Buying a Short-Term Rental in Colorado: The Checklist I Run Before Any Offer

1. Can you actually get a license? Not "has it been an Airbnb." Can you, as the new owner, get a license at this exact address, and does the HOA allow it? In much of Colorado the license doesn't transfer on sale. See Colorado STR rules by town.
2. Is there demand most of the year? One great ski season isn't enough. I want eight or nine solid months: winter plus summer in the mountains, or steady year-round demand near Denver.
3. Why would a guest pick this one? Views, a hot tub, sleeping capacity for groups, walkability, design. In a crowded market, an average listing earns average or worse.
4. Does it still work at 55–65% occupancy? Underwrite the boring year, not the best one. If the deal only pencils at peak numbers, pass.
5. Do you have the setup capital? Furnishing, design, photos, supplies and reserves come on top of the down payment, and on a larger home that's real money. Undercapitalized launches underperform for years.
6. What does the house really need? Condition, renovation scope and timeline. Every month the property sits offline is revenue you don't get back. On septic and wells, legal occupancy can be capped by system capacity.
7. Who runs it day to day? Pricing, guest messaging, cleaning, maintenance and a local contact who can be there within the hour. Decide before closing, not after.
8. Is the financing and insurance lined up? STR-friendly lending (second home or DSCR), plus insurance written for short-term rental use. A standard homeowner's policy often won't cover guests.

Then run the numbers twice

Once a property passes the checklist, I build a full pro forma: revenue from comparable STRs and our own managed portfolio, every operating cost, financing, and the year-one tax picture. Then I run it again at lower occupancy and rate. If the second version still makes sense, it's a deal worth making.

The tax piece can change the math a lot for high earners. A cost segregation study can turn a big share of the purchase into a first-year deduction. Run your numbers in the calculator.

Questions buyers ask

How much money do I need to buy an STR in Colorado?

Plan for the down payment and closing costs, plus furnishing and setup, plus reserves. For most of our clients that adds up to $200,000 or more. Furnishing and setup is a real line item on its own, and it scales with size and finish level.

What occupancy should I underwrite for a Colorado STR?

Stress-test it. I want a deal to still work at roughly 55 to 65 percent occupancy, not just at the peak numbers a seller or a national data tool shows you.

Can I use a regular mortgage for a short-term rental?

Often yes, as a second home or investment loan, and DSCR loans are common for STRs. Second-home loans come with occupancy and use rules, so talk to a lender who works with STR buyers before you choose.

Is a Colorado STR a good tax strategy?

It can be. With a cost segregation study and the right level of involvement, an STR can create a large first-year deduction. Whether it works for you depends on your facts. Try the calculator on our tax strategy page, then confirm with your CPA.

Covest LLC is a licensed Colorado real estate brokerage. This guide is general information, not legal, tax or lending advice. Projections aren't guarantees.