When searching for locations to invest in real estate, understanding market conditions and real estate trends is a must for success. Different market conditions influence the profitability of different types of investment properties, such as traditional rentals or Airbnb rentals. Investors should research a desired area before investing in it.
Related: Location, Location, Location: What Makes for the Best Place to Invest in Real Estate?
If you’re a real estate investor interested in Denver investment properties, you’re probably asking yourself: “What are the Denver real estate market conditions like?” Keep reading to find out!
Denver Real Estate Market Conditions: 2018 Data
The Denver real estate market conditions make the city an excellent choice for real estate investing in 2018. Here’s the most recent data on the city from Mashvisor’s real estate market analysis, provided by Mashvisor’s rental property calculator:
Median Property Price: $485,576
Airbnb:
Rental Income: $1,604
Cap Rate / Cash on Cash Return: 1.48%
Traditional:
Rental Income: $1,886
Cap Rate / Cash on Cash Return: 1.59%
The data shows that investing in Denver real estate is lucrative for both Airbnb short-term rentals and traditional long-term rentals. While both strategies boast high rental income and return on investment, traditional investing is the optimal rental strategy on average for the city. So, what are the Denver real estate market conditions and where are the best locations for each strategy?
Related: Top Six Real Estate Investment Strategies
Denver Real Estate Market Conditions: Airbnb
There are two Denver real estate market conditions that have made Airbnb rental properties very profitable: being a popular tourist destination and legalizing Airbnb rentals.
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Tourism
There’s no surprise the Denver real estate market has become a powerhouse for Airbnb rentals when looking over its tourism statistics. According to The Denver Post, about 32 million people visited The Mile-High City in 2017, generating $6.5 billion in revenue. The increase in revenue was a 5 percent increase from the previous year, exceeding the national average of 2 percent. 2017 was the 12th consecutive year of Denver’s tourism market improving in the two categories. With such tourism statistics and trends only expected to increase, it’s only rational for the number and profitability of Airbnb short-term rentals to increase as well.
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Airbnb Legalization
It isn’t easy to believe given Denver’s recent success with Airbnb rentals, but Airbnb was described as “effectively illegal” in Denver just two years ago. In 2017, however, the city legalized Airbnb short-term rentals. Requirements such as a short-term rental license, primary residence requirement, and Lodger’s tax have helped the city regulate Airbnb rental properties. Denver has become a success story with Airbnb. The city has collected over $3 million in taxes, over 70% of Airbnb hosts are licensed, and Airbnb hosts receive high rental income and return on investment from their rental properties.
Best Neighborhoods in Denver Real Estate: Airbnb
The Airbnb real estate trends in Denver, legalization and tourism, make Airbnb a profitable strategy in the city. The best neighborhoods to invest in Airbnb properties in Denver are:
1.) Capitol Hill
Median Property Price: $370,980
Rental Income: $2,977
Cap Rate / Cash on Cash Return: 3.94%
Airbnb Occupancy Rate: 69%
2.) West Colfax
Median Property Price: $959,000
Rental Income: $6,446
Cap Rate / Cash on Cash Return: 3.76%
Airbnb Occupancy Rate: 66%
3.) Union Station
Median Property Price: $455,627
Rental Income: $3,460
Cap Rate / Cash on Cash Return: 3.67%
Airbnb Occupancy Rate: 66%
4.) Highland
Median Property Price: $692,950
Rental Income: $4,006
Cap Rate / Cash on Cash Return: 3.38%
Airbnb Occupancy Rate: 64%
5.) Sloan Lake
Median Property Price: $848,000
Rental Income: $3,927
Cap Rate / Cash on Cash Return: 1.9%
Airbnb Occupancy Rate: 64%
Denver Real Estate Market Conditions: Traditional
Investing in Denver real estate with traditional rental properties is lucrative due to two real estate trends: a growing population and a strong economy.
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Population Dynamics
The Denver-Aurora-Lakewood metro area is the 19th most populous city in the US with about 2.8 million residents. This large population presents many opportunities for traditional real estate properties. 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. Based on these statistics, investing in Denver investment properties will continue to be a profitable form of traditional real estate.
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Strong Economy
A growing population and strong economy are Denver real estate market conditions that tie up together. Denver’s strong economy is one of the reasons its population is growing rapidly. For starters, the city has one of the lowest unemployment rates in the country at a mere 2.6%. 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.
Best Neighborhoods in Denver Real Estate: Traditional
Investing in traditional, long-term rentals is the optimal rental strategy in the city due to Denver real estate market conditions. The best neighborhoods for traditional real estate investing in Denver are:
1.) Union Station
Median Property Price: $455,627
Rental Income: $2,500
Cap Rate / Cash on Cash Return: 3.67%
2.) Speer
Median Property Price: $625,000
Rental Income: $3,095
Cap Rate / Cash on Cash Return: 2.51%
3.) Central Business District
Median Property Price: $407,000
Rental Income: $2,219
Cap Rate / Cash on Cash Return: 1.75%
4.) Capitol Hill
Median Property Price: $370,980
Rental Income: $1,496
Cap Rate / Cash on Cash Return: 1.41%
5.) Highland
Median Property Price: $692,950
Rental Income: $2,189
Cap Rate / Cash on Cash Return: 1.24%
The current and predicted Denver real estate market conditions drive the success of both Airbnb and traditional rental properties. The city is undoubtedly a top real estate destination in 2018 due to its beneficial real estate trends.
Want to start investing in Denver real estate? You’ll need to search for a property using a rental property calculator. Don’t know where to find one? Use Mashvisor’s! Click here to start your 14-day FREE trial with Mashvisor!
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