Live & Lease: options that make home-ownership more affordable
Updated: Jan 24
The rise of interest rates has slowed the housing market, making it easier for buyers to find and negotiate better prices and terms. The market is shifting, but it's not a buyer's market yet, and higher interest rates means the same mortgage buys less house.
There is an option that can help buyers make home-ownership a little easier to afford. I call it "Live & Lease". It is the option to live in your home AND bring in regular income by leasing a portion. These are the main three categories for rental income from your primary residence:
The city of Colorado Springs has made it very difficult to get an STR (short term rental) permit for a non-owner-occupied property, but if you live in the home, leasing rooms, basement or even an ADU (additional dwelling unit) are still pretty do-able. STR permits give you permission to lease for stays of fewer than 30 days. For stays longer than 30-days, no permit or collection of tax is required.
Pros: commands the highest nightly rate, guests typically treat your property with care and respect, you control your calendar, it can be enjoyable to meet people and share a part of your home.
Cons: you need to set the space up completely for an extraordinary guest experience, be ready to excel at marketing to compete in the busy market, be prepared to handle frequent turnovers (cleaning, restocking and setting up for the next guest), learning and dealing with the vacation stay platforms (especially AirBnB, in my experience) can be frustrating and time-consuming
Also called "Corporate Stay", mid-term renting is an interesting hybrid of vacation and long-term stays. In this case, you typically set up the space as you would a vacation home - fully-furnished, with all utensils, decor, utilities and conveniences included for a monthly rate. You then offer this turn-key space to traveling nurses, professionals, retired couples, families displaced and waiting for repairs to be made on their home, etc.
Pros: you can charge a much higher rate than long-term leasing, the guests are typically much more like "guests" and not tenants and treat your property with respect and care, stays are often 2-4 months at a stretch
Cons: you need to set to the space up completely for a comfortable stay, vacancies can be a little greater than they are for long-term leasing
This can be a nice option in special circumstances and has the benefits of minimal set-up costs and consistent income with low turnover.
Cons: You are stuck with whoever you decide to rent to for the term of the lease. If things don't go as planned, it can be difficult and costly to evict your tenant.