily operators combined with these, you know, branded operators like maryada, or Asana or lirik. They’re trying to create a real consistent guest experience much like a hotel where like, if you stay in America, you kind of know what you’re getting, versus a Holiday Inn. Well, that’s the type of experience they want to create for vacation rentals, quality linens, quality furniture, packages, maybe even concierge or Guest Services, you know, very professional interactions. And so they’re targeting, you know, the traveler that’s more serious, maybe the business traveler or sometimes the higher end traveler, but it’s, from my perspective, it’s really raising the bar across the industry. And I think going back to your original question trends, I think this is all good for travelers, right travelers have more options. Now they have you know, branded options, they can set a mariadb short term rental, they can stay in a branded, you know, like a sonder where they know what kind of experience are going to get have some services attached to it, I think, I believe the markets getting more difficult for the kind of casual or passive short term rental owner or person that’s just doing it sporadically or are not putting a lot of effort into it. And this may be connects back to your saturation point. So as the industry matures and the bar raises on the quality of properties, operators and guest experience, you have to know what’s going on if you’re short term running, and continue to create a quality experience and operate in a professional way if you’re going to continue to succeed in this marketplace. So that’s the other thing we’re saying. It’s just the bar is being raised.
Jason Hartman 24:30
Yeah. Okay. I’m just sort of wondering how you classify it as a short term rental style property. It’s obviously not a hotel room. You’re saying it’s an apartment, but it’s not going to compete with the single family home market?
Rob Stephens 24:44
Well, I mean, single family homes are a big part of the the short term rental market rally or in resort locations. When you get into the cities. It’s apartments, condominiums. Sure, yeah, things like that. Yeah.
Jason Hartman 24:57
Interesting. Anything else you want people to know about? The marketplace overall where it’s going. And then let’s talk about the tax compliance aspect,
Rob Stephens 25:05
broadly speaking, and I’ve touched on some of this. I’ve been doing this for 20 years, Jason and when I, you know, first started running my property in Vail or I rented a property from somebody, it was an offline, if I wanted to book it, either email them or call them. Usually you send a check to the mail, there was all this kind of offline cookie, go pick up a key somewhere. It’s super clunky. Yeah, exactly. And all that has really been streamlined. So whether you’re a guest or an owner, I think it’s gotten easier and easier to do. The industry is hugely popular and booming. To your point, probably in certain markets. You know, it is getting to a point where how many more short term rentals Can you have, but I would just encourage people that want to travel that way or have an extra property or want to try it. It’s a lot easier now than it was even five or 10 years ago.
Jason Hartman 25:51
Yeah. But the ease remember, there’s always this is what I always like to tell my listeners, there’s always an equalizing factor to everything. So it is easier. You’re absolutely right. The technology and, you know, from everything from the platform sites where you can list the property and find guests, to the electronic locks and smart home features, it’s all made it a lot easier, you know, in the fact that just that the public has sort of accepted it as normal, just like we’ve accepted the idea of getting into some stranger’s car, you know, not only getting into some stranger’s car but taking candy from him. It’s funny what we’ve accepted as normal. You know, it’s really amazing, the way the sharing economy has redefined the whole way we interact with things. Yeah. It’s incredible. But because it’s easier, you know, you’ve lowered the bar, you’ve lowered the barrier to entry, it’s easier for everybody. So it, you know, it’s easier to create more supply and have more people jump into the market as well. Right?
Rob Stephens 26:47
Absolutely. I mean, you know, long time ago, I was in college and you took an economics class and supply and demand. You’re absolutely right supply will continue in the marketplace at some point, you know, for property owners, their nightly, really rates are there occupancy rate, they’re just not going to be able to command as much dollars for that rental. If it just keeps going there, there is an equilibrium there, we’ve probably hit it in some markets. But at some point people will keep entering and the, you know, the economic theories that you know, the marginal benefit will keep going down. And you know, the risk as you hit a saturation point. Yeah.
Jason Hartman 27:20
Yeah. Talk to us a little bit about tax compliance, what your company does, and what’s new in that world?
Rob Stephens 27:27
Yeah, I mean, that’s our little corner of the world in the industry. And as we’ve talked about the industry become very, very large, popular, successful, lots of growth. But you know, for every one of these vacation rental transactions for every booking, there’s a hotel occupancy, tax component to it, and it’s not always well understood by the host or the homeowner. So yeah, we see it as a real blind spot. And that’s what we’re, you know, that’s basically our role in the marketplace is to provide a online, you know, cloud based solution, you know, for $20 a month where we’re going to handle all the registrations, all the forms, tell people The correct tax rate that they need to collect from the ghast. And then you’ll file and pay that tax, which is typically due every month or every quarter. So there’s a lot of moving parts of these taxes that the rank and file person engaged in short term running isn’t always aware of, they never dealt with it before. So, again, it’s a part of every transaction, you know, we’re here to help people solve it and make it very, very simple. And we leverage technology to do that. You know, in terms of trends in our space, we you know, the big trend over the last couple years and externally, two or three years ago, Airbnb started, you know, directly collecting remitting tax on behalf of hosts. So that’s been a big change over the last couple of years that the big platforms like the rbo and Airbnb have got entered into the tax collection remittance game. So you know, Airbnb is collecting and remitting in over 40 states homeaway has started to expand their their tax compliance footprint. So you know, in some instances, that’s great for the host. It’s one less thing for them to worry about if Airbnb is clocking in paying the tax instead of them but what we’re seeing is typically these platforms are paying the state taxes, but not city and county taxes so you know like here in Colorado they have an Airbnb has an agreement with the collar Department of Revenue where they pay the state, but they don’t pay my countervail local taxes. So even though these platforms are paying some of the tax in most cases, the host still has a obligation which in some sense creates even more confusion for what people need to do. And again, that’s our role to solve it and bring technology to bear to solve it. But tax compliance and taxes and regulations is a much much bigger issue in the industry than when we spoke four years ago, but the markets changing with some of the platforms handling some of the obligation
Jason Hartman 29:35
and so this is the same tax that hotels charge right the you call it the occupancy tax I think some call it the tourism tax though right
Rob Stephens 29:43
called different things in different states it’s you know tourism tax in Florida. It’s hotel tax in Texas, it’s room tax and Oregon. Its sales tax a lot of places but yeah, it’s by and large, the exact same tax that a hotel has to pay on the overnights day, which I think we’re all familiar checking into a hotel and Paying that extra 10 or 15%. It’s that same 10 or 15%, that all of us in the short term rental space have to collect permit.
Jason Hartman 30:06
How much do these taxes differ from one area to another? I mean, of course, there’s 50 states, while 51 if you include Puerto Rico, and then there are just probably 400 local municipalities to tax me. I don’t maybe there’s more than that. Like 45,000 Oh, my God, wow, I was kind of going by the number of counties or NSA is, I guess, yeah, you can’t do it that way. So how much do they vary? I’d be curious to know, you know, interestingly, some of the generally considered low tax jurisdictions where you might want to move to have rather high tourism or hotel or occupancy or whatever you want to call it tax. Just speak to that for a moment. Maybe give us a couple interesting examples, if you would,
Rob Stephens 30:50
these taxes generally function pretty similarly across the US. The challenge was these taxes, like I mentioned is you’ve got thousands of different tax jurisdictions. With their own tax, it’s all pretty similar. You got to register and you know, collect the tax pay monthly, that type of thing. But it’s different for each city and county. And that’s, that’s the real complexity there. You know, these are state taxes, but also city and county taxes. So they vary all over the US. And typically, you know, it’s the urban markets, I would say, these taxes average 10 to 12%. You know, and this is a tax on the rent. So if you charge your guests $1,000, it’s an extra, you know, hundred to $120 in tax. Well, when you get into urban markets, you start to encounter very high tax rates, typically, you know, 15% or higher. Chicago is probably on the far end of the spectrum right now with I think, over a 23% tax on short term rentals. So that’s very high. But it’s, it’s very common when you get into urban markets with lots of hotels, lots of you know, business travelers trancing activity, that you have high tax rates. I mean, look, it’s a great revenue source for a lot of municipalities because it’s a tax that the local community hasn’t paid the tax on visitors and traveler so it’s the classic, you know, the hotel The car rental tax is always very high in these communities and the urban communities it can be very high taxes.
Jason Hartman 32:05
Interesting. I you know, I almost think in when I asked you that question, I was almost wanted to recommend that as a strategy for tourists. I mean, look, you know, now people are getting sophisticated enough. And I’ve recommended in my show for many years that people get themselves out of high tax jurisdictions, and, you know, make a plan to, at some point, hopefully in the near future move to a no income tax state or lower income tax state. But now, I think it’s even worth considering shopping. That is a tourist because it can be pretty significant. I remember once renting a car for example, in one of my favorite places where I did live for six years, I was in Scottsdale, Arizona. I posted a screenshot of my rental car bill on Facebook because I was so astonished. The tax was 69% of the overall All car rental fee. I mean, actually, the cost of renting the car was 31%. Because I was I was astounded. I couldn’t believe what I was reading. Any thoughts?
Rob Stephens 33:11
Yeah, I think me and everyone listening to this are probably nodding their heads, we all have that experience with these types of taxes.
Jason Hartman 33:17
I mean, when the government is making more on the deal, the national company, I feel sorry for the company.
Rob Stephens 33:23
Hotel taxes, I don’t think it was, you know, there’s certainly no hotel tax that’s 50% or 6%, or an enclosed setup because, look, hotels are big ticket item. Typically, if you’re staying in an urban market, it’s hard anywhere in this economy stay, you know, for a decent, you know, hotel for less than two or 300 a night. But again, in the urban market that’s very common is that 15 to 20% tax. So I think we’re all as consumers, when when we’re traveling, there’s the quoted rate and then when we check out it’s just always higher and sometimes significantly higher, just because of these taxes. And like I said, it’s a great revenue source for municipalities that have a lot of hotels and travelers.
Jason Hartman 34:00
stuff. Anything else you want to share? Before we wrap up?
Rob Stephens 34:02
You know, I don’t think so just as I mentioned before, short term earnings became very popular. It’s gotten it’s gotten very easy. So I would just encourage people to try it, whether they’re traveler or if they want to jump into it as a homeowner. And if they’re looking for help with the compliance side of it, that’s our role in the world. Good stuff. Rob. give out your website.
Jason Hartman 34:20
milosh tax com milosh tax. com. Rob. Thanks again for joining us,
Rob Stephens 34:25
Jason. Thanks for having me.
Jason Hartman 34:28
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