Short-term rentals (STR) like Airbnb, VRBO, and other platforms allow homeowners to rent a room, a suite, a guest house, or an entire residential property for nightly guests. You can transform any home or living space into a cozy hotel room without the parking lots and elevator time. Many travelers prefer vacation rentals because they are homier, quieter, and often more exclusive-feeling than a hotel. Short-term rentals are also profitable for those owners whose spaces are beautiful and well-located.
If you are looking into real estate investment, short-term rentals are a great idea and worth exploring. Here in Colorado, the demand for short-term rentals is high but the laws and opportunities vary by county. Let’s dive into the profitability and potential of short-term rentals in and around the Denver, CO area. Is a vacation rental a good investment for your portfolio? We can easily find out.
Why Short-Term Rentals are Profitable
Short-term or vacation rentals make money like a hotel room, every night you book is another infusion of income, and the overall monthly rate can be much higher than the fair rental rate for long-term residents. This means that an in-demand property that is booked most of the time will multiply your income compared to a long-term rental.
Because running a vacation rental is a business model, you can write off all rental expenses in your tax deductions as business costs.
In the city of Denver and other Colorado counties, you may need to register your vacation rental and pay an annual registration fee. However, this amount is often less than you might charge for a single night, so should be no real impact on your income calculations.
Creating a Profitable Short-Term Rental Experience
Short-term rentals also have a higher demand on the owners or property managers. Each will need to be beautifully decorated to create an experience that feels both cozy and luxurious. In addition to the decor, you will also need to be far more involved, as you are now an acting hotel manager and not just a landlord.
For investors who love the idea of hosting guests and don’t mind answering the phone for a clogged toilet at 3 AM (or have a property management team to help with this), then managing a profitable short-term rental can be very rewarding.
Vacation rentals do come with the cost of a regular cleaning service and on-demand support for guests, but this cost can be easily offset by including the cleaning expense in the booking price.
Don’t forget safety features. Regulations for hosting commercial guests may require a certain checklist, including a fire extinguisher, smoke and carbon monoxide detectors, and adequate fire escape access.
How to Find the Best Properties for Vacation Rentals
Choosing your vacation rental location is the most important step you will take. Colorado has many in-demand locations. Downtown Denver is a great choice, but vacation rentals in every Colorado city and those close to our beautiful natural tourist attractions like mountain hiking or skiing are also in-demand.
Know Your Local Regulations
However, be extremely aware of the local regulations regarding short-term rentals. The city and county of Denver require all short-term rentals to be part of a primary residence (houseguests only) and for the rental to be registered under the name of the primary resident. However, guest houses in the backyard and attic or garage suites provide some flexibility. Some counties have outright banned short-term rentals and others have no regulations at all. Know the rules of your location before you choose a property.
Unusual Properties as Great Vacation Rentals
When it comes to private short-term rentals, the best properties are often small yet elegant. Houses that are too small or strangely shaped for good homes can often be bought at a steal for a vacation rental – decorated in a quirky way that will delight guests and turn unusual space into uniquely appealing rentals.
The Best Tool for Vacation Rentals: AirDNA
When looking into this, we discovered one of the best tools in the business for identifying profitable short-term rental properties to invest in. AirDNA provides a great overview of the recent profitability of vacation rentals in each county.
Starting Your Vacation Rental Business with Denver Dyllan
As an experienced Denver real estate agent, I’ve watched the growth of the vacation and short-term rental business with enthusiasm. Tiny homes, studio apartments, and homes with multi-suite designs have been shown new love by investment buyers and hybrid “house hacking” buyers with vacation guests in mind.
I would love to help you find the perfect properties to build a profitable and rewarding vacation rental business based on your financial plans and the regulations in each neighborhood where you plan to invest. Contact me today to explore the enjoyable business of short-term rentals in Colorado.