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Building Your First Short Term Rental: Should You Start with a Property You Own or Buy New?

evergreenescapesco
May 26
3 min read

"The secret to getting ahead is getting started."- Mark Twain


You're committed. You're buying a short term rental property in Colorado.

Now you need to decide: Do you convert a property you already own into a short term rental, or buy a property specifically built for short term rental?

This decision affects your capital investment, your timeline, and your revenue potential.


The Case for Converting an Existing Property

You own a cabin near Divide or a mountain home in Idaho Springs. It sits vacant most of the year. Converting it to a short term rental seems logical.

Advantages:

  1. No new purchase. You own the property free and clear (or have a mortgage). No new down payment.

  2. Familiarity. You know the property, the neighborhood, the basics.

  3. Sentimental value. Maybe this property means something to you. This keeps it in the family while generating income.

  4. Faster timeline. Buy, list, done. 2 to 3 months versus 6 to 12 months for new purchase.

Challenges:

  1. Uncertainty in revenue potential. You don't have rental data. You're estimating.

  2. Conversion costs. That cabin needs updates to be competitive: hot tub, new kitchen, updated bathrooms. $20,000 to $50,000 or more.

  3. Capital deferred. You've now tied up capital in conversion improvements that could have been a down payment on a revenue-generating property.

  4. Sunk cost bias. If the property underperforms, you're emotionally attached. Hard to sell or pivot.


The Case for Buying New (Short Term Rental Focused)

You're buying a property specifically to operate as a short term rental.

Advantages:

  1. Known cash flow. If buying an existing rental, you have historical data. You know what it generates.

  2. Revenue from day one. No conversion period. Guests book immediately.

  3. Optimized design. Modern short term rental properties are built with guests in mind: hot tubs, open layouts, minimal partitions, quality finishes.

  4. Growth trajectory. You're buying a proven asset, not gambling on untested conversion.

  5. Financing clarity. Lenders prefer financing rental properties with proven income. Traditional short term rental purchases are easier to fund.

Challenges:

  1. Higher purchase price. A $400,000 property that generates $5,000 per month is worth more than a $350,000 property that might generate $3,000 per month after conversion.

  2. Down payment. 20% down on a $400,000 property is $80,000. That's substantial.

  3. Competition. You're buying in a competitive market where other investors are doing the same thing.


The Financial Comparison

Let's compare two scenarios.

SCENARIO A: Convert existing property

  • Property you own: $400,000 value, no mortgage

  • Conversion investment: $40,000 (hot tub, kitchen, updates)

  • Projected monthly revenue: $3,500

  • Return on investment on conversion: $3,500 times 12 equals $42,000 per year revenue from $40,000 investment equals 105% annual return on investment

But if it underperforms:

  • $3,000 per month revenue: 90% return on investment (still good, but lower)

  • $2,500 per month revenue: 75% return on investment (mediocre)

SCENARIO B: Buy new short term rental property

  • Purchase price: $400,000

  • Down payment (20%): $80,000

  • Proven monthly revenue: $4,500

  • Annual revenue: $54,000

  • Annual return on investment: 67.5% on down payment

If you had $80,000 capital:

  • Scenario A: Tied up in conversions. If revenue disappoints, you're stuck.

  • Scenario B: Down payment on proven asset. Revenue is predictable.


The Smart Answer: It Depends

For most first-time short term rental buyers:

BUY NEW if:

  • You have capital available ($80,000 to $150,000 down payment)

  • You don't have an existing property you're emotionally attached to

  • You want faster revenue with less uncertainty

  • You want to scale to multiple properties

CONVERT EXISTING if:

  • You have a property you're attached to (sentimental, close to home)

  • You have capital for conversions but not for down payments

  • The property has strong bones and good location

  • You're not in a rush to maximize revenue


The Cohost Factor

Here's the real kicker: professional cohosts prefer managing short term rental-optimized properties over converted homes.

Why? Hot tubs work. Amenities are quality. Guest expectations are managed. Revenue is predictable.

If you're buying a property specifically to hand off to a cohost, buy new. Your cohost will appreciate it. Your revenue will be higher. Your experience will be smoother.


The Recommendation

If you have the capital: Buy a proven short term rental property at the $350,000 to $450,000 range in Divide, Idaho Springs, or near Pikes Peak. Own it for 5 or more years. Let a professional cohost manage it. Reinvest revenue into more properties.

If you don't have capital: Convert an existing property you own. Do it well. Aim for $3,500 or more per month revenue. Once you have proof of concept, save capital and buy property number two.

Either way: use professional management. Scale over time.


Tony and Natalie have helped dozens of Colorado property owners decide between conversions and new purchases. They've seen both succeed and fail based on execution, not the choice itself.

Ready to hand off your management? Schedule a call for your free 30-minute no strings attached consultation.



 
 
 

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