Short-term Rentals: The Better Investment

Short-term Rentals: The Better Investment

MANY of our customers debate whether they should rent short-term or long-term with their investment properties. This assumes, usually, that a long-term rental is the less risky option. I would argue that long-term rentals can be MORE RISKY in a healthy travel market like Colorado Springs. With long-term rentals, there is real risk in finding a tenant that won’t trash your investment property, and avoiding long vacancy periods. You essentially lose control when you rent long-term. Your investment is subject to how well the tenant will treat your property over the course of a year (or more), which often isn’t very well.

All of this risk is essentially just to break-even financially, or maybe make a few hundred bucks a month in hopes of building up equity in an unpredictable housing market. And finding a reliable long-term rental management company to make sure your property is being taken care of? One that won’t simply take all of that wimpy monthly profit in the process? Good luck with that, say most of the investment-savvy realtors we speak to.

There is a SOLUTION! If I told you that you could have full control over your investment property, that it was getting cleaned professionally 1-3 times a week, that someone was actively monitoring your property 7 days a week, that anyone staying in your house was subject to a review system that would keep them accountable, and that you could earn 2X – 3X what you would earn with a long-term rental, would you believe me? If done right, short-term rentals present THIS possibility. 

A short-term rental property that’s being professionally cleaned 1-3 times a week is going to stay in good shape. If you do get a (rare) bad apple, there are systems already in place to cover any damage or any extra cleaning you might need; things like security deposits and multiple layers of insurance to protect your property.

The REVIEW SYSTEMS on sites like Airbnb and HomeAway work extremely well in keeping guests accountable. People behave so much better when their reputations are on the line! Rental platforms like Airbnb won’t tolerate guests NOT respecting your property, (or you not providing the guests with a wonderful stay). We even find that guests are going as far as making their beds and taking out the trash before they leave (THANK YOU!!!). The review system really creates this ecosystem of “people respecting people” and treating your property as their own.

The Numbers

This is where it gets interesting…

An Example. We’ll use a hypothetical place to throw some numbers out there. A modern, updated 2 bedroom, 2 bath cottage, in Old Colorado City, a fun (and more desirable) part of Colorado Springs. This place would rent for around $1,500/mo long term. Here’s what we have, short term, assuming varying (though realistic) occupancy rates:

Short Term Rental Rate: $100 – $150/night depending on the time of year. This place would book for more in the summer months.

Monthly Revenue at 100% occupancy: $3,000 – $4,500

Realistic Occupancy Scenarios…

65% Occupancy: $1,950 – $2,925

80% Occupancy: $2,400 – $3,600

90% Occupancy: $2,700 – $4,050

The numbers speak for themselves. Obviously, every individual property is different, and choosing an investment property really optimized for short term renting (like our example here) usually leads to better results. But we believe renting short term in most cases just makes sense. Over the next few weeks we’ll be providing actual case studies, with real and actual income and expense figures and more detailed property characteristics to SUBSCRIBERS, to help folks make the best decisions possible. CONTACT US if you have a specific scenario you’d like to run by us.