short term rental or longterm for more cash?

[John Williams]

I recently bought a home that has an attached dwelling unit where Im planning to move in and rent out the main unit. A question I have is, if i rent out the main unit that has 4BD-2B, is it better to get a long term renter with steady rent payments from them or rent out for airbnb?

This is colorado springs area

Thank you. Any suggestions would help please

[Bruce Woodruff]

Depends on the exact area of course....but generally STRs will make 2-3 times what a LTR makes. So if you want to handle the extra work, like cleaning, repairs and all of the calls and texts, then go for it. You can lawyas change back to LTR if it doesn't work.

[Daniel McDonald]

@John Williams like Bruce mentioned area is going to play a huge part. 

First I would call the town and ask for the STR requirements. Some towns require licenses, max out the days you can do it, etc.

Then I would run comps in the area. AirDNA is the best for this. Doing a quick scan off I see there are about 5k STRs in Colorado Springs (assuming you are there and not a neighboring town I am gonna say the town has minimal restrictions). Occupancy rate is about 60% and annual revenue is about 40k (without filtering anything). If you filter to 4/2s the revenue jumps to 51k with only 200 listings. The ones that are doing really well (close to 100k in revenue) are entire homes with all the amenities. 

It definitely seems like you could make a killing there, but it's going to take much more up front cash then LTRs. Most people who make a ton on Airbnb hire out designers, put in flashy amenities, and create a true experience. That may not be your motive right now. 

A lot to think about. Make sure your decision compliments your "why". 
 

[Joey Banasihan]

Hey @John Williams, love this strategy! I think it comes down to your goals and risk threshhold. STR can provide more cash (potentially), but its a high risk high reward strategy - if you invest in the furniture, staging, photos, and management or self manage, there is a lot of time and money invested. Ideally it pays itself back over the next few years and could be great! But if it doesn't work out as you hope, then you take some lost. LTR is stable, slow, and risk is low but potentially not as much cash (right away).

Comes down to what goals you have and your risk threshhold - I have friends in CO springs who do STR and MTR, and works out great - but also have folks who LTR in that area and it pays for them self and it a great way to save money in places like taxes and build equity.

The cool thing is you have multiple strategys and just because you choose one, does not mean you cannot switch to another one - maybe one fits your short term goals and another one helps down the line with long term goals. Real estate is a LONG game and a good way to build wealth through equity. Good luck!

[Bonnie Low]

Quote from @John Williams:

I recently bought a home that has an attached dwelling unit where Im planning to move in and rent out the main unit. A question I have is, if i rent out the main unit that has 4BD-2B, is it better to get a long term renter with steady rent payments from them or rent out for airbnb?

This is colorado springs area

Thank you. Any suggestions would help please

Colorado Springs has some weird regulations about this depending on which county it's located in so be sure to check in with the planning department in the specific county you're looking at. I had this come up on a house I was submitting an offer on. I was intending to rent out the upstairs 3/2 as an LTR then convert the basement to a unit for myself half the year and rent it out as an MTR (midterm rental) when I wasn't there. El Dorado County prohibited this, though it seems there are "creative" ways to work within their framework. I could have rented out the entire unit as LTR, MTR or STR. Or I could have rented out either the top unit as one of the 3 OR the bottom unit, but not both the top and bottom unit. Didn't make a lot of sense to me, but sometimes regulations don't make much sense. The person I talked to in the Planning department was very helpful and agreed that the regulations are ridiculous, but for the time being, they're still in place. Call and find out exactly what uses your property is eligible for before you do your underwriting because it will make a huge difference.

[Tatum Littleton]

All great advice so far and would agree with the other comments. I would reinforce making sure you know the leg work it takes for a STR and the potential hurdles that may slow you down (gov./city regulations, set up costs, doing things to stand out) and leave you with less cash in case of an emergency. Do plenty of research and find out what other mistakes have been made in your are and learn from them.

Both are great options but maybe doing a simple pros/cons list for both STR and LTR. Ask yourself how much work you want to do (real estate is not a passive income endeavor) and how does it or does not fit into your life right now. The good thing about your property and area is that it seems that you could potentially transition between the two if you had to. Maybe setting up for STR and looking into MTR since you have it furnished already, there is plenty you can do with your situation.

And someone said it before but make sure it aligns with your "why", don't just do it willy nilly and think you can just make a quick buck, what is your ultimate goal and which strategy will help facilitate that? 

Good luck and keep at it!

[John Williams]

@Bruce Woodruff

Thank you for your reply and insight on this. I live in the 80904 area about like 6  or 7 minutes from garden of the gods.

[John Williams]

Quote from @Joey Banasihan:

Hey @John Williams, love this strategy! I think it comes down to your goals and risk threshhold. STR can provide more cash (potentially), but its a high risk high reward strategy - if you invest in the furniture, staging, photos, and management or self manage, there is a lot of time and money invested. Ideally it pays itself back over the next few years and could be great! But if it doesn't work out as you hope, then you take some lost. LTR is stable, slow, and risk is low but potentially not as much cash (right away).

Comes down to what goals you have and your risk threshhold - I have friends in CO springs who do STR and MTR, and works out great - but also have folks who LTR in that area and it pays for them self and it a great way to save money in places like taxes and build equity.

The cool thing is you have multiple strategys and just because you choose one, does not mean you cannot switch to another one - maybe one fits your short term goals and another one helps down the line with long term goals. Real estate is a LONG game and a good way to build wealth through equity. Good luck!

 Thank you for taking time to give great advice. Thats awesome you have friends that do it here. Wish i knew them for some advice. But ill consider your advice. Thank very much!!

[John Williams]

Quote from @Daniel McDonald:

@John Williams like Bruce mentioned area is going to play a huge part. 

First I would call the town and ask for the STR requirements. Some towns require licenses, max out the days you can do it, etc.

Then I would run comps in the area. AirDNA is the best for this. Doing a quick scan off I see there are about 5k STRs in Colorado Springs (assuming you are there and not a neighboring town I am gonna say the town has minimal restrictions). Occupancy rate is about 60% and annual revenue is about 40k (without filtering anything). If you filter to 4/2s the revenue jumps to 51k with only 200 listings. The ones that are doing really well (close to 100k in revenue) are entire homes with all the amenities. 

It definitely seems like you could make a killing there, but it's going to take much more up front cash then LTRs. Most people who make a ton on Airbnb hire out designers, put in flashy amenities, and create a true experience. That may not be your motive right now. 

A lot to think about. Make sure your decision compliments your "why". 
 

 Thank you for your insight Daniel.

I just checked AIRDNA, and its a very helpful tool thank you. So I live in the co springs close to garden of the gods area. so is it better to rent out whole house for aibnb or rent per room? it sounds like renting a whole house, youd make more

[John Williams]

Quote from @Tatum Littleton:

All great advice so far and would agree with the other comments. I would reinforce making sure you know the leg work it takes for a STR and the potential hurdles that may slow you down (gov./city regulations, set up costs, doing things to stand out) and leave you with less cash in case of an emergency. Do plenty of research and find out what other mistakes have been made in your are and learn from them.

Both are great options but maybe doing a simple pros/cons list for both STR and LTR. Ask yourself how much work you want to do (real estate is not a passive income endeavor) and how does it or does not fit into your life right now. The good thing about your property and area is that it seems that you could potentially transition between the two if you had to. Maybe setting up for STR and looking into MTR since you have it furnished already, there is plenty you can do with your situation.

And someone said it before but make sure it aligns with your "why", don't just do it willy nilly and think you can just make a quick buck, what is your ultimate goal and which strategy will help facilitate that? 

Good luck and keep at it!

 Thank you for your input Tatum, I really appreciate it!

[John Williams]

Quote from @Bonnie Low:

Quote from @John Williams:

I recently bought a home that has an attached dwelling unit where Im planning to move in and rent out the main unit. A question I have is, if i rent out the main unit that has 4BD-2B, is it better to get a long term renter with steady rent payments from them or rent out for airbnb?

This is colorado springs area

Thank you. Any suggestions would help please

Colorado Springs has some weird regulations about this depending on which county it's located in so be sure to check in with the planning department in the specific county you're looking at. I had this come up on a house I was submitting an offer on. I was intending to rent out the upstairs 3/2 as an LTR then convert the basement to a unit for myself half the year and rent it out as an MTR (midterm rental) when I wasn't there. El Dorado County prohibited this, though it seems there are "creative" ways to work within their framework. I could have rented out the entire unit as LTR, MTR or STR. Or I could have rented out either the top unit as one of the 3 OR the bottom unit, but not both the top and bottom unit. Didn't make a lot of sense to me, but sometimes regulations don't make much sense. The person I talked to in the Planning department was very helpful and agreed that the regulations are ridiculous, but for the time being, they're still in place. Call and find out exactly what uses your property is eligible for before you do your underwriting because it will make a huge difference.

 Thank you for your insight and headsup Bonnie!! I am going to look into this and see if there's no restrictions that could prevent me from doing so.

[Daniel McDonald]

Quote from @John Williams:

Quote from @Daniel McDonald:

@John Williams like Bruce mentioned area is going to play a huge part. 

First I would call the town and ask for the STR requirements. Some towns require licenses, max out the days you can do it, etc.

Then I would run comps in the area. AirDNA is the best for this. Doing a quick scan off I see there are about 5k STRs in Colorado Springs (assuming you are there and not a neighboring town I am gonna say the town has minimal restrictions). Occupancy rate is about 60% and annual revenue is about 40k (without filtering anything). If you filter to 4/2s the revenue jumps to 51k with only 200 listings. The ones that are doing really well (close to 100k in revenue) are entire homes with all the amenities. 

It definitely seems like you could make a killing there, but it's going to take much more up front cash then LTRs. Most people who make a ton on Airbnb hire out designers, put in flashy amenities, and create a true experience. That may not be your motive right now. 

A lot to think about. Make sure your decision compliments your "why". 
 

 Thank you for your insight Daniel.

I just checked AIRDNA, and its a very helpful tool thank you. So I live in the co springs close to garden of the gods area. so is it better to rent out whole house for aibnb or rent per room? it sounds like renting a whole house, youd make more

 It would probably be less work renting the whole house too. But some of it will come down to personal preference. 

[Dan Thomas]

Quote from @John Williams:

I recently bought a home that has an attached dwelling unit where Im planning to move in and rent out the main unit. A question I have is, if i rent out the main unit that has 4BD-2B, is it better to get a long term renter with steady rent payments from them or rent out for airbnb?

This is colorado springs area

Thank you. Any suggestions would help please

It may be more $$$ but that isn't the only metric you should look at. Would you rather work for $1100/hr or $437/hr? STR's are a job. I don't care what anyone online says if you live there and have tenants at your home it will be a job. You can outsource and automate all you want but when you run into your guests in the driveway and they want to talk you can't just walk away....your reviews will reflect that.

I used $1100 and $437 as a real example. I have a duplex that I rent out long term and cashflow $1100 a month. I spend 1 hr (on the high side) per month managing. I have a STR that cashflows $3500/mo that I spend 8 hours per month managing. I guarantee I would spend more time if I lived there and it was an ADU.

[Tanner Pile]

@John Williams In COS STRs will get about 3x more than long term rates. And being near garden of the gods that I a great spot for an STR. You have to make sure you follow the STR permits laws though. Must have multi-family zoning and be 500+ feet away from another non-owner occupied STR or you must live in the property for 6 months out of the year.

If you're living in a separate dwelling this can work out great! 

Also, STR management can take a lot of time unless using a PM which can be 25%+ in COS. I have a local STR PM company of you would like to chat with them.

For doing an STR well the larger properties are best and it needs to stand out amongst competition to perform well.

STRs also have the seasonal aspect to it for the winter time in COS and long term rentals are steady. 

[Mark Cruse]

Before you go any further, I think you should understand they are 2 entirely different things. One can be close to a hands off, passive investment depending on a few things. The other is a service and sort of hospitality-oriented approach. The STR is a lot more work and even if you get a manger, you may have to be involved. So many more things to consider and do. I have both. I have a property manager for my STR and manage some of the LTRs myself. Even with the manager, in mine, I'm thinking about and doing more in the STR than they ones I actively manage. I would research and drill down what is required from each and see if it even fits you. Not sure, but the way it was presented it seems like you were putting these two approaches in similar buckets.