When looking to invest in real estate, an investor must pay careful attention to location. The location of an investment property can make or break its success. The best real estate investments are typically found in the best locations, while the worst real estate investments are typically found in the worst locations. Today, we’re here to talk to you about one of the top rental markets in US real estate: the Denver housing market.
Related: Location, Location, Location: What Makes for the Best Place to Invest in Real Estate?
Denver Housing Market: Overview
How well are Denver investment properties performing in terms of price, rental income, and return on investment? Take a look at the data mentioned below, all provided by Mashvisor’s investment property calculator.
Median Property Price: $476,418
Price Per Square Foot: $276.37
Traditional
Rental Income: $1,935
Cap Rate / Cash on Cash Return: 1.8%
Airbnb
Rental Income: $3,511
Cap Rate / Cash on Cash Return: 3.93%
As presented from Mashvisor’s investment property calculator data above, the Denver real estate market trends have resulted in properties that are profitable for both Airbnb and traditional investment properties. Both strategies generate high rental income and return on investment for Denver investment properties. However, Airbnb is the clear dominant rental strategy at the moment. Property price growth has begun to slow down in the Denver housing market, but the median property price is still greater than the median listing price in the Colorado real estate market. These reasons, and the following ones to be mentioned, are why you should invest in Denver real estate!
Denver Housing Market: Traditional
The driving forces of a successful real estate market for traditional investing are a large and growing tenant population and a strong economy. The traditional Denver housing market has these two features, along with profitable traditional rental income and return on investment averages.
Related: Airbnb vs. Traditional: Which Rental Strategy Yields Higher Rental Income?
The Denver-Aurora-Lakewood metro area is home to about 2.8 million residents, making it the 19th most populous city in the US. Over half of them, according to Neighborhood Scout, are renters. This scenario opens up many opportunities for traditional Denver investment properties. What’s even better is that this population is growing at a great rate. The population is expected to grow to 3.3 million by 2020, which further increases the tenant pool. Denver is also one of the top cities with the greatest additions of residents. These real estate market trends will only bolster the already successful traditional Denver real estate market.
The city’s economy is also top-notch and is one of the reasons its population is growing at its current pace. The city’s unemployment rate of 2.6%, for example, is among the lowest in the country, and much lower than the national average of 3.9%. Forbes also listed Denver as the best city in the US for businesses and careers. The economy is also very diverse, with jobs ranging from the energy sector, research, and the fast-casual restaurant industry. The Denver housing market will only improve as its economy strengthens.
Best Neighborhoods in Denver Housing Market for Traditional Investing
Here are the best neighborhoods in Denver real estate for traditional properties:
- Hampden South
Median Property Price: $497,333
Rental Income: $2,400
Cap Rate / Cash on Cash Return: 3.02%
- Hampden
Median Property Price: $445,780
Rental Income: $1,874
Cap Rate / Cash on Cash Return: 2.45%
- Marston
Median Property Price: $412,729
Rental Income: $1,622
Cap Rate / Cash on Cash Return: 1.63%
- East Colfax
Median Property Price: $291,667
Rental Income: $1,253
Cap Rate / Cash on Cash Return: 1.35%
Denver Housing Market: Airbnb
Airbnb Denver is the more profitable rental strategy in the city, and for good reason. Many tourists visit the city annually and the short-term rental platform has been legalized. With high rental income, efficient Airbnb regulations, and multiple guests to rent to, you’ll definitely want to invest in Airbnb Denver.
Related: Your Real Estate Investment Guide to Airbnb Rental Properties: Where Is Airbnb Legal?
It would be an understatement to say Denver is an Airbnb hub. According to The Denver Post, about 32 million people visited The Mile-High City during the last year alone, generating $6.5 billion in revenue. The increase in revenue was 5 percent higher than that of 2016, exceeding the national average of 2 percent. 2017 was also the 12th consecutive year of Denver’s tourism market improving in the two categories. These trends are expected to only improve for the city’s Airbnb trends, making the Denver housing market more lucrative for investors.
Denver’s Airbnb regulations, introduced with legalization in 2017, have made the short-term renting platform a success story in the city. Some of its requirements include a short-term rental license, primary residence requirement, and Lodger’s tax. Such effective regulation has earned the city over $3 million in taxes and over 70% of Airbnb hosts are licensed.
In order to make Airbnb Denver your investment strategy and remain within legal bounds, consider house hacking.
Best Neighborhoods in Denver Housing Market for Airbnb Investing
These are the five best neighborhoods in the Denver housing market for Airbnb:
- Chaffee Park
Median Property Price: $388,650
Rental Income: $4,700
Cap Rate / Cash on Cash Return: 7.68%
Occupancy Rate: 80%
- Regis
Median Property Price: $496,800
Rental Income: $4,269
Cap Rate / Cash on Cash Return: 5.53%
Occupancy Rate: 79%
- Capitol Hill
Median Property Price: $309,725
Rental Income: $3,422
Cap Rate / Cash on Cash Return: 5.93%
Occupancy Rate: 78%
- Speer
Median Property Price: $474,333
Rental Income: $3,059
Cap Rate / Cash on Cash Return: 3.55%
Occupancy Rate: 73%
- Gateway-Green Valley Ranch
Median Property Price: $345,980
Rental Income: $2,688
Cap Rate / Cash on Cash Return: 3.65%
Occupancy Rate: 58%
Overall, the Denver housing market is one of the best rising markets in the US. The traditional and Airbnb markets are excellent and only expected to continue to prosper. Want to find a Denver investment property? Click here to start your 14-day free trial with Mashvisor!