Why This Decision Has Become More Complex
For years, short-term rentals appeared to offer higher returns almost everywhere in Colorado. Today, the picture is more nuanced. Regulations have evolved, operating costs have increased, and traveler behavior has shifted. At the same time, long-term rentals have regained appeal due to stability and sustained demand.
Choosing between short-term and long-term rentals now requires market-specific analysis, not assumptions based on past performance.
What Defines Short-Term vs. Long-Term Rentals
Understanding the distinction is essential.
- Short-term rentals (STRs) typically involve stays of fewer than 30 days and are often marketed to vacationers or business travelers.
- Long-term rentals (LTRs) usually involve leases of six months or more and target local residents.
Each model serves different demand drivers and carries different risks.
Short-Term Rentals: The Upside
Short-term rentals can still perform well in the right locations.
Potential advantages include:
- Higher nightly rates during peak seasons
- Flexibility for owner use
- Ability to adjust pricing dynamically
In tourist-driven areas or unique properties, STRs can outperform traditional rentals when well-managed.
The Challenges Facing Short-Term Rentals
STRs face increasing pressure in many Colorado markets.
Key challenges include:
- Local licensing and permitting requirements
- Primary residence rules in some cities
- Higher management and cleaning costs
- Greater income volatility
Regulatory uncertainty has become one of the biggest risk factors for STR investors.
Long-Term Rentals: Stability and Predictability
Long-term rentals have gained renewed interest.
Benefits include:
- Consistent monthly income
- Lower turnover and operating costs
- Simpler management and compliance
In many Front Range markets, long-term rentals offer steadier performance—even if headline returns appear lower.
Demand Drivers for Long-Term Rentals
Colorado’s long-term rental demand remains strong due to:
- Population growth
- Employment centers
- Affordability barriers to homeownership
Markets like Denver continue to support long-term rental demand across multiple price points.
Regulation: A Key Differentiator
Regulatory environments often determine which strategy works.
Many Colorado cities:
- Limit STR licenses
- Restrict non-owner-occupied rentals
- Enforce zoning-specific rules
Long-term rentals generally face fewer regulatory hurdles, making them more predictable for long-term planning.
Operating Costs Matter More Than Gross Income
Comparing gross income alone can be misleading.
STR investors must account for:
- Management fees
- Cleaning and maintenance
- Utilities and furnishings
- Vacancy and seasonality
LTR investors typically face:
- Lower operating complexity
- Fewer variable expenses
Net income—not gross revenue—should drive decisions.
Financing Considerations
Lenders often view STRs differently than LTRs.
STRs may require:
- Higher down payments
- More conservative underwriting
- Specialized lenders
LTRs typically qualify for more traditional financing options.
Risk Tolerance and Time Commitment
The right strategy depends on the investor.
STRs often suit investors who:
- Are comfortable with volatility
- Actively manage or oversee properties
- Accept regulatory risk
LTRs suit investors who:
- Value predictability
- Prefer passive income
- Plan long-term holds
Lifestyle and time availability matter just as much as numbers.
Hybrid Strategies Are Becoming More Common
Some investors blend approaches.
Examples include:
- Renting short-term during peak seasons and long-term otherwise
- Starting with long-term rentals and transitioning later
- Using medium-term (30–90 day) rentals for flexibility
Hybrid models can balance income and stability when regulations allow.
What Works Best Right Now?
In today’s Colorado market:
- STRs work best in clearly tourism-driven areas with stable rules
- LTRs offer better risk-adjusted returns in many urban and suburban markets
The “best” strategy depends on location, regulation, and investor goals.
Questions Investors Should Ask Before Choosing
Before committing, investors should ask:
- What are local STR regulations today—and how have they changed?
- What does realistic net income look like?
- How much time and involvement am I willing to commit?
- What’s my exit strategy if conditions shift?
Clear answers prevent costly pivots later.
Final Thoughts
Short-term and long-term rentals can both work in Colorado—but not everywhere and not for everyone. Investors who align strategy with regulation, location, and personal tolerance tend to build more resilient portfolios.