Investing in vacation home rentals has become a profitable real estate investment strategy during the last few years. The most dominant form of vacation home rentals is Airbnb rentals, which are short-term rentals rented out on the Airbnb platform (we will use “Airbnb rentals” and “vacation home rentals” synonymously for the purposes of this blog). These vacation home rentals are now all over the world and have made tremendous profit for investors in American cities.
Related: The 20 Best Places to Buy a Vacation Home in the US at the Beginning of 2018: Part 1
The Denver real estate market has become one of these successful cities for Airbnb rentals. This blog will go over the best neighborhoods in Denver for Airbnb rental properties and the legal status and requirement of Airbnb Denver.
Legal Status and Requirements of Airbnb Denver
While Airbnb vacation home rentals are legal in the Denver real estate market, this was not always the case. As recently as two years ago, Airbnb was described as “effectively illegal” in Denver by the R Street Institute’s Roomscore 2016 Report. Luckily, much has changed since then, or else this blog wouldn’t have existed and Denver wouldn’t have been among the best places to invest in Airbnb!
Related: Your Real Estate Investment Guide to Airbnb Rental Properties: Where Is Airbnb Legal?
In early 2017, Airbnb rental properties became legalized in Denver. The city began implementing legal requirements to make Airbnb compatible with Denver real estate. As of the time of this post, the main legal requirements of Airbnb Denver are:
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Short-Term Rental License
Airbnb real estate investors must obtain a short-term rental license for their Airbnb rental property. There is a $25 registration fee with the license. It must also be renewed annually.
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Liability Insurance
The property must be insured in order to obtain the short-term rentals license.
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Primary Residency Requirement
Investors can only rent out their primary residence as an Airbnb property. The investor must obtain written permission from the landlord or owner.
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Lodger’s Tax and Occupational Privilege Tax
A 10.75% Lodger’s Tax is imposed on reservations for less than 30 nights. Since April 2018, Airbnb itself has collected this tax. The host must obtain a Lodger’s Tax ID, which has a $50 fee every 2 years. An occupational privilege tax is also imposed on businesses that receive at least $500 in a calendar month.
Despite what some may view as strict Airbnb laws, Airbnb vacation home rentals have been flourishing in Denver. The city has collected about $3 million in taxes during 2017, and over 70% of Airbnb rental properties are properly licensed. Such efficient regulation, coupled with high Airbnb rental income, have boosted Denver’s status to one of the best places to buy vacation property. So, how profitable are Denver Airbnb vacation home rentals exactly?
Airbnb Denver – City-Level Data:
Median Property Price: $485,576
Rental Income: $1,604
Cap Rate / Cash on Cash Return: 1.48%
As you can see, Airbnb is clearly a lucrative real estate investment strategy to follow in Denver real estate. With a moderate median property price, high Airbnb rental income, and great return on investment, Denver has become a premier market for Airbnb vacation rentals.
Airbnb Denver – Top 7 Neighborhoods
Where exactly should you look for an Airbnb vacation home in Denver? The top seven neighborhoods for Airbnb vacation home rentals are Central Business District, Sloan Lake, Highland, Union Station, West Colfax, Capitol Hill, and Civic Center.
1.) Central Business District
Median Property Price: $407,000
Rental Income: $3,332
Cap Rate / Cash on Cash Return: 3.07%
The Central Business District is the most common neighborhood for Airbnb vacation home rentals in Denver. It acts as a profitable standard compared to the other neighborhoods.
2.) Sloan Lake
Median Property Price: $848,000
Rental Income: $3,927
Cap Rate / Cash on Cash Return: 1.9%
Airbnb Occupancy Rate: 64%
Sloan Lake might have the second most expensive Airbnb vacation rental property price on this list, but it has very high Airbnb rental income.
3.) Highland
Median Property Price: $692,950
Rental Income: $4,006
Cap Rate / Cash on Cash Return: 3.38%
Airbnb Occupancy Rate: 64%
Highland is home to about one hundred Airbnb rental properties. This neighborhood provides excellent rental income; it is the second highest on this list.
4.) Union Station
Median Property Price: $455,627
Rental Income: $3,460
Cap Rate / Cash on Cash Return: 3.67%
Airbnb Occupancy Rate: 66%
While not as income-generating as Highland, Union Station is the more profitable neighborhood when it comes to cap rate and cash on cash return.
Related: Understanding Cap Rate vs. Cash on Cash Return
5.) West Colfax
Median Property Price: $959,000
Rental Income: $6,446
Cap Rate / Cash on Cash Return: 3.76%
Airbnb Occupancy Rate: 66%
West Colfax is by far the neighborhood with the highest Airbnb rental income in Denver. However, it is also the most expensive in terms of property prices.
6.) Capitol Hill
Median Property Price: $370,980
Rental Income: $2,977
Cap Rate / Cash on Cash Return: 3.94%
Airbnb Occupancy Rate: 69%
Much like Central Business District, Capitol Hill is a stable Airbnb neighborhood with high rental income and return. It also has the highest Airbnb occupancy rate in all of Denver.
7.) Civic Center
Median Property Price: $475,000
Rental Income: $3,037
Cap Rate / Cash on Cash Return: 2.7%
Airbnb Occupancy Rate: 67%
Civic Center is similar to the previously mentioned neighborhood. It has high rental income, moderate property prices, and high occupancy rates.
How to Find Lucrative Airbnb Vacation Home Rentals in Denver
Denver is a city that embraced Airbnb with proper regulation and has had success as a result. There’s no doubt that The Mile-High City will remain one of the best places to buy a vacation home in the US for years to come.
Since that’s the case, you, as a real estate investor, should hop in and earn rental income from Airbnb vacation home rentals in Denver! Want to do just that? Click here to learn about our product, which includes services such as a property finder, real estate market analysis, and investment property calculator!