Buying a Short Term Rental Property: 7 Tips and Tricks
A Short term rental can be a terrific opportunity for any investor in an expensive resort town such as Avon, Colorado. Avon is home to Beaver Creek, and the town has just passed an ordinance regulating short term rentals.
A short term rental can be a terrific opportunity for any investor in an expensive resort town such as Avon, Colorado. Avon is home to Beaver Creek resort, and the town has just passed an ordinance regulating how and where a short term rental can occur in town. Local regulators consider short term rentals to be properties that occupants stay in for 31 days or less.
In a resort town, such as Avon, short term rentals have become the topic of controversy. Recently, with the success of Airbnb, Craigslist, and others, local residents and hotel operators have made formal complaints to town officials. Local operators do not like the competition, while residents do not like the added noise coming from their neighbor’s property. The local towns are cracking down and placing regulations and rules on how and where short term rentals can operate. What affects both complainants are the missed tax collection, as most of the short term rentals are owner operated and private. Estimates range in the tens of thousands in missed revenue, and recently local resort towns, such as Avon, have taken notice. Problems can be avoided with proper preparation, guidance, and buyer due diligence.
Image Source: Flickr/Dave Herholz
A property in a short term rental operation can be a terrific opportunity for those buyers considering a luxury real estate purchase. The rental income from properties found in the Vail or Avon area can be staggering.
Here are a seven tips and tricks to avoid any future problems. These will help keep an investor code compliant. These are Avon and Beaver Creek specific. Your resort or resort town may differ significantly.
1. Hire a local and knowledgeable Coldwell Banker real estate agent to help steer an investor in the right direction. A good agent can help a buyer navigate the local legislation and announce any homeowners associations that may not permit short term rentals. They also can provide guidance on what type of property may do best in a rental pool or operation.
2. Once a property has been located and placed into escrow, obtain a sales tax license and place the property into an LLC.
3. Ask your agent to make any contract to buy “assignable.” Making it possible to move into a limited liability company, easier.
4. Hire an attorney to review your entire transaction, and ask them to provide counsel on future protections that you may need.
5. Be sure to have carbon monoxide detectors in the new rental residence, and place the units outside any bedroom door(s). Be sure to buy a carbon monoxide detector with battery backup, in case the power fails. You may want to hire a CO2 detector placement service to further lessen liability. (Yes, they do exist!)
6. Find a property that you can see yourself staying or living in. Buyers in resort towns often buy for lifestyle and dream about living where they have invested after retirement or when life permits.
7. As always, remember the golden rule: location, location, location. A condo with a nice view or an access point to on-mountain activity is always a plus and should return a good dividend upon resale.