Why I Avoid Short-Term Rentals

I’m constantly on the lookout for interesting investment opportunities. Like many of you, I’ve been watching the world of short-term rentals (STRs)—Airbnb, VRBO, and the like—for years. Post-pandemic, the conversation only grew louder.

Recently, I’ve been digging into numbers on deals currently operating as STRs, and honestly, the math doesn’t always add up. One of the most shocking things I’ve seen is just how high the expenses run compared to long-term rentals.

The Allure of STRs

It’s not hard to see why STRs attract investors:

• Higher Revenue Potential – Platforms often show impressive projections. For example, one of my own properties (just outside Denver city limits, in Adams County where STRs are allowed) showed potential revenue of $68,200 annually at a 72% occupancy rate and $260 ADR (average daily rate). Those numbers get attention. For comparison I currently get $46,200 in total gross revenue as a long term rental.

• Flexibility – Owners can use the property themselves when desired, making it both an investment and a lifestyle asset.

• Market Liquidity – STRs often benefit from strong resale demand if the numbers pencil out, since some buyers are looking for turnkey vacation rentals.

• Tax Benefits – In certain situations, STRs may qualify for bonus depreciation or more favorable tax treatment than long-term rentals, though this depends heavily on your situation and your CPA’s guidance.

  
  

The Hidden Costs

But here’s the catch: those strong revenue numbers often mask a heavy expense load. In the example above AirDNA also said expenses were projected at about $35,000 annually, leaving only $33,300 in NOI—a 50% expense ratio.

Why so high? After talking to STR owners, here’s what I’ve learned:

• Utilities – Unlike a long-term rental where tenants pay their own bills, STR owners cover all utilities, including internet, streaming, and sometimes even premium TV.

• Frequent Repairs & Replacements – Guests break things. Furniture wears out faster. Linens, towels, and kitchen supplies need frequent replacement.

• Cleaning Costs – Cleanings between guests add up. While some cost is passed along via cleaning fees, these fees can’t always cover the real expense. Often owners eat some of the cleaning fees to get more bookings—especially with one- or two-night stays.

• Management Fees – If you’re not self-managing, expect 20–30% of revenue going straight to management. The fees on STRs are significantly higher than long term rentals, which are usually 6-10%

• Maintenance & Landscaping – You can’t hand this off to a tenant; the property has to look hotel-ready at all times.

• Insurance & Taxes – STR-specific insurance can cost more than standard landlord policies, and in some jurisdictions, lodging taxes are due on top. I recently looked at a property that adjusted their zoning from residential to commercial to make the property into a STR hotel. What the owners did not plan for was the increased property taxes, as commercial taxes in Colorado are often 3x residential taxes. That significantly increased their expenses, pushing them to over 70% of gross revenues.

Compare this to a long-term rental, where I usually estimate a 25% expense ratio for taxes, insurance, and maintenance (excluding loan payments). Tenants cover utilities, yard work, and even snow removal. That’s a big difference.

Regulatory Risks

Another major factor: regulations. Many cities have cracked down on STRs, limiting where and how they can operate. In Denver proper, the rules are strict. In nearby counties, they may be looser—but areas that allow them are becoming hard to find and those areas can quickly become oversaturated with options, eroding occupancy.

Regulations can change overnight, and what pencils out today may not tomorrow.

Market Trends

I’m also hearing a common refrain from STR owners: bookings are down. Whether due to oversupply, economic softening, or traveler fatigue, the market doesn’t feel as hot as it did in 2021–2022. Add in rising operating costs, and it’s no surprise some owners are selling or pivoting back to long term rentals.

My Take

For me, the kicker came when I compared my own rental property’s long-term income to the STR projections. After factoring in risk, hassle, and the 50% expense load, the difference was negligible. Why take on the extra management headaches for essentially the same net return?

That’s why—for now—I’ve stuck with my long-term tenant. The stability, reduced expenses, and lower regulatory risk outweigh the upside of chasing potentially higher but less predictable short-term income.

The Bottom Line

Short-term rentals can be profitable, but they’re not the easy-money play they once appeared to be. They come with higher risk, higher expenses, and increasing regulatory pressure.

If you’re considering an STR investment, run the numbers carefully. Use conservative assumptions, factor in all hidden costs, and make sure you’re comfortable with the management burden. For some investors, the lifestyle perks and flexibility will make it worth it. For others—like me—it may be better to stick with long-term rentals and enjoy the stability they bring.

Have you owned or considered owning a short-term rental? What’s been your experience?