Are you looking to turn an Accessory Dwelling Unit (ADU), like a mother-in-law suite or a basement apartment, into a short-term rental? In that case, you need to research your municipality’s regulations and laws for both ADUs and short-term rentals. The prevalence of both ADUs and short-term rentals is relatively new, so there can be a lot of confusion when navigating both. Here are the first four steps to follow:
Research local regulations and restrictions: You must live in the primary dwelling unit in Colorado. You cannot live in the ADU and then Airbnb your main home.
Ensure property zoning allows short-term rentals: Some cities and counties, like Routt County, prohibit short-term rentals. Others may have placed a moratorium on short-term rental licenses.
Register for appropriate licenses through the city: In Denver, a Short-Term Rental business license and a Lodging Facility business license apply to short-term rentals. Also, check their property zoning department, for they may also need to pick up a short-term rental permit.
Prepare for additional taxes: Short-term rental income qualifies for income and self-employment tax.