Airbnb Rental Arbitrage in Whitefish | What You Should Know!

What is Airbnb Rental Arbitrage?

Airbnb Rental Arbitrage is the practice of renting out one or more properties in the long term and re-renting or subletting them on Airbnb in the short term, with the permission of the property owner of course. It allows for easier entry to hosting on Airbnb, accelerates ability to scale, and is far less risky than purchasing property for the purpose of hosting. Airbnb rental arbitrage also allows you to get out of markets on the decline and get into markets on the rise quickly and less painfully. With the rise of property prices across the US and the world, Airbnb rental arbitrage is fast becoming a popular model in entering and gaining success in operating an Airbnb business.

Whitefish as a Tourist Destination

The resort town of Whitefish has benefitted from several emerging and rising short term rental market trends. The shift from urban to rural destinations, particularly in locations with access to state and national parks and driven by families, has seen Whitefish, which provides access to Glacier National Park, emerge as a top destination for Airbnbs. The town is also benefiting from increasing interest in sporty, outdoorsy activities, being known for skiing, golfing, fishing, mountain biking, snowboarding, boating, swimming, kayaking, and hiking and has seen its residency swell from those choosing longer stays and embracing the digital nomad lifestyle.

Located in the state of Montana and home to big open skies, majestic mountains, glacier-carved valleys, and crystal-clear lakes, Whitefish is a year-round destination. Ranked as a Top 10 Ski Town in the World by National Geographic, it offers visitors the romance and loveliness of a picture-postcard resort town including scenic landscapes that change with the seasons and offer up amazing photographs.

Whitefish provides access to Glacier National Park, one of the most beautiful national parks in the US, where over one million acres of protected land lie glacial lakes, hundreds of miles of hiking trails, and encounters with moose, mountain goats, longhorn sheep, and even bear, on occasion. The park hosted over 170,000 visitors in May 2021 despite it being a shoulder season and is the biggest draw for travelers to Montana who stay 1 or more days. Visitors generally stop by Polebridge Mercantile, the over 100-year-old general store that is a Flathead Valley Institution, to shop for essentials beforehand.

Downtown Whitefish is an idyll that exudes the atmosphere of an old western town. Travelers will find a plethora of shopping options, from antique stores and boutique shops to jewelers and artist galleries with an emphasis on products made in Montana. Many stop by Stumptown Historical Museum which can be found in the Amtrak station which itself is a historical, half-timbered building designed in the Tudor Revival style. Also known as Whitefish Depot, it is listed on the National Register of Historic Places.

Visitors flock to the intriguing Whitefish offerings of food and beverages, including lemon ricotta pancakes with lemon elderflower curd at Swift Creek Café, home-made pies at Loula’s Café, and fantastic ice creams with flavors such as Huckleberry, Mountain Mint, Bear Scat, and Going to the Sun Road at Sweet Peaks. And no one leaves without a sip of local craft beer at Bonsai Brewing Project or exotic cocktails at the beautiful tasting room of Spotted Bear Spirits.

Many visitors enjoy adrenaline-laced activities like taking Montana’s longest zipline tour and taking the Gondola Ride to the top of the 6,817 ft Big Mountain where they can also enjoy a meal with a spectacular view at Summit House. Others take in the incredible Whitefish Lake, relishing lake activities or soaking in the sun on the sandy stretch of beach. There’s also scenic horseback riding over 3,000 acres of terrain at Bar W Guest Ranch, just a few minutes from the town.

Whitefish also offers several events throughout the year from the Great Northwest Oktoberfest, Whitefish Winter Carnival in February, and live theater and jazz concerts at the Whitefish Theatre Company.

Whitefish is easily accessed across any mode of transport including by plane, train, bus, and car. Amtrak’s Empire Builder stops in Whitefish daily while Glacier Park International Airport is only 15 minutes away.

Rental Arbitrage Potential in Whitefish

According to AirDNA, the leading provider of data and analytics for the global short-term rental industry, Whitefish offers high returns on short term rentals.

In Whitefish, as per AirDNA data for 2021,

• Average Daily Rate is $405 (December)

• Occupancy Rate is 93% (July)

• Average Monthly Revenue is $8,300 (July)

Meanwhile, 97% of all short term rentals are entire homes with 2- and 3-bedroom houses being the most popular. Strict and super strict cancellation policies, which reduce risk for property managers, are popular and most guests book stays 1 to 3 days long. Approximately 5% of guests opt for stays longer than 30 continuous days.

Meanwhile, according to Realtor, which offers a comprehensive list of for-sale properties, rents for 2- and 3-bedroom condos, townhouses, and houses in Whitefish range from $2,800 to $3,500 per month while larger, more luxurious properties can rent at $5,000 and above.

Airbnb Rules in Whitefish

Definition

The city of Whitefish defines a short term rental or vacation rental as the rental of an entire privately owned house, townhouse unit, condominium unit, apartment, or any other residence, or any space within a dwelling unit rented independently, for stays of less than 30 days.

Bed and breakfasts, hostels, motels, and other hotel establishments are precluded by definition.

Zoning

Short term rentals or vacation rentals are only allowed in some districts: WB-3, WRR-1, WRR-2, WRB-1, and WRB-2. These are a mix of general business, resort business, and resort residential zones.

Application

1. Registration

Register for a joint short term rental permit and business license with the Whitefish Planning Office. The application will require:

• Proof of application for a State of Montana Public Accommodation License for a Tourist Home administered by the Flathead City County Health Department

• Verification of registration with State of Montana Department of Revenue for State Bed Tax

• Review fee

2. Inspection

Once the application is submitted a copy is sent out to the Fire Marshal who will contact the applicant to set up a time for an on-site property inspection to ensure it meets current safety standards. This too will incur a fee.

3. Approval

Once the Fire Marshal submits his approval to the Planning Office and if all contents in the application are deemed up to standard, an official Business License permitting the operation of a short term rental will be issued by the city.

Additional Requirements

• All short term rentals must meet off-street parking standards as set out in the city ordinance.

• Post an emergency contact notably visible from outside the front door containing the owner’s name and phone number or designated local contact.

• Provide trash collection services.

• Not put up exterior signage of any kind advertising the vacation rental

• Homeowner Associations (HOAs) may also have specific rules regarding vacation rentals.

Violations

Violating any of the above-mentioned conditions as well as getting repeated complaints of disturbing the peace could result in suspension or revocation of the permit and license and even enforcement action

Tax

As an operator of a short term rental in Whitefish, you are required to report and remit 3% Resort Tax to the City.

Registering with the Montana Department of Revenue is required as part of your application for a permit and business license to operate a vacation rental in Whitefish. The state imposes the following taxes on short term rentals:

• 4% Lodging Facility Use Tax

• 4% Lodging Sales Tax

These are collected from guests and remitted by Airbnb on your behalf.

All taxes are calculated on the full listing price including any cleaning fees and guest fees.

Medium Term Rentals

Interestingly, in December 2021, the Whitefish City Council unanimously voted to recognize and regulate “medium term rentals”, i.e. vacation rentals that are rented out for 30-90 day periods at a time. These would qualify as longer term stays on Airbnb. This does not apply to rentals of less than 90 days to local workers or long term, month-to-month rentals to individuals or families.

Conclusion

The potential for rental arbitrage in Whitefish is good with its capitalization on the trend to travel to rural destinations, ample tourist attractions year-round to satisfy families, pet-owners, couples, and adventurers alike, and average rents at less than half of average monthly revenues.