Rental Arbitrage in Jacksonville | What You Should Know!

Ever wondered how to make real estate profits without owning property?  Today's blog is all about how to turn leased properties into profitable short-term rentals in Jacksonville. With its booming tourism and vibrant rental market, this city offers a golden opportunity for rental arbitrage. 

Jacksonville as a Tourist Destination

The city offers a perfect blend of urban charm and natural beauty, Jacksonville ranks among the top five tourism growth cities in the Southeast United States. It offers a relaxed atmosphere compared to bustling Miami, making it an ideal Florida destination to explore nature. 

Jacksonville features eco-adventures, world-class fishing and extensive parks. The city boasts historic neighborhoods, diverse museums, vibrant street art, inspired cuisine and craft beer. With 22 miles of beautiful beaches, Jacksonville provides ample opportunities for fun and relaxation.

Rental Arbitrage Opportunity in Jacksonville

According to AirDNA, Jacksonville remains one of the top markets for rental arbitrage, offering substantial potential for high returns. As of July 2024, the data shows that Jacksonville has continued to perform strongly in the short-term rental market.

Key metrics from AirDNA for Jacksonville include:

• Effective Rent: $1,187

• Annual Revenue: $11,880

• Average Daily Rate: $159

• Occupancy Rate: 49%

• Revenue per Available Rental (RevPAR): $77

Detailed Insights

• Listings have grown by 8% over the past year, with a total of 4,938 available listings.

• 1-bedroom units constitute 44% of the listings, followed by 2-bedroom (24%) and 3-bedroom units (21%).

• Entire homes make up 82% of the listings, showing a preference for renting out whole properties.

Market trends

The average revenue per available rental is $77, suggesting strong earning potential for rental properties. The current average daily rate is $159, and the occupancy rate has improved by 5% year-over-year, reflecting the city's increasing appeal as a rental market. 

Short-Term Rental Rules in Jacksonville, FL

Jacksonville, FL, offers a dynamic market for short-term rentals, appealing to both tourists and business travelers. However, property owners and investors must navigate a comprehensive regulatory landscape to operate legally. Below are the key requirements and considerations for obtaining and maintaining a vacation rental license in Jacksonville, FL.

Florida law defines a vacation rental as:

“Any unit or group of units in a condominium or cooperative or any individually or collectively owned single-family, two-family or four-family house or dwelling unit that is also a transient public lodging establishment but that is not a timeshare project.”

Application process for a vacation rental license

To secure a vacation rental license, property owners or licensed agents must submit an application for a Short-Term Vacation Rental Certificate for each property. 

Documentation and compliance

Ensuring compliance with all documentation and fee requirements is essential for obtaining a vacation rental license. The comprehensive list of documents ensures that the property meets local, county, and state regulations.

The application process includes providing several documents, 

• Short-Term Vacation Rental Certificate Affidavit

• Local Business Tax Form for short-term vacation rentals

• Duval County Local Business Tax Receipt

• Duval County Tourist Tax Certificate Registration

• Florida Department of Revenue Certificate

• Florida Department of Business and Professional Regulation (DBPR) License

• Sample Lease Agreement (if available)

• Required Postings as per Ordinance Number 2019-8118

• Boundary Survey and Photograph demonstrating off-street parking compliance

• Photo Identification for the property owner or licensed agent

• Articles of Incorporation (AOI) or Articles of Organization (AOO), if applicable

• Fire Marshal Inspection Report for initial applications and modifications

An application fee, payable by check to the "City of Jacksonville Beach," is also required.

Zoning and property use regulations

Short-term rentals are allowed in all zoning districts where residential use is permitted or conditionally permitted. This includes single-family homes, duplexes and multi-family units. Specific zoning regulations must be adhered to, especially in historic districts and coastal areas, to maintain compliance with local ordinances.

Ownership and business operation flexibility

Investors in Jacksonville have the flexibility to own multiple vacation rental properties and operate them as business entities. There are no specific limitations on the number of properties an investor can own, and business entities are allowed to own and operate these rentals, providing ample opportunities for market expansion.

Costs and financial obligations

The costs associated with obtaining a vacation rental license in Jacksonville include,

• Initial and Annual Registration Fee: $150 per property

• Annual Local Business Tax Receipt Fee: $79.20 per property

In addition to these fees, hosts must ensure they comply with local, state and federal tax obligations, including the collection and remittance of the Tourist Development Tax. 

Platforms like Airbnb and VRBO typically remit these taxes on behalf of the hosts, but it is crucial for property owners to stay informed about all tax requirements.

Occupancy and safety standards

Jacksonville imposes specific occupancy limits for vacation rentals, restricting the maximum occupancy to two persons per bedroom, with an additional allowance of two occupants and a total maximum of sixteen individuals per unit. Compliance with safety and building standards, including regular inspections by local fire officials, is mandatory to ensure the well-being of guests.

Responsible agent requirements

A responsible agent, either the property owner or a licensed agent, must be available 24/7 to address issues, respond to notifications, and ensure the vacation rental unit complies with all regulations. This requirement underscores the importance of proactive management and community relations in the short-term rental market.

Insurance requirements

Maintaining appropriate insurance coverage for vacation rental properties is a necessity in Jacksonville. Property owners must ensure they have adequate insurance to cover potential liabilities and protect their investment.

Duration and renewal of licenses

Vacation rental licenses in Jacksonville must be renewed annually by October 1st. If there are no changes to the dwelling unit since the issuance of the most recent certificate, no additional documentation is required for renewal, simplifying the process for compliant property owners.

Tax Obligations for Short-Term Rentals in Jacksonville, FL

In Jacksonville, FL, short-term rental hosts must adhere to various tax obligations to ensure compliance with local, state, and federal laws. 

Tourist Development Tax

Jacksonville falls within Duval County, where short-term rental operators are required to collect and remit the Tourist Development Tax. This tax applies to rentals of six months or less and is a percentage of the rental amount collected from guests. Platforms like Airbnb and VRBO typically collect and remit this tax on behalf of the hosts, but hosts should verify that this process is being correctly managed.

Local Business Tax Receipt

Each short-term rental property must obtain a Local Business Tax Receipt from Duval County. The annual fee for this receipt is currently $79.20 per property. This tax confirms that the rental business is registered and recognized at the local level.

State and Federal Taxes

Short-term rental income is subject to state and federal income taxes. Hosts must report their rental income on their annual tax returns and may be eligible for various deductions related to their rental operations. It's advisable to consult with a tax professional to ensure proper reporting and to take advantage of any applicable tax benefits.

Additional tax obligations

Florida Transient Rental Tax: This state tax is imposed at a rate of 6% on the rental amount.

Discretionary Sales Surtax: This varies from 0.5% to 1.5% depending on the county.

Ensuring compliance

To maintain compliance with these tax obligations, hosts should:

• Keep detailed records of all rental income and expenses.

• Regularly review and update their understanding of local and state tax laws.

• Utilize tax software or consult with a tax professional to ensure accurate reporting and remittance.

Making the Most of Opportunities in Jacksonville

Rental arbitrage is a fast-growing business model in the short-term vacation rental space, allowing more players to enter the market and operate swiftly without the obligations of large capital outlays. As one of the markets continuing to earn a high rental arbitrage premium in the US, Jacksonville offers considerable potential for rental arbitrage.

Platforms like Hostaway can provide essential tools and resources for managing multiple short-term rental properties efficiently, helping investors maximize their returns in this promising market. By leveraging such platforms, investors can streamline their operations, ensuring compliance with local regulations while optimizing occupancy and revenue.