What is a Short Term Rental: Frequently Asked Questions

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A short-term rental refers to the practice of renting out a property or a portion of it for a brief period, typically ranging from a few nights to a few months. It is commonly associated with vacation rentals, serviced apartments, or properties listed on platforms like Airbnb, where guests can book accommodations for short stays instead of long-term leases.

Short term rentals have become increasingly popular in recent years, especially with the rise of home-sharing platforms like Airbnb, Booking.com, and VRBO. In simple terms, short term rentals refer to the practice of renting out a furnished property, whether it’s a single room, an entire apartment or house, for a short period of time, typically anywhere from a few nights to a few weeks.

Short term rentals can be an attractive option for both hosts and guests. For hosts, it offers a way to earn extra income by renting out their property when they are not using it, and for guests, it provides a more affordable and convenient alternative to traditional hotels.

To Have a Short Term Rental, Owners Need to:

  • Research local regulations and restrictions before considering short-term rentals.
  • Ensure that the property’s zoning allows for short-term rentals.
  • Register for any necessary licenses through the city.
  • Prepare for additional taxes that may be applicable.
a short term rental with a green lawn and white house.

Why Own Short-Term Rentals

Owning a short term rental can be a lucrative investment, providing a source of passive income and potential tax benefits. Additionally, it offers the opportunity to meet new people, gain hospitality experience, and enjoy greater flexibility and control over one’s property.

High Returns

One of the biggest advantages of owning a short term rental property is the potential for high returns. Short term rentals can generate significantly more income than traditional long-term rentals, as they are typically rented out for a higher nightly rate. This can be especially beneficial for properties located in popular tourist destinations, where demand for short term rentals is high.


Another advantage of owning a short term rental is the flexibility it offers. As the owner, you have the freedom to set your own rental rates, block off dates when you want to use the property yourself, and choose which guests to accept. Additionally, owning a short term rental can provide you with the opportunity to gain hospitality experience and develop your skills in customer service and property management.

The Challenges of Owning a Short Term Rental

Stressful and Time-consuming

However, it’s important to note that short term rentals are not without their challenges. From a host’s perspective, managing short term rentals can be time-consuming and stressful, requiring constant communication with guests, coordinating cleaning and maintenance, and dealing with unexpected issues that may arise.

Regulations and Local Restrictions

Before renting out the property, owners must be aware of the local regulations, zoning, taxes, and licensing as each city or county has its own definition of what qualifies as a short-term rental property. Homeowners who attempt to rent under the radar risk hefty fines and penalties, making it critical to verify these local restrictions to avoid any legal issues.

Some cities and municipalities have enacted strict regulations to govern short term rentals, while others have banned them altogether.

Don’t Forget About HOAs

Check with your homeowners association: If you live in a neighborhood with a homeowners association, they may have rules about short-term rentals that you need to follow.

Frequently Asked Questions

How long can you stay in a short-term rental?

Every city has different rules. Some areas restrict stays to less than 30 days, while others allow stays that are several months long. It also depends on the kind of property; multi-family properties can fall under different rules than single-family homes. 

Can I rent out my home as a short-term rental?

Yes, if it is legal in your city and you comply with all applicable laws and regulations.

What kind of properties qualify as a short-term rental?

It depends on what your city allows. Some local governments allow whole homes to be leased as short-term rentals, while others restrict residents from leasing anything larger than a single room. In some cities, homeowners can rent out something as small as a renovated Airstream trailer or a “structure” in their backyard. 

How do I know if my city allows short-term rentals?

Do your research! Check your city’s website (ex. Colorado Springs) Many cities have information about short-term rental regulations and requirements on their official websites. Contact your local government: You can reach out to your city’s zoning or planning department to ask about the regulations for short-term rentals. Check with your homeowners association: If you live in a neighborhood with a homeowners association, they may have rules about short-term rentals that you need to follow. Consult with a local attorney or real estate professional: A local attorney or real estate professional can help you understand the regulations and requirements for short-term rentals in your city.

How do I manage seasonal revenue?

Try out these couple of strategies: 1. Look at adding extra services to offer during the off season. 2. Automate expenses 3. Hire part time staff to offset workload. Read more about preparing for seasonal revenue. Learn more about how to manage seasonal revenue.

What is a good cap rate for short term rentals?

While it is challenging to pinpoint an exact cap rate that universally applies to all short-term rentals, a common rule of thumb is to aim for a cap rate between 8% and 12% for a short-term rental property. However, it’s important to note that this range can vary significantly depending on the specific market, property characteristics, and local regulations.

How much can I charge for a short-term rental?

The rental rate will depend on a variety of factors, including the location, type of property, and amenities offered. Don’t forget seasonality, depending on your location and time of the year, your pricing should be dynamic to match the demand. 

What amenities are typically included in a short-term rental?

Amenities can vary widely, but may include things like Wi-Fi, cable TV, fully equipped kitchens, and laundry facilities.

Do I have to have a license?

Local governments define licensing laws for short-term rentals. Some have mandates around zoning or whether short-term rentals are allowed at all. Owners may need to register for a general business license, should check their property zoning and may also need to pick up a short-term rental permit.

Do I need insurance for my short-term rental?

Yes, it’s important to have insurance that covers your short-term rental property in case of damage or liability issues. Learn more about Airbnb insurance.

How do I handle taxes for my short-term rental?

Tax regulations can vary depending on the location, but in general, short-term rental hosts are responsible for collecting and remitting applicable taxes to the appropriate authorities.

What taxes do I have to pay on a short-term rental?

Short-term rental income qualifies for income and self-employment tax. Additionally, some cities expect landlords to pay occupancy taxes, also known as a hotel tax. 

What kind of guest reviews should I expect?

Aim for 4.8 stars or higher. Reviews can vary, but guests typically look for clean, comfortable accommodations with good amenities and responsive, friendly hosts.

In conclusion, short term rentals can offer a unique and rewarding experience for both hosts and guests, providing a flexible, affordable, and authentic way to travel. However, it’s important to approach short term rentals with caution, and to carefully consider the potential risks and benefits before making any decisions.

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