Discussion - how long-term rentals are being purchased and converted into short-term rentals.
Estes Valley Board of Realtors - For the Trail Gazette
There has been much discussion recently about how long-term rentals are being purchased and converted into short-term rentals. The market data do not support this supposition.
Myth number one: Second homes are being rented on a short term (vacation) basis. Therefore, those homes are not available for long term rentals. The implication is that if short term rentals are eliminated those properties would be available for long term rental. This is incorrect.
- Second homes are just that - second homes. They are used throughout the year by owners, for a week or two at a time. Some come for summer or fall and then live elsewhere during the rest of the year. Some owners come for a month or two. Some come for Scottsfest, Christmas, Presidents’ Day weekend, July 4th, fall colors, etc. These homes are not available as long term rentals.
- Second homes are also used by extended family members or friends. They are not available for long term rentals (and never have been). Owners of these properties want to use them periodically throughout the year and do not want or need to rent them long term.
- There are property owners who take advantage of the vacation rental market to add some extra income and fill in the gaps when family and friends are not in residence.
- A segment of second home ownership is available for long term rentals. Those properties are purchased for eventual retirement and the buyers wish to take advantage of the current market. Owners realize long-term appreciation when they retire. Owners earn more money through long term rentals and have fewer expenses than if the home is used as a vacation rental.
Myth number two: Properties will be built specifically to be vacation rentals because the profit is so great. The perception is that vacation rental properties are a large profit maker for the owners. This is not the case. Long-term property rental is a much more lucrative and stable proposition for an investor or retiring owner. While there are some homes that are specifically associated with and booked by lodging properties, most are managed by professional property management companies with fees ranging from 30 to 50 percent of gross revenues.
- Typically a home can be rented as a vacation rental by the week for about what it would rent for by the month in a long-term rental market. However, there is only about an 8 to 10 week rental period.
- Vacation homes must be fully furnished and equipped to account for the needs of the vacationers from young families with infants to retirees with grandchildren. Housekeeping between guests is usually an additional costs as are paper products, linens and cleaning supplies. Water and electric are charged at a commercial rate. Not so for long term rentals.
- Long-term rental properties require no furnishings, housekeeping or supplies. Those are the responsibility of the tenants. Management fees for professionally managed long-term rental properties typically are about 10 to 12 percent of monthly income. Tenants typically pay all utility costs. When you do the arithmetic long term rentals are a much better investment.
The rental market in Estes Park has always had many facets. Discussions surrounding rentals, and housing in general, must deal with facts rather than suppositions, faulty perceptions and neighborhood complaints. Vacation rentals are not the reason behind long-term rental shortage in the community.
Please speak to members of the Estes Park Board of REALTORS® and the professional property managers who are part of the organization. Those are the people who have the most detailed knowledge of rental housing market in Estes Park.