Choosing Between Long-Term and Short-Term Rentals in Colorado Springs: A Guide for Real Estate Investors

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Investing in real estate can be a daunting decision, especially when choosing between long-term and short-term rentals. But if you're considering Colorado Springs as your destination, you're in luck. With a thriving economy, a growing population, and a booming tourism industry, Colorado Springs is an attractive proposition for real estate investors. The question is, which rental strategy will give you the best returns? Read on for a detailed comparison of the advantages and disadvantages of both long-term and short-term rentals in Colorado Springs, and discover how you can maximize your investment with the help of Renjoy property management services.

Investing in real estate in Colorado Springs, CO, is an attractive proposition due to its growing population, vibrant economy, and stunning natural beauty. However, one crucial decision you need to make as an investor is whether to opt for long-term rentals or short-term rentals. Both strategies have their own set of advantages and disadvantages. Here’s a detailed comparison to help you make an informed decision.

Colorado Springs: A Thriving Market for Real Estate Investment

Economic Growth

Colorado Springs has been experiencing robust economic growth, driven by diverse sectors such as defense, technology, healthcare, and tourism. The city’s unemployment rate is consistently below the national average, and its population has been growing steadily. According to the U.S. Census Bureau, Colorado Springs’ population increased by 13.8% from 2010 to 2020, reflecting a healthy influx of residents and a strong demand for housing  .

Tourism Boom

The city is a major tourist destination, attracting over 23 million visitors annually who contribute approximately $2.4 billion to the local economy . Attractions like Pikes Peak, Garden of the Gods, and the U.S. Air Force Academy make Colorado Springs a hotspot for short-term rental demand.

Real Estate Market

The real estate market in Colorado Springs has seen significant appreciation. According to Zillow, the median home value in Colorado Springs increased by 14.7% over the past year, making it a lucrative market for real estate investment .

According to RentCafe, the average rent for an apartment in Colorado Springs is $1,439, reflecting a year-over-year increase of 9%. This rental appreciation is indicative of a strong long-term rental market, supported by the city’s growing population and economic stability.

Benefits of Long-Term Rentals vs Short-Term Rentals in Colorado Springs

Advantages

  1. Stable Income: Long-term rentals provide a consistent and predictable monthly income. This stability makes it easier to plan finances and manage mortgage payments.
  2. Lower Turnover: Tenants in long-term rentals usually stay for a year or more, reducing the time and money spent on marketing and preparing the property for new tenants.
  3. Less Maintenance: With fewer turnovers, there is generally less wear and tear on the property. Tenants also tend to take better care of a place they consider their home for an extended period.
  4. Simplified Management: Managing a long-term rental is often less demanding since it involves fewer interactions with tenants compared to short-term rentals.

Disadvantages:

  1. Lower Rental Rates: Monthly rental income from long-term rentals is typically lower than what you might earn from short-term rentals, especially in a high-demand market like Colorado Springs.
  2. Tenant Risk: If you end up with problematic tenants, it can be challenging to evict them, leading to potential legal battles and lost income.
  3. Market Sensitivity: Long-term rental income is more sensitive to market conditions. If the rental market in Colorado Springs experiences a downturn, you might struggle to find tenants or be forced to lower rents.

According to AirDNA, Colorado Springs has an average occupancy rate of 70% for short-term rentals, with an average daily rate of $150 . This high occupancy and competitive daily rate make short-term rentals a lucrative option for investors looking to maximize their rental income.

Benefits of Short-Term Rentals vs Long-Term Rentals in Colorado Springs

Advantages:

  1. Higher Income Potential: Short-term rentals often generate higher nightly rates, leading to greater overall income, particularly during peak tourist seasons in Colorado Springs.
  2. Flexibility: Short-term rentals offer greater flexibility for the property owner. You can use the property yourself during vacant periods or adjust pricing dynamically based on demand.
  3. Tax Benefits: There are potential tax advantages, such as deductions for property management fees, maintenance, and even depreciation, which can be more advantageous than long-term rentals.
  4. Tourist Demand: Colorado Springs is a popular tourist destination, attracting visitors year-round with its attractions like Pikes Peak, Garden of the Gods, and the U.S. Air Force Academy, ensuring a steady demand for short-term rentals.
  5. Regulation: While this may seem more like a disadvantage (which it can be!) it’s also an advantage. Governments regularly limit the amount of supply of short term rentals. Over time as the city grows, so will demand for short term rentals. However, the supply might very well be capped at a slower growth rate given the regulations. This mismatch between supply and demand would increase profits.

Disadvantages:

  1. High Turnover: Short-term rentals require constant marketing, guest communication, and property preparation, which can be time-consuming and costly.
  2. Regulation and Taxes: Short-term rentals are subject to local regulations, which can include licensing requirements, occupancy taxes, and restrictions on the number of nights the property can be rented out.
  3. Maintenance Costs: Higher guest turnover leads to increased wear and tear and more frequent maintenance and cleaning requirements.
  4. Management Complexity: Managing a short-term rental can be demanding, often requiring professional property management services like Renjoy to handle bookings, guest services, and property upkeep.

Choosing between short term & long term rentals in Colorado Springs

Both long-term and short-term rental strategies have their own unique benefits and challenges. The choice between them depends on your financial goals, management preferences, and the specific market dynamics of Colorado Springs. If you value stable, predictable income with less hands-on management, a long-term rental might be the better choice. However, if you’re looking for higher income potential and don’t mind the additional management responsibilities, short-term rentals can be highly lucrative, especially in a tourist-friendly city like Colorado Springs.

At Renjoy, we specialize in maximizing the returns on your short-term rental investments while handling all the complexities of property management. Whether you’re new to real estate investing or looking to switch strategies, we’re here to help you succeed. Visit our website or contact us today to learn more about how we can assist you in making the most out of your Colorado Springs rental property.

By tailoring your investment strategy to the unique advantages and challenges of each rental type, you can optimize your returns and enjoy the benefits of owning property in one of Colorado’s most vibrant cities.

References

1. U.S. Census Bureau, Colorado Springs Population Data

2. Colorado Department of Labor and Employment, Employment Statistics

3. Visit Colorado Springs, Tourism Statistics

4. Zillow, Colorado Springs Housing Market Data

5. RentCafe, Colorado Springs Rental Market Report

6. AirDNA, Short-Term Rental Market Data for Colorado Springs

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