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The most popular short-term rental platform is Airbnb, so in this article I’ll use “Airbnb” and “short-term rental” interchangeably. Other popular platforms include VRBO and HomeAway. And here are a few alternatives, some with different focuses.
Want to be an Airbnb Host?
You can make a lot of money! But it’s a lot of work.
It can be mean extra income from a spare bedroom (or even a couch) and, when taken to greater scale, it can mean a higher income than a traditional long-term rental.
Greater reward usually brings greater risk and/or more work, so it’s important to be aware of all the considerations — logistical, legal, tax-wise and otherwise – that running a short-term rental entails.
I recently attended a class forum about short-term rentals, where every speaker was a hands-on expert in the industry. Longtime hosts, property managers, a lawyer, an insurance rep, marketing experts and a mortgage guy talked about the nuts and bolts of the industry and offered practical advice on how to make money in this somewhat new and quickly evolving cottage industry.
Here are the main points discussed.
Expert Advice on Short-Term Rental Hosting
Legal implications. You’ll need to apply for a business license. Pay attention to your local zoning and regulations. Since this is a newer industry, laws are still evolving and vary greatly by jurisdiction.
Denver and many other large cities now require that your short-term rental property be your primary residence. So you can really only rent it out part time (while traveling or vacationing) or just rent part of your house (like a bedroom or a couch) to a wayfaring stranger. Do some people flout this rule? Probably. But you’ll be paying taxes on this money, so in order to keep business above board it’s best to follow the rules.
I hear Englewood has less stringent requirements — meaning you could rent out a second home– at least for now. The primary residence rule, which might seem kind of strict, is to protect long-term rental supply for residents who actually live here.
Thinking of investing in real estate? I can help! Get in touch and let’s talk.
Insurance. Opening up your place to renters opens it up to more liability. As an Airbnb host in Denver or elsewhere, you can be denied a claim if you’re not upfront about your property usage. Not all insurance companies offer policies that allow this type of use, so do your research and find a good, local provider. The insurance provider who hosted this forum does allow for this type of coverage. (Shout out to Lisa Kerin-Welch at Community & Family Insurance).
Management. Traditional long-term rentals are more “set it and forget it,” while short-term rentals require much more attention. High turnover means frequent cleaning, supplies upkeep, and more frequent guest communication and assistance. To keep full occupancy and maximize your profits you’ll need time to market your place, and you’ll have to spend significant time working on the books – recording expenses, paying taxes, etc.
Fortunately there are property managers who can do this for you. Costs vary but you might expect to pay 10% -15% of your rental income for a manager, depending on the agreement and services provided.
Expenses. You may have the aforesaid management fees, and of course the platform service fees (Airbnb charges 3% but there are different plans available). Don’t forget taxes, insurance, cleaning, upkeep, and supplies.
As a broker who’s been through boom and bust cycles, I believe real estate investment is a solid wealth-building strategy. If you’re an investor or would like to become one, please contact me and let’s come up with a plan to fit your budget and needs.
More Tips on Hosting Successful Short-Term Rentals
- Make sure your place looks fabulous and get professional pics!
- Be an excellent host. Get five-star reviews so you attract the most visitors.
- Become a super host.
- Allow pets for higher occupancy (charge a pet fee).
- Keep on good terms with your neighbors and/or the HOA board.
- Guests sign an Accommodation Agreement in addition to the hosting site agreement.
- Use security cameras on exterior — make sure to disclose this to your guests.
- Market on Instagram. Have your guests tag you and market for you.
Short-Term Rental Pros
- Neater place – your place stays well maintained and ideally updated
- It’s fun to meet people and host
Short-Term Rental Cons
- Inconsistent cash flow
- High expenses