Crested Butte Short-Term Rental: What Owners Need to Know

Renting Your Crested Butte Home Considerations

Many people are able to generate some rental income that helps them justify a larger home up front and cover the fixed cost of ownership. However, renting your home will come with some conflicts as to when you will use it, and when you will put it out for rental. The peak rental weeks may also be the times you will want to vacation in your home.

Check with local ordinances, as some areas and HOAs have implemented a ban on vacation rental by owner…

Many Areas and HOAs in Crested Butte Prohibit Short Term Rentals

There are currently a number of areas or Home Owners Associations that restrict or prohibit short-term rentals. The reasoning from the HOAs is that they are striving to attract owners who appreciate the sense of community and are not just absentee owners who fill their home with renters.

The owners in the HOA feel some undesirable renters don’t have as much respect for their HOAs rules (driving fast in the neighborhood, loud parties, too many vehicles in the driveway or on the street, too many people in the home…).

Downtown Crested Butte Short Term Rental Restriction

There is an ordinance that limits the number of homes that may be in the rental pool. And owners are required to purchase a Business License and Register with the Town of Crested Butte (see details below).

Downtown Crested Butte Long-Term Rentals – Crested Butte also has deed restrictions for long-term rentals in “accessory dwellings” that cannot be changed. Meaning that the nice apartment above the garage out back cannot be converted into the kids’ game room space. Yes, really.

As well if you add a garage and want to add a living space above with a full-bathroom – this crosses the line and makes the space a deed restricted unit (forever). Make sure to discuss all your intended uses with your experienced local real estate agent to avoid such surprises.

Examples of Some Crested Butte HOAs that Restrict or Prohibit Short Term Rentals:

• Glacier Lily
• Wildhorse at Prospect
• Gold Link (Summer –  only one rental group is permitted in any one week
  period.  Winter – “only one rental group is permitted in any two
  week period).
• The Links Condos in Skyland

Finding a Crested Butte Home that will “Cash Flow”

If you are looking for a Crested Butte property that will “cash flow,” meaning that all of your expenses including finance costs will be covered by your rental income profit, you may want to look for a rental property at the beach.

Mountain towns support rentals on a seasonal basis, and so there will be many weeks when nobody will want to rent your home. Also, when doing your analysis, ask yourself if you got 50 percent of your projected rental income how this would affect your finances.

Remember that the IRS considers income property as a business and there are tax ramifications. Be sure to check with your CPA, financial advisor or retirement planner before investing in property that you plan to lease or rent.

There are many variables that go into this equation: how much you will use the home, if you are using it during peak weeks, the desirability of the home (location, quality, number of pillows, etc.) and whether you are using a broker to rent your home, or doing it yourself.

Most Crested Butte Rental Brokers will charge between 20-50 percent of the gross rental income for their services. They will potentially be managing all aspects of renting your vacation home. The list of tasks is not short, so if you plan to rent by owner via VRBO or AirBnB, be prepared to spend quite a bit of time managing this effort.

Crested Butte “Renting By Owner”: Tasks for Consideration

Here is a shortlist of some of the tasks you should consider:

• Website: create, manage and maintain
• Lease, liability waivers, security deposit forms
• VRBO.com registration, update
• Inquiries, phone, email, VRBO.com
• Screen renters (pets, college students, how many people…?)
• Deposit/security deposit, collections
• Final payment collection
• Referral payments
• Sales tax and lodging tax payments (just like a hotel, you will likely be required to collect and remit state sales tax and local lodging taxes)
• Accept checks, credit cards, and/or PayPal?
• Cancellations, refunds
• Renter checkin, keys
• Problems/issues during stay, local property manager contact
• Maid service coordination
• Checkout timing (e.g. check out Guest 1, check in Guest 2 same day)
• Inspect/clean/laundry
• Multiple sets of linens/towels, laundry done offsite?
• Snow removal, drive, walkways, deck
• Put gravel/salt down on ice
• Hot tub service (daily?)
• Recommendations, complaints, ratings
• Security deposit refunds
• Wear and tear/upkeep/replacement of items

Insuring Your Crested Butte Vacation Home

Many homeowner’s policies specifically exclude properties that are used as rentals. Since this is not your primary residence, you will need to get a vacation home insurance policy. Since no one lives there full time, second homes tend to pose more risks than occupied homes and premiums may be a bit higher. Water damage (frozen pipes), fire, acts of vandalism and liability, for instance, are potentially serious issues with a second home that is not occupied full time.

Most homeowner’s policies won’t cover these types of risks on a vacation property, but vacation or second-home insurance is an option for you through many of the national insurance carriers. You should consider insuring your home for its replacement cost; it is normal that the cost to rebuild your existing home will far exceed your purchase price.

Insuring Your Crested Butte Vacation Home That Is Also a Rental Home

What if the maid service or the property manager does not lock the upstairs exterior door after the renters leave and the door blows open. If it is the middle of the winter and a pipe freezes and breaks it is possible that 50,000 gallons of water will flow through three levels of the house before the problem is detected a week later?

If a pipe freezes and breaks it is possible that 50,000 gallons of water will flow through three levels of the house before the problem is detected a week later? 

If the pipe freeze and flood happened as a result of renters and you did not have a policy covering that use, you may not be covered. Your insurance carrier will likely require you to install a security system that has water detection devices (“water bugs”) located under every sink, next to every toilet, and the water heater.

A water main shut-off valve will be tied into the system so that if water is detected, the water main line will be turned off, preventing significant damage and sending an alert to the home monitoring service.

Fire alarms and CO2 detectors are also required, and will be a part of the home security system. Talk with your insurance company and ensure you have a policy that covers your vacation home, and your rental home scenarios.

A “Regular” Homeowner’s Policy is not Enough

A regular homeowner’s policy and a vacation home policy may cover personal liability. But personal liability coverage or a personal umbrella policy will not cover business activities, such renting your second home.

Personal liability is intended to cover you in the event that someone claims that you have caused them bodily injury, or damaged their property as a result of your personal actions.

When you rent your home, you are a business and you need commercial liability coverage (business liability). This coverage is specifically designed for “business activities” like your second home rental business. Liability coverage protects you if someone slips on an icy sidewalk and you are sued for damages.

If there is severe damage to your second home and it cannot be rented, you may also want to ensure that your lost rental income is also covered.

When You Are Not There, Your Crested Butte Home Is “Vacant”

There is a “vacant” status for a residential property, and many insurance carriers will not cover the home, or will require a separate policy or rider (a “vacancy endorsement”). Typically, the home needs to be vacant for thirty days before it is considered “vacant.”

Like everything with insurance coverage, the devil is in the details, and in the fine print of the policy. It is a good idea to ask your agent what their rules and definitions are and how this will affect your coverage. Using the burst pipe worst-case scenario, if you submit a $75,000 claim and the insurance company denies coverage because the home was “vacant” and you did not have the “vacancy endorsement,” you will be sad, and out $75,000.

Who Should “Own” Your Crested Butte Rental Home, You or an Entity?

What about the “renter slips on the ice” worst-case scenario, where you get personally sued for negligence and $1,000,000? Just like you need liability coverage to protect you, it is also recommended to separate your personal finances from your business liability. It is wise to contact an attorney to set up an entity that will shield your personal assets from a potential lawsuit from a renter.

Anybody at any time can sue you; the lawsuit may be justified or frivolous, but you will likely need to hire an attorney to defend yourself. If you set up a Family Limited Partnership (FLP), Limited Liability Company (LLC) or a Corporation, you can separate your personal assets from being at risk. Talk with an attorney to ensure you are informed and protected.

Crested Butte Property Managers

Most second homeowners have a Property Manager who will watch over their home when they are not there.

Property managers can be your eyes and ears in your home when you are away, and will do what you ask them to do. At a minimum, they will check on your second home once a week, coordinate scheduled maintenance and service providers (hot tub cleaning, snow removal, appliance repairs, etc.).

Crested Butte Property Managers may also provide “concierge-type services”. Delivering a vehicle to the airport, or buying groceries for you prior to your arrival. In addition, they will inform you of the things that need to be done that you might not be aware of.

Mt. Crested Butte Vacation Rental Licensing Rules

There are no restrictions in Mt. Crested Butte  (other than local HOA Restrictions on obtaining a business license to Short-Term Rent your home).  Currently, there is no limit to the number of short-term rental licenses in the Town of Mt. Crested Butte, and there are no zoing restrictions. In 2020, The Town of Mt. Crested Butte created a Short Term Rental licensing program.  Any property advertised or rented for 29 nights or less must have a short-term rental license.

Just like downtown Crested Butte you must submit an Application for a short-term rental license, and you are subject to Town of Mt. Crested Butte Inspection, you must have local representative and must comply with rules and regulations including Lodging Taxes.