As short-term rentals grow more popular and widespread, it makes sense that they’re becoming more professionalized, too. One such professional management company is Hostē. Located in Colorado Springs, they manage over 160 properties in the Springs and surrounding areas.
I recently sat down with Craig Kallian, business development manager, to talk about what services Hostē offers clients, more information on the short-term rental climate in the Springs, and what advice he has for investors looking to get into this market.
- Listen to the podcast “#60: Short-Term Rentals in Colorado Springs: An Interview with Hostē” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
What is Hostē?
Hostē started in 2017 with a focus on room rentals. From there, it shifted to managing entire properties as short-term rentals. Due to the impact of Covid in 2020, they pivoted to medium-term rentals. Now that they’ve developed that model, they’re starting to take on properties specifically for medium-term rentals, too. They learned to keep an open mindset and adapt to fluctuations and changes in the market.
One thing that sets Hostē is apart is the organizational structure. Everyone in the company understands their role and specializes in that area. Craig started off doing long-term rentals and burned himself out over the next five years. Now that he focuses on getting homeowners set up for their short-term properties, he sees how much easier it is to thrive when he’s in a role that fits him more directly.
What is Hostē’s method for setting up a short-term rental?
First, Hostē provides the property owners with a checklist of items to include in the home. These items range from silverware and pillows to safety devices, like a fire extinguisher. They show owners like-listings and aid them in setup, as well as connecting them to companies that provide useful services.
Their $1200 startup fee covers: filing permitting on behalf of the property owner, a deep clean, installing a smart lock on the door, providing items like soap dispensers, and doing a safety inspection (and providing safety equipment if necessary). They also build out an FAQ for the property that guests can reference. With their partner, Feed Media, they do marketing for the home. This marketing includes interior and exterior photography, as well as drone photography.
After the two week startup period, the property goes live and is blasted out to 250 different sites.
Case Study: Fourplex in Colorado Springs
I recently came across a fourplex with 1 bed/1 bath units that would be great to use as a short-term rental. I sent this information over to Craig and asked him what clients should expect. Before walking the property, he first finds like-properties and pulls data from 3rd party sources to understand what the competition looks like.
For this property, he recommended charging $114 a night and ran occupancy at 74%, or about 270 days full a year. For each unit, including the 22% management fee, the owners would get a net income of 24.1%.
What are the effects of the strict short-term rental rules in Colorado Springs?
The rules for owner-occupied short-term rentals remain fairly flexible. At the end of 2019, however, Colorado Springs released some of the most restrictive short-term rental rules we’ve seen in Colorado for non-owner occupied properties. The restrictions include requirements that eligible properties are zoned R2 and above. Properties that meet the zoning requirement are then subject to a density test to ensure that the property is not within 500 feet of another short-term rental.
Craig says that Hostē focuses on pocket areas within the Springs that have fewer restrictions. They keep their finger on the pulse of new ordinances to ensure that their clients are able to operate within the legal bounds of their area.
What is the permit situation like for other nearby areas?
Certain cities require business licenses, but there’s no permitting in the majority of them. This makes it a little bit easier to set up properties. Craig encourages anyone interested in short-term rentals to look into the regulations in their area or talk to a property manager before taking any action. He’s had conversations with homeowners who didn’t find out until after they purchased a property that the zoning or HOA prohibited short-term rentals.
Always check with a property management company or call the local planning department before making any decisions about buying a property with the purpose of using it as a short-term rental.
What are the differences in returns for a short-term rental vs long-term?
Generally speaking, clients can typically make 2-3 times more than long-term rentals, though there are a lot more moving parts with short-term. If you are able to get a permit within the city of Colorado Springs, you will likely see that level of return.
Do different types of properties perform better as a short- or medium-term rental?
Craig recently pulled some data on 2 bed vs 4 bed properties to see how they compare. He found that for short-term rentals, 4 bed properties bring in higher returns because those are usually sought out for larger groups and gatherings.
For medium-term rentals, the sweet spot is 1 to 3 beds because those are usually rented by solo travelers. Usually, these guests are traveling nurses, people attending corporate events, or military personnel. They don’t need a lot of bedrooms, usually just one for themselves and a work station or guest room.
Is it fair to say that short-term rentals are more risk and more reward?
The answer to this depends on your perspective. Craig likens it to leaving a salaried job for one based on commission. You know exactly what you’re making every week with a salary, whereas with a commission, there are highs and lows.
It’s a big change to go from long-term rentals to short-term, and not knowing what the market will bear can bring some anxiety. While he’s seen investors who are apprehensive initially, he’s never seen anyone switch back to long-term.
How does seasonality affect short-term rentals?
A common concern that comes up is the seasonality of the market. In Colorado, June-August are the most popular travel times, and owners will often see their property booked 100% during this period. Once they move into the slow season, owners get worried when they see their property is booked less often.
In Colorado Springs specifically, May through August are when we see the most visitors. The Springs broke travel industry records in 2021. The area is a popular destination these days as it’s a big, spread-out city and there is a ton to do outdoors.
With normal seasonality, February and April are the least busy months. February tends to be very cold, and April is usually the lull between spring break travel and summer vacations.
Hostē coaches clients on what to expect during the slower season and to plan their financials accordingly. They also have tips on how to offset this dip, such as how to stand out from other listings (insider tip: hot tubs will boost the nightly rate quite a bit). This awareness upfront prevents future disappointment.
What would you say to investors who have a basic knowledge of short-term rentals and are curious if it would fit their portfolio?
With the disclaimer that this is his opinion and not investment advice, Craig says that the best thing property owners can do is be patient with it. People are excited at the beginning thinking of how much money can make, but there’s more to it than that. First, make sure you have the right property; there are ways to make an older property shine, but it requires time and patience.
If you’re buying a property for investment purposes, plan to put in more than you expect. There are always issues or higher than anticipated costs. Plan for the unexpected and take your time.
Seek out as much data as you can find to make a smart, informed decision. Use available 3rd party data sources to get an idea of what you need to do. Short-term rentals are becoming more professional, so make sure you’re up on the latest trends and prepared to do the extra work. If you’re getting into this industry, be willing to innovate, change things, and adjust to the market.
Remember that travel trends are fluid. The Springs is a desirable market, but sometimes we can’t predict what will happen. Nobody foresaw the effect that Covid would have in 2020, or that Colorado Springs travel would break records the next year.
Are there types of people who shouldn’t invest in short-term rentals?
For prospective clients of Hostē, Craig says property owners need to be willing to let them manage the property. If a property owner is insistent on visiting their property, for example, it will affect how they can manage it. Sometimes they need to move guests from one property to another, and if an owner as at the home or doing something to it, then they have to place the guests elsewhere.
If someone needs to make a certain amount of money or it will sink their property, short-term rentals might not be the right move for them. This ties back to seasonality—there is fluidity in seasonality and owners aren’t always going to make the same amount of money every month.
These are preliminary conversations that Hostē has clients to make sure it’s the right fit for them.
Connect with Hostē
If you want to learn more about short-term rentals, STR Intel is a weekly podcast from Hostē. It is available on all major podcasting platforms. You can also email Craig directly at [email protected] or visit https://iamhoste.com/.
Connect with Us
Are you interested in buying your own investment property? Reach out to me and I’ll be happy to help you form a strategy and find the right property for you.