Getting Paid in the STR Industry: What Happens After Someone Owes You Money

Let me describe a situation I hear about regularly: an STR investor loans $200,000 to an operator to acquire and furnish a property. The deal is structured through LLCs. There’s a promissory note, but no personal guarantee, no collateral, and no security interest. The operator stops making payments. The investor sues, wins a judgment—and then discovers the LLC has no assets, the bank accounts have been drained, and the operator has transferred the property to a family member’s entity.

The investor did everything right in court and still can’t collect a dollar.

This is the gap most STR professionals don’t understand until they’re living it: being owed money and actually collecting money are two very different things. Winning a lawsuit is not the finish line. In many cases, it’s just the starting point of a second, harder fight.

In a recent episode of the STR Law podcast, I spoke with business litigation attorneys Mark Rossman and Noah Matthews of Rossman PC about what actually happens after a court awards money damages—the legal tools, timing strategies, and investigative techniques that turn judgments into real recoveries. For anyone in this industry who lends money, invests in deals, or operates through partnerships, this is essential knowledge.

Time Is Not on Your Side

The single most important takeaway from our conversation is urgency. Once a debt goes unpaid, every day that passes works against you. Debtors who know they owe money don’t sit still. They move assets, shift funds between accounts, transfer property to relatives, or simply drain business accounts. By the time many creditors get around to enforcement, there’s nothing left to enforce against.

What surprises most people is that even during short statutory waiting periods after a judgment is entered, attorneys can take immediate steps to protect assets. Courts may allow emergency motions, asset discovery, and other early interventions designed to prevent debtors from moving money beyond reach. The key is having counsel who is prepared to act on day one—not day sixty.

I’ve seen creditors wait months after a default “to be reasonable” or “give them a chance to work it out,” only to find that the debtor used that goodwill period to systematically move everything of value. Patience has its place. Collections is not usually it.

LLCs Don’t Always Protect the People Behind Them

In the STR world, deals are almost always done between LLCs. Many operators assume that means the company is the only entity on the hook if things go wrong. That’s not always true.

If a business owner personally guaranteed a loan, commingled personal and business funds, or transferred assets out of the company to avoid creditors, legal claims can extend well beyond the LLC itself. Rossman and Matthews described cases where property was transferred to family members for little or no consideration after debts arose. In those situations, creditors can pursue fraudulent transfer claims to unwind the transaction and recover the asset. In more egregious cases involving coordinated efforts to hide money, additional claims like civil conspiracy or racketeering statutes may come into play.

The core principle is straightforward: moving assets to dodge legitimate business debts doesn’t eliminate legal exposure. It creates new legal exposure—often worse than the original debt.

How You Structure the Deal Determines How You Collect

This is where prevention and enforcement intersect, and it’s the part of the conversation I wish every STR investor would hear before they fund their next deal.

If your loan or investment relies solely on an LLC with no personal guarantee and no collateral, your recovery options narrow dramatically if the business fails. You may win in court and still have nothing to collect against. On the other hand, properly structured personal guarantees and security interests can give you real leverage—both in settlement negotiations and in enforcement.

I see this constantly in the STR space: investors who are sophisticated about deal economics but casual about deal documentation. The promissory note is two pages. There’s no default interest provision, no attorney fee clause, no collateral schedule. The money goes out the door based on trust and a handshake dressed up in just enough legal language to feel official. When the deal goes sideways, the creditor discovers that the agreement they relied on gives them almost nothing to work with.

Investing in well-drafted agreements on the front end is dramatically less expensive than trying to collect on a weak one after the fact.

Post-Judgment Discovery: The Tool Most Creditors Don’t Know About

One of the most powerful and underused tools in collections is post-judgment discovery. After a judgment is entered, creditors are often entitled to demand detailed financial information about the debtor’s assets, bank accounts, income sources, property transfers, and business interests. These examinations can surface accounts, real estate, vehicles, and even digital assets that weren’t previously known.

Modern collections work increasingly involves tracing electronic financial trails. Bank records, payment platforms, and even cryptocurrency holdings may be discoverable. For STR operators who run their businesses through Airbnb payouts, Stripe, Venmo, and other digital platforms, it’s a mistake to assume that funds are invisible simply because they’re not sitting in a traditional local bank account. Money leaves a trail, and experienced collections attorneys know how to follow it.

Judgment Liens Can Follow Real Estate

Real estate is often the most valuable asset in an STR professional’s portfolio, and it’s also one of the most reachable. Once a creditor obtains a judgment, they may be able to record a lien against real property owned by the debtor. That lien can prevent refinancing or sale without first addressing the debt. In some cases, foreclosure of a judgment lien is even possible.

For STR operators and investors who own rental properties personally or through closely held entities, this is an important reality: judgments can follow those assets long after the underlying lawsuit ends. A judgment lien recorded today can cloud a title for years, creating leverage that didn’t exist when the original debt was incurred.

Weak Contracts Make Hard Collections

A recurring theme in our conversation—and in my practice generally—is how often the most difficult collection cases trace back to the same root cause: informal agreements. Loans made on a text message. Partnership deals outlined in an email. Service arrangements with no written terms at all.

Without personal guarantees, collateral provisions, attorney fee clauses, and clear default terms, creditors are left with fewer tools and more risk when it’s time to collect. Clear payment terms, default interest, fee-shifting provisions, and properly documented guarantees change the economics of enforcement. They make settlement more attractive for the debtor and litigation more viable for the creditor.

I’ll keep saying it because it keeps being true: the best time to think about collections is before you need to collect.

The Bottom Line

In an industry built on partnerships, platforms, and private deals, the gap between being owed money and actually recovering it is wider than most people realize. Court judgments don’t automatically produce payment. Delay almost always benefits the debtor. And the strength of your recovery position is largely determined by decisions made long before a dispute arises.

STR professionals who extend credit, invest in deals, or rely on business partners need to understand both sides of this equation: how to structure agreements that reduce risk on the front end, and how enforcement actually works when things go wrong.

If you’re entering a deal that involves significant capital, a lending arrangement, or a partnership structure, Katie Johnson PLC can help you get the documentation right before the money moves. And if you’re already in a collection situation and need to understand your options, we work with experienced litigation counsel to help STR professionals recover what they’re owed.

Schedule a call today.

What STR Investors Need to Know About Zoning Before Buying

A few months ago, an investor called my office after closing on a lakefront property in a small Michigan township. He’d already furnished the home, listed it on Airbnb, and started taking bookings. Then a neighbor filed a complaint, the township sent a cease-and-desist letter, and he learned—for the first time—that his property sat in a zoning district that didn’t permit short-term rentals. No conditional use permit process. No variance path. Just a flat prohibition he could have identified with a single phone call before closing.

Variations of this story play out across the country every week. Short-term rentals continue to grow, but the legal framework governing them has not developed evenly. Local zoning ordinances, discretionary permitting processes, and community opposition create serious risks for property owners—particularly those investing in unfamiliar markets. One of the most common and costly mistakes STR investors make is assuming that zoning compliance is straightforward, or that informal approval from local officials is sufficient.

It usually isn’t. Here’s what you need to understand before you buy.

Zoning Law Is Local—and Often Discretionary

Zoning rules are set at the local level and vary widely by jurisdiction. Depending on the state and location, zoning authority may rest with a city, township, or county. In some rural or unincorporated areas, investors assume zoning restrictions are minimal or nonexistent, only to discover later that the county exercises regulatory control.

Even when zoning ordinances appear clear on paper, interpretation and enforcement are often discretionary. Zoning administrators may provide informal guidance that later proves incomplete or nonbinding. A use that looks consistent with the zoning code may still require a conditional or special use permit—which introduces real uncertainty into the approval process.

I’ve seen investors spend six figures on a property based on a conversation with a township clerk, only to learn that the clerk’s interpretation didn’t reflect the zoning board’s position. That’s a risk you can manage, but only if you know to look for it.

Conditional and Special Use Permits Carry Inherent Risk

Conditional use permits (sometimes called special use permits) allow property owners to use land in a manner not permitted “by right” under existing zoning. These permits can unlock investment opportunities, but they come with meaningful risk that investors often underestimate.

First, approval is not guaranteed. Permit decisions are typically made by zoning boards or boards of adjustment and may be influenced by public comment, political dynamics, or subjective considerations like perceived neighborhood impact. Second, even when approved, these permits are issued with conditions that limit operations. Violating—or being accused of violating—those conditions can trigger enforcement actions or permit revocation.

Here’s the part that catches most investors off guard: conditional use permits do not permanently change your zoning. Future complaints, shifting enforcement priorities, or changes in local leadership can all affect your property’s ability to operate as intended. Your permit is only as durable as your compliance—and the political environment around it.

Neighbor Opposition Can Change Outcomes

Public hearings are a central feature of most conditional use permit processes. While they’re intended to promote transparency, they also give neighboring property owners a platform to influence outcomes. Organized opposition—even from a small, vocal group—can significantly affect how a zoning board views a proposed use.

Neighbor concerns typically center on traffic, noise, safety, and what they see as the commercialization of a residential or rural area. These concerns may persist even when a proposed use fully complies with the zoning ordinance or aligns with the comprehensive plan. In practice, perception can matter as much as legal compliance—and that’s a dynamic that doesn’t show up in your pro forma.

As someone who operates STR properties in addition to representing STR owners, I can tell you: the relationship you build with neighbors before a hearing often matters more than the legal argument you present at one.

Informal Assurances Are Not Legal Protection

Investors frequently rely on verbal or informal written assurances from zoning staff when evaluating a property. Speaking with local officials is an essential step in due diligence—but these conversations do not always bind the municipality. In many jurisdictions, statements made by individual staff members do not constitute official interpretations of the zoning ordinance.

Without a formal, written determination, you may find that your reliance on those assurances offers little protection if enforcement priorities shift or neighbors raise complaints. This risk is especially pronounced in STR regulation, where ordinances are frequently outdated, inconsistently enforced, or actively being revised.

The bottom line: get it in writing, and make sure the writing comes from someone with the authority to bind the jurisdiction.

Enforcement Can Be Complaint-Driven

STR enforcement is often reactive rather than proactive. In many municipalities, no one is actively monitoring compliance. Instead, complaints from neighbors trigger inspections, investigations, and permit reviews. Even minor or technical violations can become grounds for enforcement action if community tensions escalate.

This dynamic makes operational discipline essential. Strict compliance with permit conditions, guest limits, and occupancy restrictions isn’t optional—it’s your first line of defense. Clear house rules, conservative guest caps, and documented compliance practices can reduce your risk profile, though they may not eliminate exposure entirely.

What You Should Do Before You Buy

Before purchasing or operating a short-term rental—particularly in an unfamiliar jurisdiction—take these steps:

•       Identify the correct zoning authority and confirm the applicable ordinances for the property.

•       Determine whether your intended use is permitted by right or requires discretionary approval.

•       Obtain formal, written zoning determinations whenever possible.

•       Assess the likelihood of neighbor opposition and local sentiment toward STRs in the area.

•       Consult legal counsel early—especially when conditional use permits or rezoning may be involved.

•       Budget for legal and administrative costs associated with zoning compliance. These aren’t optional line items.

The Bottom Line

Zoning compliance for short-term rentals is not a box to check on your way to closing—it is a legal risk that can determine whether your investment is viable. Even thorough due diligence cannot eliminate all uncertainty, particularly in jurisdictions where enforcement is discretionary or influenced by local politics.

But investors who understand these risks, plan conservatively, and get the right legal guidance early are consistently better positioned to protect their investments and avoid the kind of surprises that turn a promising deal into a costly lesson.

If you’re evaluating a property for short-term rental use and want to understand the zoning landscape before you close, we can help. We work with investors across Michigan on zoning due diligence, conditional use permits, and regulatory compliance—so you know exactly where you stand before you sign.

Schedule a call today.

“There’s No HOA, So I’m Fine”… Not Necessarily

One of the most common assumptions I hear from property owners and short-term rental hosts is some version of: “There’s no HOA, so I’m good to go.” In Michigan, that assumption is often incorrect — and it can be an expensive one.

Deed restrictions, also referred to as restrictive covenants, are private limitations recorded in a property’s chain of title. They are not zoning laws, and they are not the same thing as HOA rules. While homeowners associations often enforce deed restrictions, the existence of an HOA is not what gives those restrictions legal force. A property can be subject to enforceable deed restrictions even when there is no HOA at all.

This distinction matters because enforcement of deed restrictions is private. Unlike zoning violations, which are enforced by municipalities, deed restrictions are enforced by the parties who benefit from them. In practice, that often means a neighbor. When a deed restriction is violated, enforcement typically comes in the form of a civil lawsuit seeking an injunction to stop the prohibited use, sometimes along with damages or attorney fees depending on the language of the restriction.

For short-term rental owners, this is where problems frequently arise. A property may be located in a jurisdiction that allows STRs by ordinance, and the owner may correctly conclude that zoning is not an issue. But if a recorded deed restriction limits rentals, requires minimum lease terms, or restricts use to single-family residential purposes, a neighbor can still bring suit to enforce that restriction. Zoning approval does not override a private covenant.

Another common misconception is that deed restrictions only apply in large subdivisions or formal developments. In reality, restrictions can appear in a single deed, a developer’s master declaration, or a recorded agreement affecting a small number of parcels. Many buyers never review these documents because they are not presented as part of an HOA packet and are easy to overlook during closing.

Once a neighbor files suit to enforce a deed restriction, options can be limited. Courts in Michigan generally treat valid restrictive covenants as enforceable contracts that run with the land. While there are defenses in certain circumstances — such as abandonment, waiver, or ambiguity — those arguments are fact-specific and rarely something a property owner wants to test after investing in a property and building a rental business around it.

The practical takeaway is simple but important. “No HOA” does not mean “no restrictions.” Before purchasing or operating a rental property, particularly a short-term rental, it is critical to review the recorded deed restrictions affecting the property and understand who has the right to enforce them. That review should happen before money is spent, not after a cease-and-desist letter or lawsuit arrives.

If you own property in Michigan or are evaluating an STR investment and want to understand whether deed restrictions apply — and what enforcement risk looks like — this is an issue worth addressing early. In real estate, private land use restrictions are often where the real risk lives.