Do you wonder if STRs are still a viable investment in Colorado Springs?
I don't think this question was asked prior to October 2019. That was the month lengthy, city-imposed restrictions were introduced, completely changing what homes could qualify as short term vacation properties. Three months later, a pandemic essentially ended the market demand for most of 2020.
Not only has purchase been difficult with ordinance restrictions and low inventory, but ownership costs have increased dramatically with 40%-80% higher insurance and interest rates.
Reading the above, you might wonder how STRs can possibly still be viable. The reason they are is actually a result of some of these obstacles. Another has to do with benefits that have always been there, but rarely implemented.
It is said success results when you focus on opportunities, not obstacles. It comes with adaptation - which requires innovation and experimentation. It's in these processes that new and better solutions emerge. When you select the option to adapt, you also put yourself in the driver's seat. Your future does not hinge on who is in office, the global economy or what policies are passed.
If you ask me, "are short term rentals a good investment in Colorado Springs?" I say, absolutely. Here are my top 3 no-so-obvious reasons why.
1) STRs must now meet restrictive requirements and obtain a permit annually.
When permits were not required, it was an STR Wild West. Just about anyone could jump in and make money. With the, let's face it, severe restrictions and permit criteria introduced in 2019, many people pulled down their listings and looked for another answer. With the effective cap on the number of STRs legally permitted, we have a smaller pool of STRs resulting in higher market demand. So, if you have a permit, or can get one, do so and hang on to it. Properties that meet the requirements for a non-owner-occupied STR permit are a valuable commodity.
Another beauty of having an STR is the turkey ability to add MTR (mid-term-rental, stays 30 or more days) stays. This is an absolutely wonderful solution to our low season lag and one not many have implemented or would have considered had the permit restrictions not come into play. (See The Intriguing World of Mid-Term Rentals.)
2) Colorado Springs is predicted to be the hottest real estate market in 2025.
Realtor.com recently posted their Top Housing Markets for 2025, which puts Colorado Springs in first place. This is focused on purchase/sale transactions, but it also has an impact on the long-term, mid-term and short-term markets. If their prediction pans out, it indicates a bright future for those investing, building, selling or otherwise offering housing solutions in Colorado Springs. People will be moving for jobs and retirement as well as exploring the area to assess it's potential for them, all creating a demand for short and mid-term stays.
Even more importantly, one of the primary criteria used in the evaluation is the average appreciation rate. Colorado Springs currently has one of the highest with a 12.7% increase in existing home sale prices year over year. The national average is roughly 5%. That gives a 25% return over 5 years. If you can increase that just 3% more, you get a a 40% return. That is dramatic.
3) There are 2,949 short term rental listings in The Springs area according to AirDNA Dec 30, 2024.
While this is down from the early 2019 numbers, many people consider it a saturated market. Let's look at what is meant by a "saturated market"? It implies there are so many listings there is no room for more. A large number of STR listings is not like a large number of For Sale listings. STR listings are businesses that exist due to demand. When I see a lot of STR listings, I see a high demand.
I also know I am not competing with all those listings, but a small fraction. I am competing with the best of those in a small area offering similar amenities. For example, I have a family home in the Historic Old North End neighborhood. That home does not complete with a two-room condo on the east side of town. I am one of a small number of options for families who want a roomy, classic home in a classic neighborhood, a place that comfortably accommodates the Grandparents on the main level and where Fido is welcome. My guests don't have 2,949 options, they have about 10.
So, if you are feeling crushed by the new and property-rights-defying, long-term lease laws, look at what potential your property might have in the vacation and corporate stay markets.
If you have always wanted a place to vacation that also provides passive income and unique tax savings, team up with someone knowledgeable, start asking questions and start the journey!
The STR world is vast and colorful and may be just the refreshing and rewarding adventure you seek in the new year!