Shelby County, Tennessee Short-Term Rental Regulation: A Guide For Airbnb Hosts

What are Short-Term Rental (Airbnb, VRBO) Regulations in Shelby County, Tennessee?

Shelby County, Tennessee, which includes the city of Memphis, allows property owners to operate short-term rentals like Airbnb and VRBO, but only if the owner has obtained a short-term rental permit. The county has enacted regulations to govern these types of rentals.

Starting a Short-Term Rental Business in Shelby County

To legally operate a short-term rental in Shelby County, property owners must:

1. Obtain a Short Term Rental Property Permit from the county. The application requires:

• Site plan showing each rental unit
• Proof of current ownership
• Proof of insurance with liability coverage of at least $1 million per occurrence

2. Meet all applicable state and local building and fire safety codes, including:

1. Locating a 5-pound fire extinguisher (rated for A, B, and C fires) in each unit
2. Installing approved smoke alarms meeting UL 217 standards in all sleeping areas and rooms leading from sleeping areas
3. Installing approved carbon monoxide detectors on every habitable floor

3. Abide by all applicable noise control restrictions and litter/garbage control provisions in the county code

4. Ensure the principal renter is at least 18 years old

5. Not receive compensation for rentals of less than 24 hours

The permit holder must also agree to use best efforts to ensure the rental property use will not interfere with neighboring property owners' rights to quiet enjoyment of their properties.

1. Some additional considerations for short-term rental operators in Shelby County:
2. Review insurance policies to ensure they cover injuries, accidents, or losses arising from renter use
3. If renting the property, get the landlord's written approval for short-term subleasing
4. Review the property deed for any restrictive covenants that may regulate rental activity

According to posts on the Bigger Pockets real estate investing forum, short-term rental regulations in Shelby County are relatively lenient compared to some other areas. One investor noted that as regulations have tightened in Nashville, they are considering pivoting their strategy to focus more on short-term rentals in Memphis instead.

Overall, operating a short-term rental business is viable in Shelby County for those who follow the permit process and abide by the regulations. Hosts should be respectful of neighbors to increase their chances of success. As one Reddit user put it: "The better job hosts do of keeping neighbors happy and undisturbed will greatly increase your ability to be a successful host."

Short-Term Rental Licensing Requirements in Shelby County

To legally operate a short-term rental in Shelby County, property owners must obtain a Short Term Rental Property Permit from the Shelby County Clerk's Office. The application requires submitting the following:

1. Completed Short Term Rental Property Permit Application
2. Site plan showing each rental unit
3. Proof of current ownership of the property
4. Proof of insurance with a minimum $1 million liability coverage per occurrence
5. Passing a final inspection by Memphis/Shelby County Code Enforcement (the Clerk's Office will verify this)

The applicant must also certify and agree to the following:

1. The STR will not interfere with neighboring property owners' rights
2. The property is in compliance with Shelby County's Short Term Rental Ordinance
3. No citations have been issued by law enforcement or regulatory agencies in the last 12 months
4. The property is in compliance with the County's Technical Codes
5. No similar permits have been denied, suspended or revoked in the last year
6. No unpaid fines or court costs related to STR ordinance violations
7. All property taxes are current
8. Room Occupancy Tax requirements will be met

Permit applications should be submitted in person or by mail to:

Shelby County Clerk
150 Washington Ave, Suite 200
Memphis, TN 38103

The permit fee is $100 and permits are valid for 365 days. Renewal applications, along with a $50 fee, must be submitted at least 30 days prior to the current permit's expiration date.

Shelby County may levy a fine of $50 per day for each day that a short-term rental operates without a valid permit. Operating without a permit may also result in the property being deemed a public nuisance subject to abatement.

The typical processing time for STR permit applications is not specified on the Shelby County website. However, the requirement to submit renewal applications 30 days in advance suggests the approval process may take up to a month. Prospective hosts should apply well in advance of their desired start date for short-term renting.

Required Documents for Shelby County Short-Term Rentals

To obtain a Short Term Rental Property Permit in Shelby County, applicants must submit the following documents along with their completed application:

1. Site plan showing each rental unit: This provides the county with details on the layout and configuration of the rental property. It should clearly delineate each unit being used for short-term rental purposes.
2. Proof of current ownership: Documents like a deed, title, or mortgage statement prove the applicant has the legal right to rent out the property. These can typically be obtained from the Shelby County Register of Deeds.
3. Proof of insurance with $1 million liability coverage: Short-term rental operators must secure liability insurance covering a minimum of $1,000,000 per occurrence. A certificate of insurance or policy declarations page from the insurance provider is required as proof.
4. Passing a final inspection by Code Enforcement: The rental property must pass a final inspection to ensure compliance with county building codes and the Short Term Rental Ordinance. The Shelby County Clerk's Office will verify that this inspection has been completed before issuing the permit.

In addition to these documents, applicants must also agree to several certifications regarding their compliance with the county's Short Term Rental Ordinance, Technical Codes, tax obligations, and other requirements. These certifications are included as part of the permit application form.

By gathering the required documents and information in advance, prospective short-term rental hosts in Shelby County can help ensure their permit application is processed smoothly. The Shelby County Clerk's Office is the main point of contact for any questions about the application process or requirements.

Shelby County Short-Term Rental Taxes

Short-term rental operators in Shelby County are required to collect and remit several types of taxes on the rental income they receive. Understanding these tax obligations is crucial for running a compliant rental business.

The key taxes that apply to short-term rentals in Shelby County include:

1. Local Transient Room Tax (Occupancy Tax): Shelby County levies a 5% privilege tax on the occupancy of any hotel, motel, or bed and breakfast for each transient stay. This tax is based on the total consideration charged by the operator, not including state and local sales taxes.
2. State Sales Tax: The state of Tennessee imposes a 7% sales tax on short-term rental accommodations. This applies to the listing price, including any cleaning fees and guest fees, for reservations of 89 nights or less.
3. Local Sales Tax: In addition to the state sales tax, Shelby County and its municipalities collect a local sales tax ranging from 1.5% to 2.75%. Like the state sales tax, this applies to the total price of reservations 89 nights and shorter.

So for example, if you charge $100 per night for your short-term rental, the total taxes owed on that reservation would be:

1. 5% Occupancy Tax: $5
2. 7% State Sales Tax: $7
3. 2.25% Local Sales Tax (assuming max rate): $2.25
4. Total Tax: $14.25

It's important to note that these taxes are the responsibility of the host, regardless of whether you pass them on to your guests or not. Failure to collect and remit applicable taxes can result in penalties and legal issues.

Possible Deductions and Write-Offs

Short-term rental operators may be able to deduct certain expenses to reduce their tax liability. While you should always consult with a tax professional, some common deductions include:

1. Mortgage interest and property taxes
2. Rental insurance
3. Cleaning and maintenance costs
4. Utility payments
5. Repairs and supplies
6. Depreciation of assets used in the rental business

Hosts renting out a portion of their primary residence may need to calculate these deductions based on the percentage of the home used exclusively for rental purposes.

By understanding the tax landscape and taking advantage of available deductions, short-term rental hosts in Shelby County can stay compliant while optimizing their business operations. Proper record-keeping and working with experienced tax advisors can help navigate these requirements successfully.

Tennessee Wide Short-Term Rental Rules

In addition to Shelby County's local regulations, short-term rental operators must also comply with state-level rules enacted by the Tennessee General Assembly. The key piece of legislation governing vacation rentals is the Short-Term Rental Unit Act, passed in 2018.

Under this act, a short-term rental is defined as a residential dwelling rented out wholly or partially for a fee for less than 30 consecutive days. This encompasses properties listed on platforms like Airbnb and Vrbo, as well as other types of vacation rentals.

Some of the main provisions of the Short-Term Rental Unit Act that Shelby County hosts should be aware of include:

• Limits on local prohibitions: The act prevents local governments from completely banning short-term rentals or restricting them based on classification or use. However, reasonable regulations to protect public health and safety are still allowed.
• Permit requirements: Local jurisdictions may require short-term rental operators to obtain a permit or license. Hosts in Shelby County must secure a Short Term Rental Property Permit from the county clerk's office.
• Compliance with taxes: Vacation rental owners must collect and remit all applicable state and local taxes, including sales tax and occupancy taxes. In Tennessee, short-term rentals are subject to a 7% state sales tax plus any local sales taxes.
• Insurance obligations: The act authorizes local governments to require hosts to show proof of liability insurance coverage. Shelby County mandates a minimum of $1 million in liability insurance per occurrence.
• Penalties for violations: Short-term rental operators who fail to comply with state or local regulations may face fines, permit revocation, or other penalties as determined by the governing authority.

It's important to note that while the Short-Term Rental Unit Act sets certain boundaries, it still gives local jurisdictions like Shelby County leeway to layer on additional rules. Hosts must ensure they are in full compliance with both state and county-level requirements.

One area the state law does not address is zoning. Local governments retain the power to restrict short-term rentals in certain zoning districts, so Shelby County hosts should consult the county's zoning ordinance and map to confirm their property is eligible for vacation rental use.

By adhering to the provisions of the Short-Term Rental Unit Act alongside Shelby County's permit process and operating rules, hosts can legally run successful and compliant short-term rental businesses. Consulting with local officials and keeping abreast of any legislative changes will help ensure ongoing compliance.

Does Shelby County Strictly Enforce STR Rules?

Based on discussions in real estate investing forums like BiggerPockets, Shelby County appears to enforce short-term rental regulations relatively strictly compared to some other areas. One investor noted that as STR rules have tightened significantly in Nashville, they are considering pivoting to focus more on rentals in Memphis instead, suggesting Memphis may be somewhat less restrictive.

However, Shelby County does require all short-term rental operators to obtain a permit and follow various rules around building codes, occupancy limits, noise ordinances, and more. In 2017, the city of Memphis began taking steps to identify and collect taxes from Airbnb and VRBO hosts, showing they are paying attention to the growing short-term rental market.

As of 2023, Memphis now requires all Airbnb and similar rentals to obtain a permit from the city, with some exceptions for properties already operating as STRs before July 1, 2023. Repeated violations of city laws can lead to permits being revoked.

So while Shelby County may not be the strictest area when it comes to short-term rental enforcement, they do appear to be actively monitoring the industry and cracking down on non-compliant hosts. The permitting process and potential penalties indicate the county wants STRs to operate above board.

Compared to cities with very stringent regulations like San Francisco or Las Vegas, Shelby County is likely more Airbnb-friendly overall. But hosts should not assume they can skirt the rules without consequences. The safest and smartest approach is to follow all applicable regulations to avoid fines, permit revocation, and other headaches. Hosts looking to run an STR business long-term in Shelby County will have the best success by playing by the county's rules.

How to Start a Short-Term Rental Business in Shelby County

Starting a short-term rental business in Shelby County requires careful planning and adherence to local regulations. Here are the key steps to get your venture off the ground:

• Confirm your property is eligible: Review the Shelby County zoning ordinance and map to verify that short-term rentals are allowed at your property's location. Consult with the county zoning office if you have any questions about your zoning district or land use restrictions.
• Obtain a Short Term Rental Property Permit: Submit a completed application to the Shelby County Clerk's Office, along with the required documents (site plan, proof of ownership, proof of insurance) and a $100 fee. The property must pass a final inspection by Code Enforcement before the permit can be issued. Apply for your permit well in advance of when you want to start renting, as the approval process may take several weeks. Gather all required documents ahead of time to avoid delays.
• Prepare your property for guests: Ensure the rental unit is clean, well-maintained, and stocked with essential amenities. Make any necessary repairs or upgrades to meet building and safety codes. Consider hiring a professional cleaning service between guest stays. Put yourself in your guests' shoes and provide the amenities and conveniences you would appreciate as a traveler. A well-appointed rental will garner better reviews and more bookings.
• Set up your business operations: Choose a business structure (sole proprietorship, LLC, etc.) and obtain an Employer Identification Number (EIN) from the IRS. Open a separate bank account for your rental business and consider working with an accountant to manage finances and taxes. Consult with legal and financial professionals to determine the best business structure for your situation. Keeping your rental finances separate will make accounting and tax filing much easier.
• Create a compelling listing: Take high-quality photos of your property and write an engaging, detailed description. Highlight your rental's best features, amenities, and location. Be transparent about any quirks or limitations to manage guest expectations. Study successful listings in your area to see what works. Hire a professional photographer to make your rental stand out. Keep your calendar and pricing up to date.
• Implement a guest screening process: Establish clear house rules and expectations for guests. Consider requiring a rental agreement and collecting a security deposit to protect your property. Communicate promptly with guests and thoroughly vet all bookings. Use your platform's built-in screening tools and read reviews from past hosts. Trust your instincts if a booking seems suspicious. Having a Responsible Party available 24/7 can help head off any guest issues.
• Comply with ongoing regulations: Collect and remit all applicable taxes (occupancy tax, sales tax) on your rental income. Renew your Short Term Rental Property Permit annually and keep your property in compliance with all county rules and ordinances. Set calendar reminders for permit renewals and schedule regular property maintenance to avoid violations.

By following these steps and prioritizing compliance and guest satisfaction, you can launch a successful short-term rental business in Shelby County. As with any venture, it will take hard work and dedication, but the rewards of hosting can be well worth the effort.

Who to Contact in Shelby County about Short-Term Rental Regulations and Zoning?

For questions about short-term rental regulations and permitting in Shelby County, the main point of contact is the Shelby County Clerk's Office:

Shelby County Clerk
150 Washington Ave, Suite 200
Memphis, TN 38103
Phone: (901) 222-3000

The Clerk's Office handles Short Term Rental Property Permit applications and can provide guidance on the requirements and process.

For zoning-related questions, hosts can reach out to the Shelby County Division of Planning & Development:

Shelby County Division of Planning & Development
125 N Main St #468
Memphis, TN 38103
Phone: (901) 576-7197 (Comprehensive Planning)
Phone: (901) 576-6601 (Zoning)

The Planning & Development office can help hosts determine if their property is zoned appropriately for short-term rental use under the county's ordinances.

Some additional resources and communities that Shelby County hosts may find helpful:

Airbnb Community Center - Hosting Forum: https://community.withairbnb.com/t5/Hosting/bd-p/listing-and-reservations

A forum where hosts can connect with each other, share experiences, and ask for advice. While not specific to Shelby County, the discussions can provide valuable insights.

AirHostsForum.com: https://airhostsforum.com/

An independent forum dedicated to connecting Airbnb hosts from around the world. Hosts can network and learn from the experiences of others.

BiggerPockets Memphis Real Estate Forum: https://www.biggerpockets.com/forums/816-memphis-real-estate-forum

A real estate investing forum with a section dedicated to the Memphis market. Hosts can engage with local investors and property managers to discuss the short-term rental landscape.

By utilizing these official contacts and tapping into host communities, short-term rental operators in Shelby County can get the support they need to run compliant and successful businesses. Building relationships with other local hosts and staying connected to county resources will help navigate any regulatory challenges that may arise.

What Do Airbnb Hosts in Shelby County on Reddit and Bigger Pockets Think about Local Regulations?

While there aren't a ton of online discussions specifically about Shelby County's short-term rental regulations, some hosts have shared their experiences and thoughts about operating in the Memphis area:

On the BiggerPockets forums, one investor noted that as Nashville has cracked down more on STRs with tighter rules, they are considering pivoting to focus more on the Memphis market instead. This suggests Memphis may have a somewhat friendlier regulatory environment for short-term rentals compared to other major Tennessee cities.

In a thread titled "Memphis Airbnb market - What areas to invest in?", a new investor shared their take on the STR potential of various neighborhoods:

• They felt areas like Cooper Young and Downtown were a bit oversaturated and pricey.
• Neighborhoods like Vollintine Evergreen, Binghampton and Crosstown were seen as more affordable and less saturated, though desirability varies street by street.
• The High Point Terrace, Waynoka, and Chickasaw areas were highlighted as having great locations with somewhat affordable prices.

The general consensus seemed to be that Memphis offers solid opportunities for cash-flowing short-term rentals, but hosts need to be very selective about the specific property and location.

However, a few Reddit and BiggerPockets users also shared some words of caution. One Redditor described their "nightmare" experience renting an unregulated Airbnb in Memphis that turned out to be an illegal sublease.

And in a BiggerPockets post titled "I've learned my lesson with AirBnB rentals", an investor detailed multiple negative experiences with Airbnbs that violated local rules:

"I've probably stayed in about 20 vacation rentals through VRBO, HomeAway, or professional management companies and they were always a good experience. I've rented through AirBnB three times and it's always been less than a 3-star experience. It won't happen again."

The takeaway seems to be that while Shelby County may not be the strictest market for short-term rental regulations, hosts still need to do their due diligence. Following permitting rules, selecting the right property, and providing a high-quality guest experience are key to successful and compliant STR operations in the Memphis area.

Disclaimer: While we here at BNBCalc strive to keep all of our regulation guides updated and accurate with all the latest local laws, we still do not suggest using them as your sole or primary source for local regulations. We also do not recommend you rely on the third-party sources we link to or reference, and we are not responsible for any of the information on these third-party sites. These guides are for entertainment purposes only and only provide basic information and should not be considered as legal advice.

We highly recommend directly contacting the responsible parties for each and hearing what their officials have to say. Ultimately, it's your responsibility as an investor to ensure you fully comply with the local laws, and it's best to speak with professionals before making an investment decision.