Vacation Rentals

Vacation Rentals

Owning an investment property for the purpose of short-term rentals or vacation rentals can be a profitable investment. There are so many aspects that can make these types of investments successful or difficult. The rise in short-term rentals has been significant in the last 5 years. According to “Airbnb short-term operators in Colorado hosted 1.2 million guests in 2017, a 68 percent increase from the previous year. Combined, Colorado Airbnb hosts made $183 million in 2017 with an average of $8,100 per host for the year.” Local cities and counties have been trying to navigate the growth and many have created restrictions and guidelines for this growing industry. Owning a rental in the Denver Metro area vs. resort areas can be very different. Here is some information that may help you when considering purchasing an investment property for short-term rentals.

Owning in the Denver Area

Every city and county has different regulations for short-term rentals. The city and county of Denver created a website to help owners comply. It is called Keep It Legit Denver. The website guides you through the short-term rental certification process. A short-term rental is when you rent out your home for less than 30 days. Technically, if you are renting out your primary home you are in violation. If you are renting out your investment property you are able to register your rental and comply after following a few steps. Once you register you will be paying a lodgers tax which will ensure you are not going to get fined for being off their radar. Denver is searching for non-compliant landlords/owners and giving them warnings and fines. Many cities require you to inform your insurance company and HOA if you are using your asset as a short-term rental. Cities are also requiring certain safety requirements like smoke and CO2 detectors and fire extinguishers.

Airbnb vs. VRBO

Every owner has their preference for which site to use to advertise their short-term rentals. Deciding which one to use may also be location-specific. Here are some thoughts I have gathered from various sources. Has gained a lot of traction in the last 5 years and is popular in cities and with millennials. Airbnb rates its hosts and guests. That allows for credibility on both ends. Hosts have the motivation to provide a good product and guests can create a good reputation for themselves if they get good ratings for their stay. Airbnb offers free photos, good customer service, up to 1k in damage protection for the property, guest verification, and direct contact with guests. For owners, they do not charge an annual subscription fee to use but do charge a flat fee for each booking of 3%. Airbnb offers both full-space and shared-space options for renters. So owners can rent out a portion of their home. The Airbnb app is said to be user-friendly for hosts. The cons to Airbnb are the guest service fees are sometimes higher than VRBO.
VRBO or Home is a more established platform for rentals and VRBO recently purchased Home Away so you don’t need to search both to find homes they share. VRBO is known for vacation rentals and is said to be a great resource for large-group bookings. They charge a $499 annual fee for the owners or an 8% fee per booking. For VRBO you need 24 quality photos to rank high on the searches. VRBO has hosts hold the security deposit and it is charged right away so that enables more control for the owner. VRBO allows only rentals of full homes or vacation homes and not just a room or portion of the home. For potential guests to browse available VRBO homes they do not require you to log in. VRBO is said to have more available units in rural areas.
Tech Resources~ allows hosts to edit your price or calendar and it will reflect it in both Airbnb and VRBO.
Owning a Short-Term Rental in A Resort~ Owning a rental in resort towns can be very different. There is seasonality to profits in resorts. Owners take advantage of holidays, major events, and local amenities that bring in populations. Owners sometimes have a harder time managing the rental on their own and often use a property management company. Profits are tougher in resort areas due to high HOAs and high prices for trades such as contractors and cleaning services. However, if owners can utilize the busy seasons they often can positively cash flow. Resort areas also often make you register your rental with the local city or county.

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