The Truth About Short-Term Rentals: The Risks, Regulations, and Lies You’re Not Being Told

Short-term rentals like Airbnb exploded over the past decade, becoming a $100+ billion industry and promising passive income, financial freedom, and a quick path to building wealth. For many people, it started out as a great alternative to traditional hotels, cheaper stays, unique experiences, and a simple way for property owners to earn extra cash.

But behind all the hype and success stories, there’s a side no one likes to talk about:
the risks, the unpredictability, and the increasing regulations that can wipe out your profits overnight.

If you're thinking about jumping into the short-term rental business here in Littleton, Colorado or you already own one, you need to understand what’s really going on.

Let’s break down the biggest myths, the hidden challenges, and the lies investors are being told.

What Short-Term Rentals Were Supposed to Be

Airbnb started as a simple concept: rent out a spare room, make some extra income. Then people began buying properties just to use as short-term rentals. Eventually, big investors and corporations moved in, snapping up entire neighborhoods to convert into mini-hotel businesses.

That’s when everything changed.
Competition increased. Regulations tightened. Profit margins became more unpredictable.

The Passive Income Myth

One of the biggest lies out there is that short-term rentals are “easy passive income.”

They’re not.

When you enter the short-term rental world, you’re entering the hospitality business. And that means dealing with:

• Constant turnovers

• Cleaning crews

• Repairs and restocking

• Guest communication

• Late-night messages

• Property damage

• Bad reviews if anything goes wrong

Yes, long-term rentals come with headaches too — but nothing compared to the wear and tear of strangers cycling through your property weekly or even daily.

Most people who self-manage quickly realize they’ve gained a second job, not passive income.

Are Short-Term Rentals Really a Profit Machine?

They can be. But most people only talk about the peak-season numbers.

Short-term rental income is extremely seasonal and inconsistent.
You might earn big during holidays or ski months… but what about the slow season? What about unexpected gaps between bookings?

When you average your income across 12 months, many investors discover that the “high ROI” they expected shrinks dramatically.

Long-term rentals, on the other hand, offer:

• Predictable monthly income

• Lower expenses

• Fewer turnovers

• Less wear and tear

• Greater stability

The real question is:
Does the volatility justify the effort?

For many investors I talk to as a licensed agent, the answer becomes clear once we run the real numbers.

The Biggest Risk: Government Regulations

This is the part that scares investors most — and it should.

Short-term rentals are heavily influenced by local laws in the Littleton area, and those laws can change any time. New ordinances can:

• Limit how many licenses are allowed

• Restrict short-term rentals under 30 days

• Require owner occupancy

• Impose special taxes

• Require neighbor notifications

• Demand fast response times to complaints

• Prevent properties from operating under an LLC

Entire markets can shift overnight.

Market Saturation: The Race to the Bottom

There are more short-term rentals today than ever before. And when supply goes up, two things happen:

1. Nightly prices drop

2. Owners compete harder to get bookings

This leads to a race to the bottom — lower prices, thinner profit margins, and more volatility. Unless your property is a one-of-a-kind, you're fighting thousands of others offering nearly the same experience.

So… Should You Still Buy a Short-Term Rental?

The honest answer: It depends on your goals.

Here’s what I tell my clients:

✔ Expect regulations to change — don't be blindsided

✔ Don’t rely on short-term rentals as your main income

✔ Always calculate realistic vacancy rates

✔ Look at appreciation, not just nightly revenue

✔ Consider long-term rentals for stability

✔ Be prepared to treat it like a real business, not passive income

Short-term rentals can make money.
But they come with risks that most people aren’t prepared for — especially if the entire strategy hinges on zero regulation changes.

Final Thoughts

If you understand the risks, run your numbers honestly, and don’t build your financial future solely around short-term rental income, it may still be a great investment.

But if you jump into short-term rentals blindly, believing the hype… you're one new ordinance away from losing revenue, profitability, and potentially property value.

If you’ve experienced regulatory issues, unpredictable seasons, or unexpected costs with your short-term rental, feel free to share your story. I’d love to hear it.

And if you ever want help analyzing a deal, figuring out ROI, or need a trusted real estate agent referral anywhere in the country — reach out anytime.

David Novak – The Problem Home Solver
Real Estate Agent & Investor | RE/MAX Professionals
Highlands Ranch • Littleton • Denver Metro
251+ Homes Sold | $138M+ Closed Volume
Flipper • Landlord • Storage Facility Investor
Older Home & Problem Property Specialist
www.problemhomesolver.com