If you are looking to buy a vacation rental property in Sonoma County, there is good news and bad news. Good news for most of the county but bad news for Russian River Realty and a a single neighborhood in Sonoma Valley. The reason for targeting these two specific areas is because the density of vacation rentals in these two area is over 10% and in some cases 43% of homes are vacation rentals. What does this mean for Guerneville real estate for sale? Does it change the areas where you should be looking if you are thinking of buying a vacation rental home?
Back in August the Sonoma county board of supervisors voted to limit the number of vacation rentals in the county to 1948. Since then it has still been possible to get a vacation rental permit because every time a property is sold the permit goes back into the pool the permits available for other homeowners. According to the county the get approximately 14 applications per month and release on average 6 permits per month, although this varies seasonally.
I have long been critical of the crude way in which the county has changed the rules around vacation rentals blaming the shortage of affordable housing as the main driver. My main complaint is that the vast majority of all vacation rental homes are not taking housing stock out of circulation for those buyers looking for more affordable housing. However, in the case of the Russian River, it probably is.
Given the median price of housing in the Russian River is among the lowest at $567k (compared to $691k across the entire county), it is the fifth highest vacation rental income market by value bringing in $13..9m for Guerneville home owners. (see this post for the top vacation rental markets across Sonoma County by volume and by value).
The cap has been put in place across a whole range of discrete neighborhoods in the Russian River through to August 2022. The map (above) shows the specific areas where the cap is in place. There is a detailed list of all of the specific properties where the cap is now in place itemized by specific APN numbers. The full list of APNs impacted can be seen here (pages 19-105). It will be interesting to see how it impacts houses for sale in Guerneville and Russian River Realty more generally.
For example, this week 15925 Morningside Dr in Guerneville (see above) went into escrow after just 3 days on the market. It is the perfect turnkey vacation rental and the type of property that would appeal to anyone looking to buy a vacation rental home. A week later from it going into escrow it is no longer permitted to be a vacation rental property. It definitely pays to pay close attention to the rules even through the escrow process!
The other area which has had the cap put in place is the Theodore Lane area (see above) which is on the east side of Hwy 12 just north of Boyes hot Springs. This areas was originally left out of the Sonoma X-Combining zone that banned vacation rentals a couple of years back but smart realtors/buyers figured out this was a great place to purchase as it is just 10 mins to Sonoma Plaza. This area is now 40% vacation rentals largely because the county have forced vacation rental buyers into a very small area! (Full details of vacation rental zoning rules across the county can be found here).
However, it is important to remember that while the rules have been tightened in these two areas, the cap has been lifted everywhere else which is great news for people looking to purchase either a second home where they can recover some of the costs through occasionally renting it as a vacation rental or purchasing a dedicated rental unit.
At the moment, I believe some of the best places to find a vacation rental are south west of Healdsburg in the Graton, Forestville areas and heading over to Sebastopol. The capital cost of properties are more affordable and yet they attract good income because of their location. In addition finding property with the correct zoning with easy access to the towns of Healdsburg and Sonoma will always pay dividends given these are the two most lucrative markets in the County.
While I have not been a proponent of many of the restrictions the county has put on homeowners when it comes to renting out their homes to generate income, on this occasion I think they probably got it about right. There are still opportunities for property entrepreneurs to create a good business while at the same time safeguarding some of the most affordable housing in the county.
