My hesitation stems from the fact that I am unable to wrap my head around how this will affect the overall STR supply in vacation markets.

@David S RobertsI'd venture to say those nearby properties are just ignoring the law.Most cities and counties in Colorado have well-defined STR requirements, and if you meet those, then you can operate a vacation rental. 

He is now selling it, and we have to buy or vacate.

They get the 5K relo and deposit back upon vacating Dec 1st.Again, I'm tired of dealing with this tenant. 

The lease states that I may give 60 Days notice to vacate to the Tenant who currently occupies this unit. 

hi, stick to the lease. it’s his responsibility, he sounds upset because you raised the rent (if he doesn’t like it, he’s welcome to vacate) 

An underwriter more heavily scrutinizing the situation might think it's unlikely you'll be vacationing to 2 different homes in the same area each year. 

Retail tenants filled nearly 13 million square feet, marking an 80% increase from the first quarter and the 14th consecutive quarter where more space was filled than vacated.

We turned our primary into a vacation rental.

When owning a vacation rental, the biggest financial risks to you are from fire, water, and liability.A solid overnight rental insurance policy will cover you for all of these risks.