Investing In Short-term Rental Property

The market for short-term rentals in Colorado is hot, mainly because it is such a beautiful state with so many popular tourist destinations especially in the mountains and foothills. A quick definition of a short-term rental is a property that visitors or tenants stay in for a limited amount of time, typically a month or less; or on a month by month basis.  Short-term rentals are more commonly used for vacation property and passive income for the owner. If you are considering buying a short-term rental property then you may be planning to list it on AirBNB or another vacation property site and generate income from it.  If you’re planning on jumping into the short-term rental market, there are many things to consider:

How to start the short-term rental search

Short-term rental investment can be exciting and very profitable.  In instances where the location is in a high-traffic ski resort for example, the rental could be booked all winter long and bring in a great passive income for you as the owner.  There is also the possibility of visiting the property yourself, should you and your family want to stay in it for a week if it wasn’t booked.  For success in short-term investment, research and preparation is key.  First, you’ll want to find a realtor who is in the area where you’ll want to look.  If you’ve only done transactions in the Denver metro area real estate market and you’re interested in buying property in the mountains, your realtor may not work there but will likely have a great network of referrals to other agents.  You’ll also want to figure out where you want to buy property: whether this is a ski resort, in the heart of downtown or near a mountain lake there are many great spots for short-term rentals.  The key is to start doing research and connect with an agent.

Key things to look for in short-term rental

Maybe you have other rental property, or maybe this is your first adventure into the short-term rental market. If you’ve ever owned long-term rental property, just know that short-term rentals can be a very different venture. There are some key things you’ll need to look for when searching for rental property. 

• Budget: For example, you need to calculate what you can afford.  While rental property, especially short-term rentals, can be very profitable, you want to budget for expenses you can cover outright in case you have slow months with little to no rental income.  You never want to exceed your budget.  
  • As a side note for budget, most rental property investment requires a 20% down payment to avoid the PMI so that should influence your budget as well. 
    
• Location: In real estate, everyone knows that location is integral in investment success, and even more so in short-term rental property.  Colorado has many hot tourist destinations and you’ll want to focus on choosing a good location.  Some tourist towns and ski destinations, like Summit County, are putting more restrictions on new short-term property and your realtor can help you figure that out.  Also realize that while many ski towns have a bustling ski season during colder months, there is often a “mud season” when tourism slows down tremendously.  Other towns however see events and music festivals year-round and it’s good to make note of those too. Overall, make sure you research these things.  
  
• Dues: Often, short-term rental property may be a condo or townhouse and they will have HOA or other association dues.  Most of these will be reasonable, but along the lines of budget know that you’ll need to calculate those costs in.  Also understand if these HOAs will allow short-term rental use or not, as some will not.

Do your research

Overall, short-term real estate investment is a great addition to your portfolio and it can even be one that you can personally enjoy on a regular basis.  The key thing is to decide if short-term vs. long-term rental is right for you, as well as if key factors like location and budget will work for your lifestyle.  Colorado is a great state to invest in short-term real estate and if you’re interested in starting the investment journey, reach out to me today!

Are you ready to start your short-term investment portfolio? Are you in the market to buy or sell your home?  Call and text me at (720) 323-4176 or email me at [email protected]